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25 November 2020

Tax newsletter: The waiver on rents would only cost your lessor 22% of its amount if it is a company subject to IS and even less if it is an individual

The waiver on rents would only cost your lessor 22% of its amount if it is a company subject to IS and even less if it is an individual

The finance bill provides a tax credit of 50% of the rent waiver amounts granted in the 3rd quarter by lessors in favor of companies with fewer than 5,000 employees administratively closed or belonging to the Hotels-Cafés-Restaurants sector. The tax credit is reduced to 33.1/3% for tenants with a workforce between 250 and 5,000 employees.

This mechanism, intended to support businesses in economic difficulty due to the emergency measures taken by the State with the purpose of dealing with the health crisis, should be a great incentive for donors. It reduces the effective cost of this rent waiver for the lessor to 22% of the amount of the rents abandoned for the lessors renting to companies below 250 employees or to 38.2/3% of the rent abandoned for tenants between 250 and 5,000 employees.

Take the example, an annual rent of € 12,000. If the lessor waives 1 month’s rent, i.e. € 1,000 gross, it will cost him in gross cash (after payment of his IS and imputation of his tax credit) only € 220, or € 382 (for tenant above 250 employees).

This tax credit also applies to landlords who are natural persons or SCIs.

If we take the example of a landlord taxed in the 30% income tax bracket, the rent waiver will cost him 20% of the amount of the rent. This cost will be even lower if it is imposed at a higher bracket and if the economy of CSG-CRDS is taken into account.

This measure therefore promises to be very effective by encouraging lessors to make greater efforts as part of the new negotiations underway with their tenants. We can only regret the date of imputation of the tax credit, scheduled at this stage in 2022. Let’s hope that this project under discussion will be amended on this point.