Budget cuts hit eco tax rebates

Time is running out for the tax credit scheme for eco-friendly home improvements

7 September 2010

COSTS of installing eco-friendly products such as solar panels and wood-burning stoves could go up after this year if expected government cuts go ahead.

The cuts could also be bad news for business in the renewable energies sector, some firms fear.

To make the most of the current rates, it may be best to install such products this year, as the government has announced plans to lower many of the so-called niches fiscales (tax shelters) in next year’s budget.

There are more than 400 of these schemes, but the crédit d’impôt pour le développement durable (tax credits for eco-friendly products) is one of the most well-known and popular.

Another similar scheme that is likely to face reduction is the tax credits for employing people in the home such as children’s tutors, IT support, gardeners etc (see Practical, page 27 for more about how this could be hit, and Connexion’s helpguide on Employing People at Home for more on how these credits work).

The details of the planned reductions will not be finalised until the budget is discussed at the end of the year, but Budget Minister François Baroin recently insisted he wants to save around e8.5-10 billion on the niches fiscales in 2011 and 2012 as part of measures to reduce France’s debt.

This is almost twice as much as the e5 billion that was referred to at the start of June by Prime Minister François Fillon, who said reducing almost all of the niches by about 10% was one option being considered.

Speaking to parliament, Mr Baroin said: “When it comes to reducing the tax shelters, there can be no delay. We will put it into action from the 2011 budget law which will be presented to parliament in the autumn. We will respect the objective of at least e8.5 billion.”

The aim of the cuts is to reduce public debt to 6% next year, 4.6% in 2012 and 3% in 2013 (it is expected to be 8% this year). Nonetheless some people working in the renewable energies sector said any cuts would be a backwards step.

Renewable energies supplier Sam Kane of Energie 33, in Aquitaine, said: “We are very disappointed about it. It doesn’t help us at all - though it is not unexpected as every year they have talked about doing it.

At the moment, solar panels still attract a 50% rebate, unlike some other products, like insulation, which have already had their percentages reduced from what they originally were.

“The rebate is the big selling point. It’s a huge lever for getting people to buy panels and, if they reduce it, there could be a sudden drop in the amount of people who want them.”

Phil Bennet of woodburners. fr, who sell products such as wood burning stoves and heat pumps, said: “The government already reduced the credit on woodburners from 50% to 40%, this year to 25%.

“They say they want to get people away from oil and gas and to use green energy that’s readily available. There is a big push on because the world wants to go green and they are stopping it in its tracks.”

However, he said he thought people would still buy the products even if the credits are reduced or axed. “If they are not there any more, they will just have to buy them without.”

Paul Foulkes of Echo House said the credits are attractive to customers - “People think they are getting a fantastic bargain, especially when some things are at 50%.”

However he added this was partly offset by the fact the credits had encouraged some manufacturers to keep prices artificially high, as they know customers will get part of their money back. He hoped that if there are reductions the trend will reverse.

He added: “At the start of this year some aspects changed. For example, the credit went from 40% to 25% for heat pumps. The government had always said year-on-year changes were possible until the end of 2012 and they may be dropped altogether after that.”

From the start of 2013 all new homes will need to meet very high levels of energy-efficiency, he added. It remains to be seen if any new forms of credit or loan are introduced to help with the costs of this.

What is currently on offer?

The system as it stands allows for money off income tax from 15% to 50% depending on the kind of equipment installed.

Solar thermal panels for heating hot water still attract the top 50% rate, along with the solar photovoltaic ones that produce electricity.

The latter offer the possibility of selling any surplus back to the national grid at a better-than-market rate, currently 58 centimes/kWh for roof-integrated ones and 31.40 to 37.68 centimes for other ones, depending in what part of the country you live in. This income is not taxable.

The 50% rate is also offered on wind turbines and mini hydro-electric power installations (for example, if you have a stream going through the property).

There is a 40% credit for installing a geothermal heat pump (taking heat out of the ground to heat the home) and as of this year there is a new 40% one for thermo-dynamic heat pumps for producing domestic hot water.

Wood burning heaters went down from 40% to 25% this year (though they remain at 40% if you are replacing an old one), as did air/water heat pumps for home heating.

Insulating walls, ceilings and pipes is 25%, while better insulation for doors and windows (eg. double glazing) now attracts just 15%, down from 25% in 2009. Condensing boilers also came down to 15% from 25%.

Walls and ceiling insulation is the only option that attracts a credit for labour as well as materials. Certain higher-than-usual rates for installing equipment in older homes, as long as it was done by two years after acquisition, were abolished as of this year.

In the event that the expected further cuts do come in for 2011, to benefit from the current 2010 rates you need to have work done and billed for before the end of this year. Also, if you wish to apply for an interest-free éco-prêt (eco-loan) for the same work, you need to have been offered a loan before the end of this year.

The two cannot be combined for the same work after that (see our helpguide on the eco-loan, which can be for up to €30,000).

Finding a firm

When deciding on who to choose to supply and install eco-friendly home improvements, you could rely on word of mouth from friends to find a local firm, or seek advice from your Espace Info-Energie (one of a national network of advisers on energy-efficiency in the home - see www.ademe.fr/particuliers/ PIE/InfoEnergie.html to find the nearest one).

The following site, approved by the government, can help you find firms that have signed up to a system of quality charters for certain kinds of product: www.qualit-enr.org

This is not essential to get a tax credit, but it is an indicator that a firm that has been checked for a recognised level of professionalism:

The firms listed under this quality charters scheme have the following logos:

- QualiSol (hot water and heating from solar panels),
- QualiPV (solar photovoltaic panels),
- QualiBois (wood burning stoves) and
- QualiPAC (heat pumps).

The site has a large searchable directory of firms on the top right (“annuaire”) in which you can insert your post code.

You can also try the www.connexionfrance.com directory, using keywords like “solar,” “stove” or “renewable.”

Connexion helpguide

TAX credits for environmentally friendly installations in the home have been in place since 2005.

They are for measures to make the home more energy-efficient or for renewable energy production systems.

The idea is that you have work done, then you put the cost down on your next income tax declaration (in a dedicated box) and the government takes a set percentage of it off your tax payable.

If you have work done this year you would usually apply for it next year (though late applications are possible for two years).

What is more, if you are below the threshold to pay income tax, you are entitled to a cheque from the tax office for the relevant amount.

The tax credits are expected to continue in their present form until the end of 2012, and it is not yet known if they will be extended or replaced after that.

Download our eco tax credits guide here

Resident or second-home owner in France?
Benefit from our daily digest of headlines and how-to's to help you make the most of life in France
By joining the newsletter, you agree to our Terms & Conditions and Privacy Policy
See more popular articles
The Connexion Help Guides
Income Tax in France 2021 (for 2020 income)*
Featured Help Guide
Order your Income Tax in France guide now for immediate digital access
Get news, views and information from France