French forests spread over 13 million hectares. About
2/3 of this area are owned by private owners (individuals,
pension funds or corporations).
Private forest management is performed either by private
forest consultants or by owners' cooperatives or in a small
number of cases by a public forestry organization.
Even though the forest products balance of trade is in
a deficit as a whole, French forests represent a significant
export sector, particularly in the form of logs either
as sawlogs including veneer and peeler logs or as industry
Throughout the world the quantity demanded for forest
products is on the rise as population increases and as
tropical forest resources dwindle.
Outlets for forest products are multifarious, from raw
material for woodpulp, firewood or charcoal used in chemical
industries to materials used in carpentry, furniture, interior
decorating as well as for space vessels insulation.
On average in the long pull, the market for French forest
products is good even if it is subject to short term fluctuations.
A strong domestic demand being largely completed by a strong
demand from neighboring countries whose wood production
is less than their needs.
French forest products have been exported to many European
countries and, for high quality products (such as beech
or veneer oak), are sent even to Japan or China.
III. FOREST TAXATION
Forest taxation has been geared for 50 years to help and
promote wood production.
Recent issues about carbon dioxyde reduction in the atmosphere
have fostered the role of forests as carbon sinks hence
reinforcing the need for a « mild taxation approach » of
Also because of its small incidence, it avoids owners
to have to split their properties by way of partial sales
in order to pay for taxes upon bequest.
State, district (“département”) and
local taxes upon transaction closing amount to 5.09 % effective
Jan. 1, 2006 + solicitor’s fees which vary according
to the size of the deal (say, 3 to 3.5 % is a good average).
A new tax law will allow, through Dec. 31, 2010, individuals
to deduct once from their taxable income an amount up to € 5,700.-
(€ 11,400.- per taxable married couple) under the
and owning the forest for at least 15 years. In the case
of purchasing bare land, afforestation should take place
within the first 3 years.
The same tax deductions apply to the purchase of shares
of companies specializing in forest owning (these companies
function like limited partnerships, say in California),
but shares have to be detained for at least 8 years and
the base share value upon which tax deductibility applies
is equal to 25 % of their face value upon purchase.
Other tax deduction systems exist to promote new forest
investment vehicles such as Forest Saving Companies (Société d’Epargne
Forest owners do not have to pay an income tax on the
proceeds of their cuts.
They have to annually declare a forfeited taxable income
though. This forfeited income is usually light and results
from local tax schedules set up by local commissions and
are regularly updated.
and can be applied for seedings, plantations and re-plantations
in the form of one of the following alternatives :
or as a 50 % exemption of the after seeding / planting
new annual forfeited income.
Similar tax dispositions exist for natural reproductions
existing in selection forests (i.e. regulated uneven-aged
forests) whereby 25 % the annual forfeited taxable
income is exempted for 15 (renewable) years.
3.2. Land taxes
Usually in the amount of € 4.- to 16.- per hectare
per year on average, land taxes can go up to € 30.-
per ha-year or even go beyond that.
again, exemptions may exist as follows :
- 100 % annual land tax exemption
for reforestation (afforestation) with :
· poplar over a 10 year
· softwoods over a 30 year
· hardwoods over a 50 year
- 100 % annual land tax exemption
for existing natural reproduction (1)(2) with
· softwoods over a 30 year
· hardwoods over a 50 year
upon reputed success of this
regeneration under normal conditions.
a balanced irregular forest(3) the annual land tax
rebate is 25 % for 15 (renewable) years.
to be met for natural regeneration to be land tax
exempt: presence of natural seedlings of so-called
classical species regularly spread over at least
70 % of the area, with a minimum density of 1100
seedlings per ha for ash, cherry or maple trees,
or 2000 seedlings for the other species. Seedling
height should be between 1.5 and 3 m
benefit from the full time span exemption, tax exemption
should be requested between year 3 and year 10 after
the year of final cutting. Beyond year 10, the time
span exemption will be the difference between 30
years (50 years) and the time of declaration after
the final cut year minus 10 years.
equilibrated regeneration under an irregular forest
system is when there are 100 free stems per hectare
of so-called classical forest species, having a height
between 3 and 10 m, and regularly spread over an
area representing at least ¼ of the compartment
size. The stand itself should be of an irregular
nature, i.e. presenting on the whole of the area
a diversity in both diameters and ages.
4. Gift and Estate taxes
Forest gift or estate state taxes are advantageous
since forest face values upon which these duties are
levied are divided by 4 under some commitment on the
part of the beneficiary to provide a good stewardship
of his forest during the next 30 years.
As an indication, below is a table of gift and estate
From parents to children: franchise of € 50,000
(2005).- per child.
(b) = (a) × 4
to 40.000 €
to 7.600 €
7.600 € to
11.400 € to
15.000 € to
520.000 € to
850.000 € to
Above 1.700.000 €
to 30.400 €
30.400 € to
45.600 € to
60.000 € to
2.080.000 € to
3.400.000 € to
advantageous tax options are still available when a
private owner decides, while alive, to give his property
to his children or beneficiaries in usufruct (he will
then become an usufructuary, while his children or
beneficiaries become naked owners– see for instance
the Louisiana tax code for similar cases).
If need be, precise
cases can be studied for our reader.
5. Wealth Tax ("Impot de Solidarité sur
la Fortune or ISF")
In France, every fiscal resident (see further) being
worth more than € 732,000.- must pay each year
a wealth tax (ISF) as follows:
|Resident’s worth (€)
||ISF tax rate
|up to 732,000
||0,00 % (no ISF)
on the amount
Note : the tariff brackets are to be modified
each year in the future.
The tax amount is reduced by € 150.- for each
dependent person to the taxpayer.
Again is the forest value taken into account for 1/4
of its appraised value. For instance, if a forest is
worth € 2,880,000.- the fourth of it is € 720,000.-
and the corresponding ISF tax rate is 0 %. It is therefore
As a condition for this reduction of 3/4 in the value
of the forests in the sense of ISF, the owner takes
the commitment to manage his property for 30 years
as a "good family father", that is to apply
an approved management plan during this period (or
several sequential management plans).
If the forest is a professional belonging (say, as
part of the assets of a sawmill or when the owner can
prove he is professionally dedicated to his forest),
no ISF tax return is to file.
For non fiscal residents in France, i.e. not having
there their main residence or main economic interests,
the ISF tax must be paid unless specific tax conventions
between countries waive this aspect to avoid double
taxation (for instance, Belgian residents are subject
to the ISF in France).
6. Capital Gains Tax
Capital gains taxation does now occur upon the sale
of a forest or of limited partnership shares. The capital
gains tax rate amounts to 27 % but after the fifth
year an annual marginal 10 % rebate applies such that
no capital gains tax is due after a holding period
of 15 years.
In addition to the preceding, a rebate of € 10.-
per hectare and per holding year is applied against
the resale value to determine the capital gains basis.
In addition a € 1,000.- rebate is applicable to
the taxable gross capital gains value.
(1) Functioning mode : Asset value € 1,500,000
|up to € 732,000 , no ISF ;
|from € 732,000 to € 1,180,000 = € 448,000.- × 0,55%
||= € 2,464
|from € 1,180,000 to € 2,339,000 = € 1,059,000.- × 0,75
||= € 7,942,50
||= € 10,406,50 per annum
7. Concluding Remarks
Forest investment has been for a long time favored
in France from a fiscal standpoint. In addition to
these advantages, subsidies are obtainable under some
conditions for reforestation or roading.
These subsidies cover about 30 to 40% of the actual
costs with variations on a case basis.
IV. HUNTING / STALKING LEASES AND MISCELLANEOUS
Leasing hunting rights can provide a substantial extra
annual income (between € 22.50 and 38 per hectare-year
with lows reaching € 7.50 and highs above € 91
up to € 152).
Fenced in forests would even reach higher rental
amounts but then one has to balance animal damage on
trees against cash income.
Lease income is taxable as a regular income. For non-corporate
owners, if such an income comes from hunting and a
rental amount less than €15,000 per year occurs,
a 40 % rebate on income is applied to take care of
forfeited expenses presumed to be needed for hunting
grounds maintenance and upkeep. If the rental is equal
to or more than €15,000, you can expense all the
pertinent costs and a further rebate of 14 % is applied
to the gross income from hunting. If the owner is incorporated,
no special tax treatment applies: he just deducts his
expenses from the hunting gross income, to which the
corporate income tax is applied.
Lease of fishing or mining rights as well as mushroom
picking permits provide possible (sometimes sizeable)
extra revenues when these activities are relevant.
V. RETURN ON
Forest profitability is a complex issue because each
forest is a special case the data of which being different
from one another and hence generating different returns.
Also one should differentiate two aspects :
1) Regular profitability or, more exactly, regular
average income obtained by the management of the forest
2) Return on investment as seen from the standpoint
of an increase in asset value over a period of time.
These two aspects can also interplay with each other.
As far as regular forest income is concerned, an average
tree volume growth of 1.3 to 6 % is usually accepted.
These figures can vary as a result of a number of factors
such as soil quality, tree species and age, stand type
and quality, as well as the management method used.
The choice of the timber marketing approach can also
made the profitability figures vary (e.g. sell timber
regularly or, if technically feasible, only when the
timber market is bullish)..
This production, however, is somewhat theoretical
since one does not crop trees each year at the same
place and since at the time of cuts several options
present themselves leading to harvest more or less
than growth (i.e. to dip into the capital, to maintain
or improve it) and to be more or less selective according
to the timber market response.
Financial outcomes will have to be seriously corrected
as a function of the particularly positive above factors,
such as forest taxation and capital gains, if one is
to make comparisons over a time period between forest
investment and other investment types.
Profitability, whether regular or long term, will
largely depend on the quality of investment which will
have been realized.
This is where precisely a domain in which the Forest
Consultant will play a capital as well as determining
role for the potential owner who will be consulted
In a general way, forest investment should be envisioned
over the long, or even very long, term to be put in
a situation to fully benefit from all its particular
components and to allow the forest owner to measure
the impact of all the management options he will have
In general, over a long period of time, forest investment
maintains its purchasing power and yields a capital
gains of 1 to 4% over and above inflation.
Furthermore, with a judicious forest investment and
the right choice of forest advisor, the stewardship
of such an asset presents no specific difficulty:
is no legal obligation to hold a bookkeeping system
(although it might be useful),
constant worry about daily arbitrages
growth rhythm allowing to ripen one's decision without
jeopardizing the future of a property if a decision
is not taken immediately.
VI. WHO INVESTS
IN FRENCH FORESTRY ?
Essentially French people or private organizations
invest in French forestry but also many Europeans as
well as prominent Middle Eastern people and North Americans,
especially when it is possible to acquire a historical
dwelling or a castle nearby the forest. The possibility
to purchase an oak forest could be tantalizing to winemakers
or cooperage specialists.
VII. THE CURRENT FOREST MARKET IN FRANCE
According to the forest type, its thriftiness and
age, one should count on investing anywhere between € 1,500
to 9,500 per hectare (or more) including land.
The average forest price is about € 3,000 to
6,000 per ha with highs going into the € 9,000
- 12,000 range (or sometimes above) per hectare.
Forest land values are counted in the above price
ranges for € 800 to 1,300 per ha.
Usual tracts purchased cover a fraction of a hectare
to 500-600 hectares, with some exceptions for larger
areas (1,500 or 2,000 ha from time to time).
For foreigners to make a "real" forest investment
it seems that a size of 80 ha would be a minimum, with
an optimum between 300 to 600 ha, a larger area justifying
better the travel costs to and from France.
As a result, a minimum purchasing budget of € 300,000
to 800,000 is advisable with a possibility to increase
it to € 2,300,000 to 3,100,000 or more.
Currently the forest market is favorable to the buyer.
There are, thus, opportunities yet to grab.
UNIT COST AND PRICE IDEAS
Silvicultural costs vary with treatment type, forest
operation intensity and local conditions. As an example:
We have mentioned public subsidies for silviculture taking
into account 25% to 40% of important expenses. Management
fees with a contracting Forest Consultant would be between € 5
to 15 per ha per year and between 3 to 8% of the proceeds
of cuts or the costs of forest work.