Why should you choose Forest Assets ?

Wood is a renewable raw material and is now considered a strategic asset. With 100% of its volume usable, its uses are now multiple and are growing thanks to advances in technology. These are all reasons why forests have become an asset class in their own right. As such, they have very specific characteristics.

Firstly, investing in forests enables you to diversify your assets in a market not extensively correlated with the major financial markets. Secondly, the value of forest investments can gradually grow under a long-term approach. Although this is no guarantee of future performance, the price per hectare of large-scale forests in Europe has risen by around 3.5% per year over the last 20 years.

Please bear in mind that the tax arrangements presented below do not automatically apply. They depend on each person’s situation, which must be considered individually, and may change depending on regulations. Furthermore, these arrangements are binding and are granted in consideration for the risks associated with this investment. Consult France Valley or your usual advisor for further information.

Succession / Monichon scheme

75% reduction in the value of forests held for calculating costs of transfer (in the event of an inheritance or donation). This allowance applies to forest assets, which excludes the cash and receivables of the Forestry Group, which may maintain a prudential cash buffer to finance potential investments. If the units were acquired on the secondary market, the donor or the deceased will need to have retained them for at least two years before benefiting from the scheme. If, as France Valley proposes, the units of the Forestry Funds are new subscribed units, there is no holding condition prior to or after the transfer. The Forestry Fund then undertakes to apply a Simple Management Plan for 30 years. All these schemes also operate for Investment Forestry Funds that have obtained AMF approval.

Income Tax Reduction / DEFI Act

For Forestry Funds that are not eligible for the first scheme, and if purchasing units on the secondary market (as opposed to subscribing to new units), the Forest Investment Tax Incentive Scheme (DEFI Act) applies. The Income Tax reduction is always 25%, subject to a minimum retention period of at least five to seven and a half years, along with a risk of capital loss. The Forestry Fund then undertakes to apply an State-Approved Management Plan for 15 years. France Valley will always offer you the first mechanism, which is more beneficial for investment in Forestry Groups. These schemes also operate for Investment Forestry Funds that have obtained AMF approval.

Exemption from Real Estate Wealth Tax

75% reduction on the value of forests, which are therefore only included under assets subject to Real Estate Wealth Tax in the amount of 25% of their value, with no cap (application to the net value of forest assets, which excludes the cash and receivables of the Forestry Fund, which can maintain a prudential cash buffer to finance potential investments). This benefit is granted in consideration for the modest profitability of forests run over several generations. In certain cases, particularly with regard to units in France Valley’s Forestry Funds, the units are entirely exempt from Real Estate Wealth Tax, with no limit on amount or duration, in consideration for a risk of capital loss. You simply do not need to declare your units in your assets taxable under the Real Estate Wealth Tax. These schemes also operate for Investment Forestry Funds that have obtained AMF approval.

Reminder of the risks associated with taxation

Remember that the benefit of an investment solution is primarily its intrinsic characteristics, rather than the applicable taxation regime. Additionally, forests are not a tax loophole: the specific taxation regime for Forestry Groups stems from the consideration of their nature and constraints:

 

Life cycle greater than that of a transfer of assets over one human generation (although 20 to 25 years is sufficient for a poplar, the figure is 70 to 80 years for coniferous trees and 150 to 220 years for oak). This explains why the significant exemption from inheritance tax has been in place since 1930.

An average asset value of 25% (land) and an operating value of 75% (value of standing timber), which explains the high exemption from Real Estate Wealth Tax, which taxes ownership only rather than future takings.

 

Also remember that Forestry Funds are so-called transparent Non-Trading Companies: as with an SCPI, income is taxed at the level of the partners rather than at the level of the Forestry Fund. The Manager of the Forestry Fund must therefore provide you with the information needed to complete your return each year. Furthermore, due to this transparency, the partners’ liability is not limited to their contributions, even in the case of Investment Forestry Funds, if they do not have approval from the Autorité des Marchés Financiers (AMF): even with a provision to the contrary in the articles of association, liability is not limited to contributions (a statutory provision contrary to the law is not enforceable against third parties).

 

Lastly, remember that there is a consideration for each tax benefit: holding period, risk of capital loss, irregular return, limited liquidity, etc.

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