Advice on real estate income in France
If you’re looking for expert advice on real estate income in France, here’s the latest from Perpignan-based expert comptable (accountant), Patrice Perrin.
1 – Unfurnished lettings “Revenus fonciers”
1-1 : Régime réel
It applies to flats that have minimal furniture and that are rented to long-term tenants (ie the tenant needs to bring their own furniture to be able to live on the premises).
Miscellaneous expenses such as insurance, land tax (taxe foncière), real estate agency and accounting fees, maintenance works (plumbing, electricity…), mortgage interests…can be set against the gross rent to calculate the taxable income.
If there are deficits, generally incurred by maintenance works and interest on mortgage, they can :
- Be set against the other taxable income for a maximum amount of 10,700 € (but not the part incurred by mortgage interest),
- Be carried forward for ten years to be set against the same type of income (real estate income).
1-2 : Micro-foncier
An optional scheme of micro-foncier also exists for rent totaling less than 15,000 € a year. Within this scheme, a flat allowance of 30% is applied to the gross rent in order to set the taxable income.
Apart from the income tax, real estate income is also subject to “prélèvements sociaux” (ie social contributions), which, since 2012, now also apply to non-residents. In 2018, the rate of these contributions was 17.2 %.
2- Furnished lettings “Loueur en meublé non-professionnel” (LMNP)
Typically this applies to fully-furnished seasonal/holiday lets that are rented to holidaymakers or those following a cure in Amélie-les Bains for instance.
2 schemes exist as per the revenus fonciers above.
2-1 : Micro-BIC
Only the gross rent has to be reported on the tax return. A flat allowance of 50% is granted for the expenses to calculate the net taxable income. Thus this scheme can not generate deficit, like the micro-foncier scheme described above.
Furthermore, the maximum yearly rent is limited to 33,200 € (82,800 € if the house rented is classified as Chambre d’Hôte, Meublé de Tourisme and the allowance is raised to 71 % as opposed to 50 %).
2-2 : Régime réel
This scheme, unlike the micro-BIC, requires the preparation of accounts to French accountancy standards and additional tax forms, and is therefore more costly. It also requires registration as a “Loueur en meublé non-professionnel” at the tax office (this is also true for the LMNP within the Micro-BIC scheme).
It enables the tax payer to claim all expenses directly linked to the activity including depreciation costs of the building and usually leads to a deficit that can be set against the LMNP income of the following years.
This scheme can also be used by non-residents who own a house in France and rent it out when they are not using it, providing that they deduct a part of the expenses (including depreciation costs of the building) pertaining to their share of occupation of the house.
Apart from the income tax, these LMNP incomes are also subject to the “prélèvements sociaux” mentioned above.
Note also that, as an indirect consequence of the EUCJ De Ruyter ruling in 2015, the law has extended the “prélèvements sociaux” from the income generated in 2015 to the “LMNP” of the non-resident.
Following a new court case against the “prélèvement sociaux” won by non-residents, the “Loi de Financement de la Sécurité sociale pour 2019” has reduced these “prélèvements sociaux” for non-residents to a flat rate of 7.5 % instead of 17.2 % as from 2018 income.
2-3 : Application of social contributions since 2017 to LMNP (régime micro and régime réel)
Due to the excesses associated with the use of collaborative platforms of type R B and B, the public authorities decided to review the criteria for affiliation to the S.S.I. (Sécurité sociale des Indépendants) of renters in furnished lettings.
The « Loi de financement de la sécurité sociale pour 2017 » recently enacted rules whereby «Any person engaged in the business of renting furnished premises, the receipts of which exceed 23,000€ when these premises are rented to a clientele on a daily, weekly or monthly basis, must be affiliated to the S.S.I. ».
The tax qualification of LMNP or LMP for these types of income is no longer relevant in terms of S.S.I. affiliation obligations. Solely the level of the income (23,000 €/year) is taken into consideration.
For further info or any other financial questions, contact Patrice Perrin today