Owners: Which tax regime to use for your rental property in France ?
Owners: Which tax regime to use for rental your property in France ?
Local taxes, real estate wealth tax (IFI- impôt sur la fortune immobilière), tax on rentals: presentation of main taxation rules you need to know to rent your property in France.
How is the rental income on an unfurnished apartment taxed?
The method of taxation varies depending on the status of the leased property. If the property leased is unfurnished, as in without any furniture or appliances, rent (less any allowable deductions) is taxed in the “property revenue” category. It is then added to the any other taxable revenue (Impôt sur le revenu – IR) and taxed at the tax rate applicable to the owner, also the rental revenue is subject to the added social security contribution (CSG, CRDS) at a rate of 17,2%. Note that since 2015, non-residents are subject to social security contribution on the revenue from their real estate rentals or the rights from such property.
If the gross annual rent (excluding charges) is inferior to 15,000€, the owner automatically benefits from the “microfoncier” scheme with a notable 30% lump sum rebate. On the other hand, the owner will not be able to deduct any eventual expenses incurred during the year.
Should the gross annual rent exceed the 15,000€ threshold or if the owner has important expenditures (renovations for example) and wishes to opt for this, the rent revenue will be taxed on the “real” amount. In this case, a large part of the charges and expenses (including the interest from a loan) are deductible from the property revenue: which will reduce the taxable amount. The year of expenditure, the eventual balance may be deducted from the global revenue of the owner up to 10,700€. Should there remain a deficit, it may be reattributed onto the rent over the next ten years.
How is rental income on a furnished apartment taxed?
If the rental property is furnished, even if it is only occasionally let out (such as a chalet rented for a couple of weeks in the winter) the rent is systematically taxed in the category of commercial and industrial revenue (bénéfices industriels et commerciaux - BIC) and is subject to the progressive tax scale.
Should the gross annual rent (excluding charges) be inferior to 70,000€, the owner automatically benefits from the “micro-BIC” scheme with a notable 50% lump sum allowance. In return, the owner will not be able to deduct any eventual expenses incurred during the year.
Should the gross annual rent exceed the 70,000€ threshold or if the owner must face up to important expenditures (renovations for example) and wishes to opt for this, the rent revenue will be taxed on the “real” amount. In this case, a majority of the charges and expenses are deductible from the property rent. The building (excluding land) and the furniture may be amortized (the building over 30-40 years and the furniture over 7-10 years). If the charges are more than the rent, the deficit may be deducted from the other taxable BIC revenue of the year and if the deficit remains, it may be reattributed over the next 10 years (LMNP status – Loueur en meublé non professionel/non-professional furnished landlord). Should the owner have opted for the Professional furnished landlord status (LPM- loueur en meuble professionnel), the deficit may be reattributed onto the global revenue of the year and on the following six years.
Non-resident owners: international tax agreements
The rental revenue on properties situated in France is subject to French tax. Many tax agreements with other countries (over a hundred) have been ratified to avoid non-residents to be taxable in France and in their country of origin. This may be adjusted according to different agreements.
Our Vaneau Location advisors are at your service to guide you through this process at the time of rental of your property in France.
VANEAU LOCATIONS RIVE DROITE
9, rue Poussin,
Tel : +33 (0)1 56 75 20 20
Contact : +33 1 56 75 20 20
VANEAU LOCATIONS RIVE GAUCHE
61, rue de Varenne,
Contact : +33 1 58 09 80 00