The tax benefits of furnished rentals in France
By definition, a furnished rental property refers to renting out property - premises, rooms, apartments or houses - with the furniture and equipment necessary for the tenant to move in directly.
In France, furnished rentals present numerous advantages by combining a more flexible lease period with higher return. The landlord of a furnished property can justifiably set a higher rent price based on the quality of the equipment and furniture provided, while also benefitting from tax benefits that result in paying little to no tax on the rental income.
Non-professional landlords 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 these 2 tax regimes. Often, for simplicity’s sake, landlords choose the “micro BIC” regime, 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.
How to pay little to no tax on your rental income in France
With the “régime reel”, the most advantageous for 85% of rentals, the landlord can deduct his actual expenses (e.g., mortgage interest, accountancy fees and renovations) and depreciate the value of his property and furniture to reduce the rental income to zero in most cases.
How to become a professional landlord of a furnished property
Landlords can choose to carry out their rental 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- Be registered on the French Companies Register (Registre des Commerces et des Sociétés) - repealed 9 February 2018.
- Generate over €23,000 per year in furnished rental income.
- Generate greater rental income than the professional income of the taxable household.
Hence, unless the landlord has significant property assets, the status of “Loueur en Meublé Non Professionnel (LMNP)” remains more advantageous.