TAXATION
What is a non-professional lessor?
The status of non-professional lessor is recognized when at least one of the following two conditions is met:
- annual income from this activity for all members of the tax household is less than €23,000 ;
- these revenues are less than the income of the tax household subject to income tax in the categories of salaries, wages, pensions and annuities (as defined in article 79 of the French General Tax Code), industrial and commercial profits other than those derived from furnished rental activity, agricultural profits, non-commercial profits and the income of managers and partners mentioned in article 62 of the French General Tax Code.
2/ Prior formalities
Non-professional furnished-rental property owners (LMNP) must complete the formalities for setting up a new business or starting up a new activity online at formalites .entreprises.gouv.fr
This procedure enables you to obtain :
- A SIRET number
- Publicize the existence of this activity
- Indicate your chosen tax regime
The SIRET number issued must be entered on the supplementary income tax return n°2042 C PRO.
The activity of non-professional furnished rental operator is considered as a commercial activity, which is subject to income tax (industrial and commercial profits category) and also to direct local taxes:
- cotisation foncière des entreprises, subject to certain exemptions ;
- cotisation sur la valeur ajoutée des entreprises if sales exceed €152,500;
- taxe d'habitation if the owner has personal use of the rented premises outside the rental period;
- property tax for the owner of the furnished accommodation.
3/ Taxable income
For more information, visit impots.gouv.fr
4/ Income tax exemption
Income from non-professional furnished rentals is not subject to income tax in two cases:
You rent out one or more rooms in your principal residence as a chambre d'hôte on a regular basis, for a period of one day, one week or one month (to people who do not elect domicile there), and the gross annual revenue (rent and any ancillary services: breakfast, telephone, etc.) does not exceed €760 including tax. If this limit is exceeded, your income is fully taxable;
You rent or sublet part of your main residence (bedroom, floor of a house). The entrance to the property is not independent (same as the owner's) and the home insurance policy does not include a "separate room". The rented rooms are the tenant's main residence (e.g., a student or apprentice) or temporary residence if the tenant can prove that he or she has a contract in application of 3° of Article L1242-2 of the French Labor Code, and the rental price is set within reasonable limits (€185 per square meter per year in the Île-de-France region for 2018; €136 in other regions for 2018).
5/ Who manages your tax file?
The department responsible for :
- your income tax (declarations n°s 2042 and 2042 C PRO) is the Service des Impôts des Particuliers (SIP) where you live;
- your business tax returns (special income tax return no. 2031 and, where applicable, VAT returns) is the Service des Impôts des Entreprises (SIE) in the area where the furnished accommodation is located.
If you own several furnished-rental properties located in different SIEs, your returns are managed :
- either at the business tax office of your principal residence ;
- or at the tax office of the location of the furnished property generating the highest income.
6/ VAT
The following are exempt from VAT on this activity:
- individuals who occasionally or permanently rent out a secondary residence, tourist accommodation or part of their main residence as furnished accommodation, without offering a set of services similar to hotel services (breakfast, regular cleaning of the premises, supply of household linen and reception, even if not personalized, of customers);
- local authorities and associations that rent out communal gîtes.
7/ Local taxes
Company property tax (CFE)
Furnished-rental tenants are subject to the cotisation foncière des entreprises (CFE). As of CFE 2019, taxpayers subject to the minimum assessment who generate revenue of €5,000 or less during the reference period are exempt from CFE.
However, people who exceptionally rent out part of their personal home on a furnished basis are exempt from CFE, when the rental is not of a periodic nature. In particular, rentals that are renewed every year are not considered exceptional. Similarly, people who rent out or sublet one or more rooms in their main home are exempt if the rented rooms constitute the tenant's (or subletter's) main residence, and the rental price remains within reasonable limits (e.g.: renting out a room to a student).
Individuals who rent out or sublet all or part of their personal dwelling, particularly as "furnished tourist accommodation", are also exempt from CFE, unless local authorities or their public inter-communal cooperation bodies decide by deliberation to re-establish the business property tax on these premises, for their share of the tax.
Council tax
People who rent out furnished premises are liable for property tax on these premises, when they constitute their personal dwelling and the owners have the premises at their disposal for a certain period of time. If the local authorities decide, by deliberation, to re-introduce the business property tax on furnished premises, the landlord will have to pay both the business property tax and the council tax (unless he is exempt from paying the minimum CFE).
Source: Centre des Impôts d'Hyères
For further information, please contact the Centre des Impôts de Hyères:e-mail: sie.hyeres@dgfip.finances.gouv.fr and www.impots.gouv.fr
INSURANCE
It is not compulsory for either the tenant or the owner to take out insurance for a furnished holiday home intended for seasonal rental. In practice, the owner can either take out the insurance or require the tenant to be insured. These details will be included in the rental contract.
As far as the owner is concerned, comprehensive homeowner's insurance (MRH) does not cover rental activities, and the use of holiday attestations is insufficient. An extension to the multi-risk policy should be requested.
Even if it's not compulsory, it seems essential to take out civil liability insurance - covering damage to property and persons - and to include the risks associated with all the activities on offer.