Putting wood in your portfolio is an original but effective way to diversify your assets. For this, you can buy a private forest directly. According to Safer – Land Development and Rural Establishment Company -, a hectare cost on average 4,630 euros at the end of 2022. “The price of a plot is variable because it depends on the nature of the species planted, the age trees and the size, and accessibility of the forest, explains Sylvestre Coudert, forestry expert and CEO of Forestry France. Please note, to exploit your woods, you will have to meet legal obligations, including a commitment to sustainable management of ten to twenty-five years.
Numerous tax reductions
To make your life easier, you can opt for a specialized investment in wood via a GFF – Forestry Land Group – or a GFI – Land Investment Group. Their shares are marketed between 5,000 and 100,000 euros, depending on the management companies. The latter buy forests, manage them and transfer the income to their partners each year. The financial profitability of high forests is, however, limited because it fluctuates between 1 and 3% per year.
This figure can be increased thanks to various tax advantages. First of all, this investment offers an income tax reduction on entry. “It corresponds to 18% of the investment, but the amount of payments taken into account is limited to 50,000 euros per year per person, 100,000 euros for a couple, and the reduction obtained falls within the tax niche ceiling of 10 000 euros per year”, specifies Mélina Louis, responsible for the real assets offer at the Financial Union of France. If you have invested beyond the first ceiling, the excess payments entitle you to the tax reduction for the following four years. And if the tax loophole ceiling has been exceeded, “it is also possible to carry the excess forward on income tax, until the fifth following year inclusive,” adds Mélina Louis.
Reduced inheritance tax
The last advantage of high forests, undoubtedly the most interesting: this investment benefits from a reduction in gift and inheritance taxes. “As it is set at 75%, a transmission will therefore only be taxed on 25% of its value, with no limit on the amount,” specifies Mélina Louis. This reduction is also applied to calculate the portion of timber assets taxable for real estate wealth tax.
Despite its advantages, this investment is not without risks, because it can go up in smoke in the event of a fire or disappear if wood-eating insects or fungi attack it. It is therefore better not to devote more than 10% of your assets to it.