The Finance Act for 2015 has extended to the hotel industry of Saint-Martin the benefit of increased rate of 45.9% to the tax reduction applied to the overseas communities for renovation and rehabilitation of hotels.
As a reminder, the article 199 undecies B of the French Tax Code (derived from the Finance Act of 2001) provides for the individuals, a tax reduction equal to 38.25% of the amount of productive investments that they perform overseas (45.9% for the communities of Guyana and Mayotte). Among these investments are eligible the renovation and rehabilitation of hotels, tourist residences, holiday resorts, for their cost price; demolition expenses, costs of construction and equipment incorporated to the building.
These constructions benefit from an increased rate of 45.9% when realized in overseas communities of Saint-Pierre and Miquelon, the New Caledonia, French Polynesia, Wallis and Futuna and the Southern and Antarctic Territories (COM).
Being a COM since 2007, Saint-Martin did not benefit from the increased rate for hotel renovations. But, it has benefited since June 2009 to hotel renovations programs granted to the hotel accommodations by the Law for Economic Development of Overseas. However, the Finance Act of 2015 has eliminated this program since January 1, 2015.
Saint-Martin hotels being the first beneficiaries of this aid (more than a third of the consumed credits)and this community being in the delicate economic situation, with a tourist industry representing a major part of its economic activity but subject to strong competition from its Dutch neighbor, the legislator wanted to prevent that this deletion tends to exacerbate an already difficult situation. Thus, the legislator allowed for investors to benefit from the tax reduction for renovation and rehabilitation of hotels.
This increase will enter into force at a date fixed by order which may not be later than six months from the date of receipt of the response from the European Commission regarding the legislative proposal as consistent with the law of the European Union on State aid.
For information, companies subject to corporate income tax also benefit from a tax advantage when investing in hotel renovations in Saint-Martin (under the article 217 undecies of the French Tax Code), equal to the deduction of taxable income of these investments cost price (net of public aid), the amount of the deduction not being affected by the present article of the Finance Act for 2015.