A Closer Look at the Overseas Investment Tax Credit for Corporations

Who are the beneficiaries?

Article 244 quater W provides that business operators engaged in agricultural, industrial, commercial, or craft activities in an Overseas Department (Guadeloupe, French Guiana, Martinique, Mayotte, and Réunion) and subject to corporate income tax are eligible for the tax credit. Housing agencies are also eligible for this tax credit for the acquisition of properties to be built or for the construction of new rental housing.

Article 244quater X applies to the same beneficiaries, but for social housing construction projects.

Which sectors are eligible?

Eligible investments include:

• The private and intermediate housing sector
• The social housing sector
• The real estate rent-to-own sector
• Renovation and rehabilitation work on hotels, tourist residences, and classified vacation villages, when such work constitutes a component of fixed assets. “Rehabilitation work” specifically refers to bringing the property up to habitability standards.

The building that is the subject of the investment must qualify as a fixed asset for the company, meaning: it must be depreciable, the rent must constitute revenue, and the various associated expenses must be deductible for the company.

What are the financing terms?

To be eligible for the tax credit, certain conditions must be met:

1. Commitment to complete the foundation work within two years;
2. Rent out the unfurnished building within 12 months of its completion or acquisition (whichever is later), for a term of at least 5 years, to a person who will use it as their primary residence;
3. The rent and the tenant's income do not exceed the limits set by decree.

Approval issued by the departmental director or regional director of public finance for the department in which the program is carried out is required when the total cost of the program exceeds 1 million euros.

How are the subsidies calculated?

The basis for calculation is the cost price of the investments, excluding taxes and certain expenses.

The amount of the tax credit depends on the rate below, applied to the calculation basis:

• 35% in Guadeloupe, Martinique, and Réunion
• 45.9% in French Guiana and Mayotte

The tax credit is paid to the recipient according to the following schedule at the close of the fiscal year and upon payment of the corporate income tax for the fiscal year in which the event described below occurs:

• 70% upon completion of the foundation work
• 20% upon launch
• 10% upon delivery.

It is applied to the balance of corporate income tax. If the tax credit exceeds the corporate income tax due for the fiscal year, the excess is refunded.

The maximum reduction is 2,727 euros (excluding tax) per square meter for Réunion (adjusted annually^on January¹ and varying by overseas department).

The tax credit claim is filed at the same time the company submits its tax returns, along with the appropriate forms.

The refund of the overpayment is issued when the corporate income tax balance is settled, which depends on the fiscal year-end date. It is issued on the 15th of^{the fourth} month following the fiscal year-end; for a fiscal year ending on December 31, Year N-1, it will be issued on May 15, Year N.

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