At the time of the acquisition of a building, several aspects must be analyzed in order to make an informed decision on the way in which this building will be held. The factors to be taken into account are the following:
- Income from rent;
- Tax on the capital;
- Mode of financing;
- Fiscal impacts at the time of the provision and the decease.
A building can be held either personally or in joint ownership, or by a joint stock company or by a trust.
Property revenue (renting)
When the income generated by the building is an income of renting, then the fiscal consequences for each mode of detention are as follows:
When the building is held personally and rented to a third party, the net income from rent will be personally imposed in the hands of the owner on his marginal rate of imposition, of which the maximum is 48,21%.
If the building generates losses, then these losses will be deductible against the other sources of income from the owner. It should be noted that there are rules of limitation to capital allowances, since paying off cannot create or increase a loss when the renting of a building is not the principal activity of the taxpayer.
When the building is held by a joint stock company, then the net income of renting will be imposed on the rate of 46,57% from which 26,67% will go to the tax balance in refundable hands as dividend (IMRTD) and which could be refunded at a rate of 1: 3 when the company pays a dividend to its shareholder.
If the building generates losses, then those could be deduced from the other incomes of the property of the company, should that be necessary; if not, they will be deferred against the incomes of the previous three years or against the income of the next twenty years. Moreover, if the principal activity of the company is the renting of buildings, then the company will be able to claim a deduction of capital allowances in order to create or to increase a loss.
When the building is held by a trust company between living persons and is rented to a third party, the net income from renting will be imposed either in the trust company, or to the beneficiaries of the trust company if an attribution of the income was made to them.
The part of the income which will be imposed in the trust, will be at a rate of 44,20% when the net income is lower than 76.770 $ or at a rate of 48,21% when the net income is higher than 76.770 $.
The part of the income allotted to the beneficiaries of the trust company will be imposed on their marginal rate of imposition, of which the maximum is 48,21%. There are rules of attribution if the beneficiaries are children less than 18 years old.
If the building generates losses, those cannot be allotted to the beneficiaries, on the other hand, they will be able to be used in the trust either against the income of the last three years or on the income of the next seven years.
Tax on the capital
No tax on the capital is due for payment when the detention of the building is personal.
When the building is held by the company, this one will be subjugated to the tax on the capital at a rate of 0,24% of its paid-up capital; however, there is an exemption of
1.000.000 $ which applies to the paid capital before the company starts paying taxes on the capital. Beginning in 2011, the tax on the capital will be abolished.
A trust company is not subjugated to the rules of the capital gains tax.