Rental Income Taxation: Understanding Property Income in France
Rental income refers to rents received from unfurnished real estate properties, whether it involves a luxury apartment in Paris, an investment building, or a high-end international property. These revenues are taxed under the category of property income and may fall under two distinct tax regimes:
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the micro-foncier regime,
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the actual (real) tax regime.
Choosing the appropriate regime is a key decision for investors managing a prestige real estate portfolio.
The Micro-Foncier Regime: A Simplified Option
The micro-foncier regime applies a flat 30% allowance to gross rental income. Only 70% of rents are taxable, with no need to justify actual expenses.
This regime applies automatically if:
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annual gross rents do not exceed €15,000,
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the property is not subject to an excluded tax incentive scheme.
No separate property income tax return is required under this regime.
The Actual Tax Regime: Preferred for High-End Real Estate
The actual regime allows landlords to deduct all real expenses, including:
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management fees,
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insurance,
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maintenance and renovation works,
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condominium charges,
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mortgage interest.
This option is particularly well suited to luxury real estate investments in Paris and abroad, where expenses are often substantial.
If deductible expenses exceed rental income, a property deficit arises. Up to €10,700 per year may be offset against total taxable income, with the remainder carried forward for ten years.
The actual regime is mandatory above €15,000 in annual rents, but may also be chosen voluntarily for three years.
Withholding Tax on Rental Income
Since January 2019, property income has been subject to withholding tax at source. Monthly or quarterly instalments are withdrawn based on the taxpayer’s withholding rate plus social contributions (17.2%).
Final tax adjustments are made the following year once the definitive tax liability is calculated.
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