Girardin Industrial Scheme
Your Objective
Do you want to reduce the amount of your income tax?
With the Girardin Industrial investment, you benefit from a tax reduction that exceeds the amount you invested. Your gain will range between 10% and 20%, depending on the timing during the year. The investment is a one-time expense: you recover the amount you invested the following year through a tax credit that is higher than the amount initially invested.
Details
The industrial component of the so-called “Girardin” law supports the financing of industrial equipment in overseas territories. In practice, a leasing company is created to purchase industrial equipment and lease it to a local company eligible for the Girardin scheme for a minimum period of 5 years.
The company that uses the equipment in the overseas territory becomes the tenant and pays a rent that is 30% lower than what they would pay with a standard loan.
This industrial project is funded by three parties: the operating company, which provides an initial contribution of around 10% of the equipment’s price; a bank, which finances about half of the cost; and private investors, who contribute the remaining 40% of the industrial equipment’s value through a one-time investment.
At the end of the 5-year lease period, the equipment becomes the property of the local operator, following the liquidation of the leasing company.
Tax Reduction Limit:
The standard tax deduction limit for tax reduction operations is 10,000 euros per year.
This limit increases to 18,000 euros with the Girardin Industrial scheme; however, due to the retrocession effect of the tax benefit to the tenant, the maximum tax reduction is:
- 40,909 euros for standard operations (with a minimum 56% retrocession to the tenant)
- 52,941 euros for approved operations (with a minimum 66% retrocession to the tenant)
Advantages
- A tax reduction that exceeds the amount of your investment, with a declining profitability rate throughout the year: between 10% and 20%.
- A financial operation that is free from taxes and social contributions.
- An ethical investment that contributes to economic development in overseas territories by reducing territorial inequalities.
- The uniqueness of this tax-reducing investment lies in the fact that it is a financing scheme. All the parameters are known in advance, which sets it apart from other investments like property purchases (under the Pinel law) or liquidation levels for FIP/FCPI funds.
OptiFi’s Opinion
This scheme works very well when properly managed and can prove to be extremely profitable.
Moreover, it is likely the most efficient in terms of cash flow immobilization. However, OptiFi highlights the importance of choosing the right management company and, beyond the “marketing message,” understanding the difference between Professional Civil Liability and a guarantee, which are fundamentally different concepts.
Special attention should be paid to offers promising more than 20% profitability and/or aggressive marketing practices.
Therefore, we highly recommend consulting a professional who can guide you appropriately. Finally, the financial advisor will assist you in calculating the required investment amount, as these calculations can quickly become complex when considering the modified ceiling, net of the retrocession of the tax benefit to the tenant.
