What is the taxation in furnished rentals for non-residents?
When you own property in Paris (or anywhere else in France) and rent it out, you'll also be earning money. That will be considered your rental income and just like your normal income, you'll have to pay taxes on it. Even if you're a non-resident.
Here in France, a non-resident is both a person who officially lives abroad and a tax status. You can be considered a non-resident when:
The income you earn from renting out your furnished property in France and from a potential sublease is subject to income tax in the category of industrial and commercial profits (BIC).
As a reminder, according to Decree No. 2015-981 of July 31, 2015, we call furnished rental, the provision of a furnished home that includes all the furniture elements essential for normal occupation.
The income must be reported on the complementary declaration 2042-C-PRO form in the dedicated section:
Overall, the taxation for furnished rentals owned by non-residents is the same as for French residents.
Here in France, a non-resident is both a person who officially lives abroad and a tax status. You can be considered a non-resident when:
- You spend most of your time outside of France
- You work overseas
The income you earn from renting out your furnished property in France and from a potential sublease is subject to income tax in the category of industrial and commercial profits (BIC).
As a reminder, according to Decree No. 2015-981 of July 31, 2015, we call furnished rental, the provision of a furnished home that includes all the furniture elements essential for normal occupation.
The income must be reported on the complementary declaration 2042-C-PRO form in the dedicated section:
- Professional industrial and commercial income
- Income from non-professional furnished rentals
Overall, the taxation for furnished rentals owned by non-residents is the same as for French residents.
What are the conditions to be met to be a professional furnished rental company?
You will be considered a professional lessor when you meet two specific conditions:
Renting out your furnished property, whether you're a professional lessor or not, is still considered a commercial activity. Thus, the profits you earn are still subject to tax.
- The annual revenue you earn from the rent exceeds €23,000.00.
- Your rental income exceeds your own general income subject to income tax under the categories of wages and salaries within the meaning of Article 79 of the French General Tax Code (CGI).
Renting out your furnished property, whether you're a professional lessor or not, is still considered a commercial activity. Thus, the profits you earn are still subject to tax.
What are the expenses deductible from the rents received?
- Notary or Incorporation Fees
- Local Taxes
- Maintenance and Repair Costs
- Loan interest
- Management Fees and Insurance
- The Depreciation of Furniture Over a Period of 5 - 10 years, for a rate of between 10% and 20% per year.
What is LMNP status?
The status of an LMNP (Non-Professional Furnished Lessor) is aimed at landlords of furnished properties. French residents and non-residents are subject to the same eligibility conditions:
Important To Note:
- Offer a furnished rental defined as "decent housing equipped with furniture in sufficient number and quality to allow the tenant to sleep, eat and live properly with regard to the requirements of everyday life" in the ALUR Law of March 2014.
- Earn less than €23,000.00 per year in rental income. The total amount of rent must also represent less than 50% of your total income. Otherwise, your status then be that of an LMP (Professional Furnished Lessor).
Important To Note:
- The LMNP Status is not subject to social contributions.
- Social Security Contributions represent:
- 17.2% for a non-resident outside the EEA (European Economic Area) Area or Switzerland.
- 7.5% for a non-resident of the EEA Area or Switzerland.
- Capital Gains Tax is the same for residents as for non-resident LMNP and is up to 19%.
How is LMNP income taxed?
Even as an LMNP, you're required to file the declaration n ° 2042-C-PRO. 2 Tax Regimes are possible:
You also need to mention your gross income and a flat-rate allowance of 50% is automatically applied.
In the case of a furnished tourist accommodation—such as cottages, vacation villas, or bed & breakfasts—a flat-rate allowance of 71% will be applied.
The application of the micro regime is automatic if the rental income does not exceed:
Under the Real Regime, all charges can be deducted.
It will be necessary to report the tax result determined on the declaration n ° 2031 filed:
- Micro BIC Regime
- Real Regime
You also need to mention your gross income and a flat-rate allowance of 50% is automatically applied.
In the case of a furnished tourist accommodation—such as cottages, vacation villas, or bed & breakfasts—a flat-rate allowance of 71% will be applied.
The application of the micro regime is automatic if the rental income does not exceed:
- €15,000.00 for Unfurnished Rentals
- €72,600.00 for Standard Furnished Rentals
- €176,200.00 for the Furnished Tourist Accommodations
Under the Real Regime, all charges can be deducted.
It will be necessary to report the tax result determined on the declaration n ° 2031 filed:
- If you only have one furnished rental under the Business Tax Service (SIE).
- If you have several furnished rentals and your most important properties are under the SIE.
Ce qu’il faut retenir :
A non-resident is both a person living abroad as well as a tax status. A person is considered a non-resident when:
The income earned from renting out a furnished property in France and from a potential sublease is subject to income tax in the category of industrial and commercial profits (BIC).
The income must be reported on the complementary declaration 2042-C-PRO in the dedicated section:
Overall, the taxation of a furnished rental for non-residents is the same as for French residents.
- They spend most of their time outside of France
- They work overseas
The income earned from renting out a furnished property in France and from a potential sublease is subject to income tax in the category of industrial and commercial profits (BIC).
The income must be reported on the complementary declaration 2042-C-PRO in the dedicated section:
- Professional industrial and commercial income
- Income from non-professional furnished rentals
Overall, the taxation of a furnished rental for non-residents is the same as for French residents.
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Posted on 05/12/2022 by
Andy LECUYER
