Forestry: An Advantageous Investment

Forestry: An Advantageous Investment

Forestry constitutes a socially responsible investment with tax relief benefits, while also offering advantageous estate planning opportunities.

How and Why to Purchase a Forest?

Purchasing a forest offers numerous advantages: asset diversification, responsible investment, income generation, tax benefits, optimised estate transmission, and so on.

There are three modes of acquisition: direct purchase, or indirect acquisition through a forestry group (groupement forestier) or a forestry civil company (société civile forestière).

A forest may be purchased through a notary, a forestry owners’ association, a forestry cooperative, a forestry expert or a specialist property agency.

Forestry land exchanges have been established to facilitate transactions. Where a forest is for sale, neighbouring landowners and the local municipality may benefit from a right of first refusal.

What Tax Treatment Applies to Forestry?

This type of investment benefits from favourable tax treatment. For example, in respect of registration duties payable by the purchaser, the overall rate, taking into account all applicable levies, amounts to between 5.1% and 5.9%.

Until 31 December 2022, natural persons making forestry investments could benefit from the Fiscal Incentive Scheme for Forestry Investment (Dispositif d’encouragement fiscal à l’investissement en forêt – Défi-acquisition), subject to management and conservation commitment requirements. The income tax reduction amounted to 18% of the expenditure incurred in purchasing the forest or shares in a forestry group, up to a ceiling of €5,700 for a single individual.

Furthermore, forests and shares in forestry groups form part of the taxable base for the real property wealth tax (IFI), but benefit from a 75% exemption on their value, provided a sustainable management commitment is entered into for a period of 30 years.

What Are the Rules Governing Gift and Inheritance?

Upon gift or inheritance, forests benefit from a 75% exemption on their value, subject to the acquirer satisfying several conditions, including the requirement to present a certified sustainable management guarantee and to undertake — together with their heirs or successors in title — to comply with it for a period of 30 years.