The Tax Benefits of Furnished Rentals in France
Furnished rentals refer to renting property - premises, rooms, apartments or houses - equipped with the furniture necessary for the tenant to move in directly.
In France, furnished rentals present numerous advantages by combining a more flexible rental period with higher return. The landlord of a furnished rental can justifiably set a higher rent price than for an unfurnished apartment based on the quality of the equipment provided, while also benefitting from tax benefits that result in paying little or no tax on the rental income.
Non-professional renters of furnished properties
In France, revenues for furnished rentals are not declared in the property tax category, but rather as commercial and industrial revenues (BIC), even if the landlord is not a professional. These “non-professional” landlords are covered by the status of LMNP (Loueur en meublé non professionnel.
This enables the landlord to benefit from a more advantageous tax regime versus unfurnished rentals, that is to say, either:
- 50% standard abatement (micro bic),
- Record and deduct depreciations, as well as all expenses (régime réel).
The landlord can choose between 2 tax regimes. Often, for simplicity’s sake, landlords choose “micro BIC”, which involves an automatic 50% abatement and no additional paperwork. Whereas in 85% of cases, by opting for the “régime reel”, they would pay little or no tax on their rental income. If this applies to you, remember that it is never too late to change your tax regime and that the Paris-housing.com teams are on hand to help you.
How can you pay no taxes on your rental income?
With the “régime reel”, the most advantageous for 85% of rentals, the landlord can deduct their actual expenses (e.g. mortgage interest, accountancy fees and renovations) and depreciate the value of their property and furniture to reduce the rental income to zero in most cases.
How can you become a professional renter of furnished property?
Landlords can choose to carry out their activity professionally by obtaining the status of LMP (Loueur en meublé professionnel). To do this, they need to fulfil the 3 following conditions:
- Be registered on the French Companies Register (Registre des Commerces et des Sociétés) - repealed 9 February 2018.
- Receive income from furnished rental > €23,000 / year.
- Receive rental income > professional income of the taxable household.
Unless the landlord has significant property assets, the status of Loueur en Meublé Non Professionnel remains more advantageous.