Why the taxation of REITs invested abroad is more interesting

Are you attracted to investing in real estate investment companies (REITs)? No wonder, given the performance offered by this proven savings product. Thus, despite the crisis, these “paper stone” vehicles once again served a well-made return in 2020, at 4.18% on average, according to the Institute for Real Estate and Land Savings (IEIF). And the dividends paid to the partners should increase again in 2021. But be careful not to rejoice too quickly because these returns – considered as property income – are understood gross of taxation, that is to say before tax on the property. income and social security contributions (17.2%). To avoid this tax sledgehammer, our reader Gabriel subscribed to shares in SCPIs invested abroad, often praised for their preferential taxation. He questioned the experts of the “Great Savings Meeting” (Capital / Radio Patrimoine) to be sure that he had made the right choice. Stéphane Absolu, associate director at Pyxis Conseil, reassures him immediately: “Taxation is more advantageous.”

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Our specialist first of all recalls that SCPIs invested abroad are taxed in the country of origin of the buildings. Thus, the rents drawn from a business located in Hamburg in Germany will be immediately taxed across the Rhine. It is then the SCPI which directly supports the local tax. But what about the French taxation which must apply? “To avoid double taxation, bilateral agreements have set up specific mechanisms,” notes Stéphane Absolu. Two overriding mechanisms apply. It can be a tax credit – in Germany, Spain or the UK for example. “Taxation is levied in the country where the building is located. Then in France, the tax convention grants the subscriber a tax credit equal to the tax normally paid in France ”, explains our expert. The operation is therefore fiscally neutral, with one nuance since the tax credit granted is determined in relation to an average tax rate, and not to a marginal rate (TMI, marginal tax bracket) as is the case in France. The marginal rate being higher than the average rate, “a delta is possible on the income tax payable”, warns Stéphane Absolu. But there is no photo between the two taxations, French on the one hand with a maximum of 62.2% of taxes between income tax (45% maximum) and social security contributions (17.2%) , and German on the other hand with a tax limited to 15.825%, without social security contributions.

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Another possibility: invest in SCPIs that hold assets in Portugal, Belgium or the Netherlands. This is the effective rate that applies to it: “The taxpayer does not suffer tax on this income (from foreign SCPIs, Editor’s note) in France. They are only taken into account for the calculation of the tax rate applied to all French income. We then take into account all income, including those of SCPI, and we determine a tax rate applicable only to French income ”, explains Stéphane Absolu. Clearly, “foreign” income is added to French income to establish a tax rate, the latter ultimately only applying to French income. Thus, the income of these SCPIs “are not subject to income tax or social security contributions”, boasts the associate director of Pyxis Conseil. As with the tax credit mechanism, “the tax rules are much more interesting than in France”, concludes Stéphane Absolu who does not forget to advise savers to also carefully study the quality of the media on which they invest.

>> Our complete tax guide. How to declare your income? How to reduce your tax bill through investments? What to do in the event of an administration check?