The Girardin industrial system allows investors to support the overseas economy by benefiting from an XXL tax reduction. Its image has been tarnished by several cases, but a few recognized companies offer interesting arrangements.
It’s a little fiscal miracle. Implemented by the Overseas Program Law of 2003, or Girardin Law (named after Minister Brigitte Girardin), the Girardin industrial system aims to reduce the premium on industrialized goods for companies in the French Overseas Territories. Tom.
The principle: through SNC (general partnership), the capital raised finances machines (vehicle, construction equipment, crane, boat, etc.) rented at a moderate rate to local economic players. In return, the law allows the entire investment to be deducted from taxes the following year, within the framework of tax loopholes. And since the arrangements generate a return, the reduction exceeds the capital invested. A unique opportunity of its kind!
A device that gets a bad rap
However, many wealth management advisors advise against the system. We have chosen to avoid Girardin for several years, announces a specialist firm. Historically, we have seen that sometimes things go wrong! The measure suffers from a sulphurous reputation. Broken promises, short-lived companies… Some savers have been victims of abuse and lost big.
The Girardin… we could see that sometimes things went wrong!
Because the law includes a significant ala. Within 5 years following the tax advantage, the goods must retain economic interest. Translation: be operated by a local company. Otherwise, the ax falls, and Bercy can cancel the tax advantage. If you get straightened out, it’s really not fun, says an investment specialist. There have been many cases.
Because the particularity of Girardin is that we invest with lost funds. Once the one-shot tax reduction has been acquired, the investment is only worth a symbolic euro. If you have to repay the tax benefit, you will have lost your initial capital. It’s a real piece of Damocls, continues our expert. Especially since the French Overseas Territories are more fragile in the current economic context.
A popular device
Little known to the public, Girardin is nevertheless acclaimed. This year, the collection will reach one billion euros, for more than 50,000 projects. Some companies have a good reputation and a fairly low tax catch-up rate, notes an advisor. The majority of files are thus concentrated in a few companies considered serious: Inter Invest, Ecofip, Ingepar, Profina, Starinvest…
The Girardin, when things go well, they go very well
Inter Invest, leader of Girardin, alone collected 520 million euros last year, and the figure will be slightly higher in 2023. Girardin, when things go well, they go very well, maintains Mlanie Kabla, director of development of Ecofip, the second largest player in the market. In five years, the company’s volume of activity has doubled: it should raise 140 million euros by December, over 10,000 projects. This proves that people trust us. We have an 87% recurrence from one year to the next. When people have bitten, they think it’s great.
Amazing performance
If capital is flowing in, it is because the performance is unparalleled. Depending on the offers and the time of year, you can deduct from your taxes between 108 and 120% of your stake. To take an example, if we invest 10,000 euros, we obtain a reduction of 11,000. In one shot, we therefore gained 1,000 euros in the operation, explains Frédrique Hazemann.
The amount will be directly reimbursed by DGFIP if the taxes were paid thanks to withholding at source, adds Mlanie Kabla. The performance can be seen differently. Promoters of tax-free products always integrate tax savings into overall performance. By applying the same logic, a Girardin 10% allows you to reach a rate… of 110%!
Another gift: the device benefits from an extension on the tax niche. Instead of the 10,000 euros cap, this is 18,000 euros. And as if that were not enough, the law provides for a strange calculation, considering that only 44% of the investment consumes the niche. Without exceeding your ceiling of 18,000 euros, you can bet (and deduct) up to 40,909 euros in taxes, bonus included. Even 52,000 in some cases. For large assets, it’s a real godsend!
10,000 euros and more if you like: tax reductions accessible until the end of 2023
This really seems too good to be true. However, Mlanie Kabla from Ecofip certifies that for two decades, no client has lost their tax advantage. The company proudly displays a historical claims ratio of 0.04%. These were road accidents, so they were taken care of. Inter Invest does not indicate its claims rate, but Frédrique Hazemann assures that whatever happens, the arrangements ensure that the tax reduction is not called into question.
We do asset management… But instead of stocks and bonds, we have trucks, excavators, cranes…
Insurance in a mess
How to guarantee it? The two companies highlight their network of employees in the field, who are experts in the local fabric. We’ve been doing this for 30 years, according to the framework of Inter Invest. Our strength is to be established on site. If the original tenant can no longer pay the rent for a tool, we are able to re-rent it to someone else.
As long as the property remains in use, the law does not regulate the change of tenant. We do asset management, argues Mlanie Kabla. But instead of shares and bonds, we have trucks, excavators, cranes… And to maintain their reputation, companies strive to secure each project for five years. It is not enough to be there to make the deal in year N. Serious fitters have human resources following the evolution of things.
Like its competitors, Ecofip favors specific standard goods with high relocation potential: trucks, cranes, excavators, cars, etc.
Promises only bind those who believe them. To convince, specialists have put in place safeguards. We have increased the number of legal clauses, insurance and counter-insurance, list Mlanie Kabla. Customers and CGPIs love it! Control of the client’s professional civil liability and damage insurance, overall insurance taking over in the event of a defect, coverage against non-delivery, erroneous declarations or management errors by the tenant, guarantee of assembly and rents no country…
The list of shields is long! Inter Invest automatically adds a guarantee of good financial and tax performance, or G3F. Whatever the cause, the manager guarantees the tax advantage, even if the administration demands it! We guarantee our installations in this sense, assures Frdrique Hazemann.
We cannot speak of a total absence of risk with Girardin, but of risk very well controlled by the clauses and insurance
Obviously, there remains the possibility of the installer going bankrupt. We cannot speak of a total absence of risk with Girardin, warns Mlanie Kabla. But we can talk about risk being very controlled by clauses and insurance. His company is so confident in its know-how that its financial performance guarantee (G+) is only offered as an option, charging 2 performance points. With G+, the customer’s tax reduction is covered whatever happens. But even with a basic file, it is estimated that the result is almost guaranteed.
Because Ecofip has added an extra layer of security with its co-funds. Extreme pooling between 6 SNCs, co-financing around forty properties in different overseas territories, different sectors, with different operators. Since the common pot confuses several Girardins, in the event of default, only a share of the reduction would be threatened. Abundance of security never hurts.
Watch out for glitter
With all these safety nets, how could some investors lose everything? The trap is having glitter in your eyes when you see very high rates, warns Frédrique Hazemann. There are still companies that offer more than 20%. These are risky models. Our yield is calculated taking into account the insurance guaranteeing the assembly. This has a cost.
Mlanie Kabla estimates that the good fitters on the market have performances ranging between 8 and 16%. She regrets the regular appearance of fanciful companies, which raise up to 50 million euros and leave with the loot. She recommends trusting 5 or 6 serious fitters. Even if you don’t want to go through Ecofip, it’s better to choose an establishment that has a storefront. It is not a monopoly: we simply favor non-requalification by the tax administration.
By investing in December, you only have to wait 7 months to recover your tax reduction
Despite everything, the Girardin has two faults. The first is that it blocks the funds until the next tax return. We are talking about a minimum of 2500 euros for Inter Invest, and 4000 for Ecofip. The hardest part is the first year, recognizes Frédrique Hazemann. Once people receive their first tax refund, it takes care of itself. Not everyone can lock up their money. This requires an effort in addition to collection at source, concedes Mlanie Kabla. But by investing in December, you only have to wait 7 months to recover your tax reduction. This is often a transfer from the DGFIP, because the tax has already been deducted at source.
The other problem is that the device is hard to understand. People have difficulty understanding this rather particular mechanism, observes Frédrique Hazemann. Concretely, we don’t buy anything and it doesn’t generate income. We give money to recover more, but in tax reduction. We’re not talking about shares, valuation, long-term returns… You have to be comfortable with the fact that you have nothing left before the tax refund. In a way, we are recommending a tax reduction!
Mlanie Kabla therefore prefers to present the Girardin as an investment offering 10% over 7 months, benefiting from an in-house guarantee. Often, clients take the time to think about it in the first year. The second, they pass the course, then come back. The advantage of a one shot is that it only blocks one year. It’s very flexible. We can increase it for an exceptional income, without making it the following year…
Haro on taxes
The target is tax exemption enthusiasts. It is clear that clients are above all looking to reduce their tax, admits Frédrique Hazemann of Inter Invest. If it wasn’t the French Overseas Territories, they would do it elsewhere.
Mlanie Kabla smiles when she hears that Girardin appeals to those allergic to taxes: We are transforming a cost center into a profit center. We are therefore able to generate profitability from this allergy! But she sees another aspect: giving meaning to her tax contribution. When we explain that the vocation is to help the French Overseas Territories, people are not insensitive, responds Frédrique Hazemann. It’s also a way to spend your money. Because it underlines that this investment has a real social and economic interest. The tax administration does not give gifts on principle. The Girardin helps compensate for the fact that everything is more expensive in the overseas departments and territories. We help local businesses develop and continue their activity.
As a general rule, the investment is accompanied by a wealth advisor. Using simulators, it can define the ideal budget to reduce tax as much as possible. Once signed, contracts are implemented very quickly. And since you don’t buy anything, there are no costs! The clients advance the money, we offer them a return, and voila, slips Frdrique Hazemann.
The envelopes expire at the end of December. At the end of the year, things go quite quickly, we warn from Inter Invest. From December 20, it is more complex. Ecofip, for its part, still offers 8 and 10% opportunities. We plan to finish on the 27th, announces Mlanie Kabla. Everything must be registered before the 31st. Attention allergy sufferers: there is not much time left to take care of themselves!
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