Investing in the forest in 2024 to reduce taxes

What are the advantages of investing in a forest?

Investing in wood has significant advantages:

• Forest investment makes it possible to contribute to the valorization of French heritage.
• Wood is a tangible asset, a safe haven from volatility Of the financial markets
• Forest investment provides regular income through forest exploitation, wood cutting or even by giving access to hunters
• A profitable forest investment is safe: risk taking is covered by insurance. The profitability of forest investment is in the order of 2%.
• An entrepreneurial project is possible by creating leisure activities, tree climbing, hiking or by setting up a campsite...
• La Exemption from taxation of forest investments is particularly advantageous under certain conditions (holding the land or the shares in the investment for at least eight years, for example)
• A forest investment combines pleasure and return for nature lovers.

What are the different types of forest investments?

A direct purchase

Buying forest directly is rather reserved for enthusiasts. The market is small and investing in wood subjects you to obligations. The Simple Management Plan (PSG) requires planning over 15 years, or even 30 years: develop the afforestation of the estate, develop and maintain it. If you are not a connoisseur, mandating a specialist or a cooperative to do it for you is essential.

Forest groups

A forest investment with a Forestry Group is possible in 2 forms:

The Forest Land Group (GFF)

The purchase of shares is made from a forest group that owns the forest. The company manages the estate and redistributes the income from the farm.

The advantage of this type of financial investment is to diversify your assets and not to expose yourself directly.

The Forest Investment Group (GFI)

The Forestry Investment Group has some differences with the GFF:

• It must obtain the approval of the Autorité des Marches Financiers
• It has an obligation to diversify in terms of geography and wood species
• The entrance ticket is cheaper
• Liability is limited to the contribution

Forest savings companies

They consist of 60% forest assets or shares owned and 40% financial assets.

What budget do you need to invest?

The average price per hectare is €4410 in 2021 (source SAFER: Société d'Establishment Foncier et d'Aménagement Rural). The price varies according to the fertility of the soil, the ease of exploitation, the species or the average age of the trees, or even the presence of nearby industries.

To benefit from advantageous tax conditions, direct forest investment requires the purchase of a substantial area and a minimum capital of 300,000 €. An area of three hectares nearby is sufficient for a leisure investment.

Forest investment in the purchase of shares in a forest group will cost between €10,000 and €300,000.

For an investment in forests via a forest savings company, the budget will vary between €9,500 and €19,000 to obtain the maximum tax advantage.

Where and how can I buy a forest?

France has large forest regions: Sologne for hunting, Île-de-France for recreation, the forest regions of Périgord for truffles or moors for porcini mushrooms. A forest investment in Brittany is very rare and constitutes an important heritage value.

Buying forest directly from 75% of private owners is almost impossible. The market is confidential and the goods are rare, as the forest is often transmitted by inheritance.

To find forests for sale, notaries, syndicates of forest owners, cooperatives and forest experts or even specialized agencies are the contact persons. SAFER can also provide you with information.

Shares can be purchased on:

• The primary market, when the Forestry Group is created or in the event of a capital increase
• The secondary market where investors exchange shares of the primary market

Taxation of forest investments

La tax exemption Forest investment is a tax system put in place to encourage investment in wood. The purchase of forest directly or shares in Land Groups entitles you to:

• A reduction in income tax of 18% of the amounts invested with a ceiling of €5,700 for a single individual or €11,400 for a couple. The declaration must be accompanied by a commitment by the group to apply a PSG for 15 years and a commitment to keep the shares for 8 years from the date of acquisition. The tax reduction is subject to the overall capping of tax loopholes.
• An exemption from gift or inheritance tax up to 75% of the value of the shares, with no limit on the amount, provided you have held them for 2 years. The departmental agriculture department must validate the management plan to be applied for 30 years
• An exemption from real estate wealth tax of 75% under the same conditions as before

Other tax cuts exist such as:

• 76% of the insurance contribution up to a limit of €6,250
• 50% of the contributions paid to trade union associations up to a limit of €1,000 per household

Tax credits of 18% for carrying out forest work up to a limit of €6,250 or 18% of the amount of management contracts up to a limit of €2,000 are granted.

Conclusion

Investing in wood to reduce taxes is a good opportunity. Exemption from taxation on investment in forests is very advantageous provided legal obligations are respected. However, it should be taken into account that buying forest directly is rather reserved for connoisseurs and that a profitable forest investment is obtained in the long term.