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3. Business Registration as a Landlord in France
3.1. 'Professional Landlord'If you let residential property in France, you may be required to register as a business with the business registration authorities, in this case the Chambre de Commerce. The requirement to register with the Chambre de Commerce as a business only applies in relation to furnished accommodation, and only then in particular circumstances. There is no requirement to register if you let unfurnished accommodation, as the rental profits are considered as ‘professional’ income. If you let furnished accommodation the rental income is considered to be ‘commercial’ income and different rules apply. The rules have been changed for 2009, toughening up the criteria on obtaining the business status of ‘professional landlord’. The status of ‘professional landlord’ of furnished accommodation is only available if you are:
The definition of 'other earnings' used to exclude pension earnings, but they have now been included in the definition. If you let both unfurnished and furnished accommodation, then the income from each will be considered separately. In the first year of operation you will need to be registered on the basis of an estimate of your rental and other earnings. If the income criteria are later not met then, in theory, you would be removed from the business register, although the procedures for deregistration are not at all clear. One reason is because the social security authorities have decided that the only criteria they will take into account for the purposes of affiliation to the self-employed social security insurance fund, the Régime Social des Indépendants, is registration with the Chambre de Commerce. Accordingly, unless the Chambre de Commerce itself acted to remove you from the business register (or you did so yourself), you would continue to remain registered as a professional landlord, even though you may not meet the income criteria! The main implication of registering as a professional landlord in France is that it grants you particular tax advantages, but you will also be required to pay social security contributions as a self-employed person. The social contributions amount to about 45% of net profits, although the precise percentage depends on the tax regime you have adopted - micro-entreprise, regime réel or auto-entrepreneur. Business registration grants you access into the health system, useful if you are not otherwise able to obtain health cover through the state health insurance system. If you already have health cover through an E form (E106, E121 etc) you will still pay the health contributions from your rental income. Prior to 2009 it was often the case that landlords of furnished accommodation were registered with the Chambre de Commerce, but did not pay social security contributions. It would now appear that this dispensation will no longer apply. As tough as this seems, even if you do not operate as a formally registered business, you do not escape the payment of certain social charges. In particular, your rental income will be subject to a social charges CSG/CRDS at the rate of 12.1% on net income. We say more about this in the next section on the Taxation of Rental Profits. Although the implications for social security contributions may be tough, there are some important tax advantages from being registered as a professional landlord. These advantages are:
3.2. Definition of ‘Landlord of Furnished Accommodation’There is a particular definition of a ‘landlord of furnished accommodation’ that is used by the tax authorities. Most importantly, the definition requires that only a minimum level of services must be provided, over and above the basic letting of the property. In particular, if the landlord provides at least three of the following services:
they cease to be a landlord of furnished accommodation, and instead become a business with hotel and related tax status. However, as is often the case in France, the general rule often has exceptions, and it is no less the case here. In particular, where the services are provided on an ‘ancillary’ basis to the main letting, then the owner retains the status of landlord of furnished accommodation. By way of example the tax authority states that where cleaning of the property only takes place on a change of guests, or the change of linen is not on a ‘regular’ basis, or the welcome of the guests is limited mainly to the handover of keys, then the owner would be a landlord of furnished accommodation. This would seem to grant owners of chambres d'hôtes and gîtes the right to hold Loueur en Meublé Professionnel (LMP) status, provided the income criteria also met. In the case of uncertainty, each case would need to be considered on its merits. 3.3. 'Auto-Entrepreneur'If you are unable to meet the income criteria to obtain business registration, and you wish to register as a business (for instance, to obtain access to the French health system), then it is still possible to obtain business status as a landlord, by registering as an auto-entrepreneur. You will pay social security contributions at the rate of 21.3% of your gross rental income, although if you own a chambre d'hôte or rural gîte you pay social security contributions at the rate of 12% and not 21.3% as for other landlords of furnished accommodation with 'auto-entrepreneur' tax status. You will also be liable for income tax on the same basis as a landlord registered as a micro-entreprise, the details of which are set out in the following pages. Next: Taxation of Rental Profits Back: Top Tips for Letting French Property Couldn't find what you are looking for? Search again now!! The IFP Guides are published for general information only. Please visit our Disclaimer for full details. |
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