Non Residents leasing Furnished Rentals in Paris: Income from a furnished rental, How is it taxed?
If you rent furnished accommodation, you are automatically placed under the ‘BIC’ tax regime (industrial and commercial income tax) instead of under the regime applied to property income, as you would be if you rented unfurnished property.
This status is also open to non-residents wishing to benefit from furnished rental status. Depending on the income you receive from your leased property, you must register either as a non-professional (LMNP) or as a professional (LMP) landlord.
LMP or LMNP
To profit from an LMP status, you must be registered in the Commerce and Companies Register (RCS). This implies that you are actively and professionally renting your business.
To have the status of LMP, the following conditions must be fulfilled:
- You must declare more than 23,000€ per year (Total rent including taxes including rental charges)
- This revenue must be greater than the total amount of your other income (salaries, other BICs, BNC (Non-Commercial Profits) …
Obviously, to be considered as a non-professional landlord, you do not need to fulfill the conditions for professionals.
Advantages of LMP status
The LMP status offers several advantages, notably in terms of:
- Property shortfall : The deficits are deductible from your other income without limitation. If your income is insufficient, the remainder can be carried forward on the taxable income of the following 6 years.
- Surplus value : In the event of the sale of the rented accommodation, capital gains are taxed according to the regime of professional gains rather than real estate gains. This is a much more advantageous scheme. A total exemption is granted when rental income is less than € 90,000 for the previous 2 calendar years, and the activity began at least 5 years ago. A partial exemption is provided where income is between € 90,000 and € 126,000.
- ISF (Solidarity Wealth Tax) : The lease is considered to be a professional property and does not fall within the scope of the ISF.
Different Taxation Schemes
Regardless of whether you are considered a LMP or LMNP, you have the choice between several schemes:
First of all, there is the BIC (Industrial and commercial benefits) scheme. You are covered by this plan if your rental income is less than 32,600 € per year, excluding VAT per year if you rent a furnished apartment. You then benefit from a 50% tax rebate. This means that you cannot deduct your charges as the rebate is supposed to cover them. However, nothing prevents you from opting for the simplified scheme.
If you do opt for the simplified scheme, your expenses exceed the 50% flat-rate allowance provided for in the BIC scheme or that income exceeds 32,100 euros per year. The simplified scheme allows you to deduct all costs and expenses (works, interest on loans, property taxes, management fees, etc.). If these are very large, it is possible to reach a real estate loss. With LMNP status, this deficit is attributable to land income for ten years. With LMP status, the investor is allowed to charge it against his total income.
The standard scheme concerns an investor with a very large rental income and offers the same benefits as the simplified scheme. However, under the conditions for a professional landlord, you can benefit from an exemption of capital gains on resale, as well as a scheme of favor with regard to ISF.
If you think that this matter applies to you, it is important to ensure substantial understanding of all relevant information, facts and procedures. Here at Maupard, we would be more than happy to advise you on the next steps and to allow you to make the most of these opportunities.
Do not hesitate to contact us by telephone on +33 (0) 1 53 93 94 20 or by e-mail to [email protected], so we can work out the needs of your business. Our team of experts is here to answer any questions you may have.