TAXATION IN FURNISHED RENTAL
Summary
- What are the types of furnished rental leases?
- What is non-professional furnished rentals?
- What is professional furnished rental?
- What is the taxation in furnished rentals for non-residents?
What are the types of furnished rental leases?
There are five types of leases in France: the principal residence lease, the mobility lease, the secondary residence lease, the civil code lease, and the seasonal rental lease.
Principal Residence Lease
Secondary Residence Lease
Mobility Lease
Civil Code Lease
Seasonal Rental Lease
Principal Residence Lease
- The standard lease for tenants looking for permanent residence in the country.
- Serves as the tenant's main address.
- As the primary residence, tenants are expected to stay on the property for at least eight months a year.
- There are two types of principal residence leases in France.
- Standard Lease - Lasts one year
- Student Lease - Lasts about nine months
- As for the contract, it should be renewed automatically at the end of each quarter.
Secondary Residence Lease
- For those who are not eligible for the mobility lease.
- Although it is more flexible than the principal residence lease, it is still a little stricter than the mobility lease.
- The minimum duration of this lease is three months.
- But if you need to terminate the lease, the tenant must send one month's notice after the end of the first three months. This lease requires a security deposit equivalent to half of a month's rent or two months' rent.
Mobility Lease
- Known in French as “Bail Mobilité”
- Intended for people who live in Paris temporarily.
- Mainly foreign exchange students, business travelers, diplomats, and the like.
- Introduced by the French government as part of its ELAN Plan, the Mobility Lease allows for more flexible conditions in the lease.
- Instead of lasting one year like the standard principal residence lease, the duration of this lease ranges from one to ten months.
Civil Code Lease
- A Civil Code lease is a lease for the secondary residence of the tenant.
- Corresponds to people who wish to rent a second home, a pied-à-terre,
- Less regulated than the principal residence lease.
- Often used on properties considered “atypical” (i.e. a beautiful view, a large balcony, a large area, etc.)
- It is used in particular when the use of the premises does not correspond to their purpose, such as when a residential property is used for professional reasons (corporate housing).
Seasonal Rental Lease
- Mostly for short-term or Airbnb-type rentals, specifically for those visiting Paris on vacation or for short business trips.
- Has become more in demand with the rise of platforms like Airbnb, Booking.com, etc.
- Duration can never exceed 120 days (approx. four months) and is not renewable.
- The contract is established from date to date.
- It's possible to extend the lease if necessary, provided it does not exceed 90 days after the original end date.
What is non-professional furnished rentals? (LMNP)
LMNP stands for Non-Professional Furnished Rental, it is a tax-legal status that concerns real estate investors in furnished rentals (new and old properties).
If this is your first time renting out a furnished property, you have to fill in the Cerfa n ° 11921 * 07 or P0i from the beginning of the lease (within the first 15 days of the start of the duration of the lease).
Regarding income in LMNP, it is requested to file the declaration n ° 2042-C-PRO. There are two tax regimes available:
If this is your first time renting out a furnished property, you have to fill in the Cerfa n ° 11921 * 07 or P0i from the beginning of the lease (within the first 15 days of the start of the duration of the lease).
Regarding income in LMNP, it is requested to file the declaration n ° 2042-C-PRO. There are two tax regimes available:
- The Micro BIC Scheme
- You will have to mention your gross receipts (professionally furnished rentals)
- A flat-rate allowance of 50% is automatically applied.
- 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 have only one furnished rental property, to the Business Tax Service (SIE) on which the furnished property depends, or,
- If you have several properties, to the SIE on which your most important furnished accommodation depends.
What is professional furnished rental? (LMP)
It is possible to carry out the activity of a professional furnished rental when two conditions are met:
REGIME BIC
- The annual revenue withdrawn by all members of the tax household exceeds €23,000.00 (in relation to this activity)
- The receipts exceed the income of the tax household subject to income tax (in the categories of wages and salaries) within the meaning of Article 79 of the CGI, BIC other than those derived from the furnished rental activity, agricultural profits, and non-commercial profits.
REGIME BIC
- Simple to set up
- Possible reduction of 50% of gross income (including expenses) and 71% in the case of furnished tourist accommodation.
- Simply indicate the amount of revenue collected during the year on the general tax return (Form n°2042 C PRO) in the Industrial and Commercial Profits section.
- Has a ceiling of €72,600.00
- Tax base: flat-rate
- Social Security Contributions: 17.2%
What is the taxation in furnished rentals for non-residents?
A non-resident is a person living abroad, but it is also a tax status. A person is considered a non-resident when:
The income resulting from the furnished rental of which you are the owner/landlord and a possible sublet are 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 section:
The taxation for non-residents with a furnished rental is the same as for French residents.
- Most of the time, they stay in a country other than France
- They carry out a professional activities mainly abroad
The income resulting from the furnished rental of which you are the owner/landlord and a possible sublet are 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 section:
- Professional industrial and commercial income.
- Income from non-professional furnished rentals.
The taxation for non-residents with a furnished rental is the same as for French residents.