3. Business Registration as a Landlord in France

1. 3.1. ‘Professional Landlord’
2. 3.2. Definition of ‘Landlord of Furnished Accommodation’
3. 3.3. ‘Auto-entrepreneur’

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 were changed in 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:

• Registered with the Chambre de Commerce as a Loueur en Meublé Professionnel (LMP);
• If your gross annual receipts from furnished accommodation exceeds €23,000 and;
• Your rental receipts also exceeds your total other earnings.

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, as some regimes pay a fixed percentage of their income in social security contributions eg - micro-entreprise 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 or S form (E106, E121, S1 etc) you will still pay the health contributions from your rental income.

Prior to 2009 it was often the case that small landlords of furnished accommodation were registered with the Chambre de Commerce, but did not pay social security contributions. Strictly speaking, given the stance taken by the RSI, this concession no longer applies, but on the evidence of reports we have received, RSI are not applying a strict interpretation of their own general rule.

This situation clearly remains unsatisfactory, and it is to be hoped that in due course there will be some clarification about the circumstances of small landlords.

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 the social charges (prélèvements sociaux) at the rate of 13.5% on net income.

We say more about this in the next section on the Taxation of Rental Profits.

These advantages are:

• You can set off losses against the totality of your other earnings, and there are generous rules on depreciation;
• The property is exempt from consideration for wealth tax;
• There are potential exemptions from capital gains tax, particularly if you have run the business for at least 5 years;
• There are concessions on inheritance tax as the property will be assessed as business assets.

You should take good professional tax advice on these potential benefits as a complicated set of rules applies.

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 tax status:

• Provision of breakfast;
• Regular cleaning of the property;
• Provision of linen;
• Welcoming of guests (even by someone other than owner);

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. 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, in order 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.

The level of your social security contributions will depend on the nature of the accommodation. The normal rate is 21.3% of your gross rental income, but if you own a chambre d'hôte or rural gîte you pay social security contributions at the rate of 12%, 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.