Chambres d'hotes Lose Tax Concession
Tuesday 18 March 2008
The French Government has removed tax breaks for rural chambres d’hôtes, which will now be liable for local rates.
Chambres d’hôtes are liable for the payment of business rates, called the taxe professionnelle, and also a property tax called the taxe foncière. In some cases they might also, or alternatively, be liable for the residence tax called the taxe d’habitation.
However, hitherto, those in rural development areas could seek exoneration from all three rates, an important concession, in many cases worth several thousand euros a year.
As there are many rural development areas in France, many such establishments have been able to benefit.
The Government have now decided that those spaces within a chambre d’hôte that are shared with the owners can no longer be entitled to exemption.
The concession has not been removed for those who run classified gîtes ruraux, and meublés de tourisme in development areas, as in these cases the owners do not share the same accommodation as their guests.
In future, therefore, a chambre d’hôte will only be able to continue to benefit from the tax break over that part of the accommodation that is used exclusively by the guests. Property reserved for the sole occupation of the owners continues to be liable to both the taxe d’habitation and the taxe foncière.
As is not infrequently the case with new tax regulations, we have found confusion amongst the few local authorities and owners we have spoken to as to the interpretation of these changes.
We have asked the tax authorities to comment on the ambiguity in the regulations. They have confirmed that, in effect, only those bedrooms and other spaces within a chambre d’hôte that are reserved exclusively for the use guests would be granted exemption. If the entrance area, hallway and dining room etc are shared with the owners then these spaces would be taxed.
This is inevitably going to mean that the owners will need to calculate the surface area of the property used exclusively by the guests, which will then receive exemption from the local taxes. The rest of the property will be taxed in the normal manner, as a residential dwelling.
These changes come on top of other recent moves to tighten regulations on the operation of chambres d’hôtes, which until recently had no clear legal or fiscal status in France.
Previously, anyone who offered bed and breakfast accommodation could effectively call themselves a chambre d’hôte.
A clampdown has now occurred, and under new rules we outlined in a recent newsletter the accommodation must be limited to a maximum of five bedrooms, and owners must offer a range of services to their guests. There are also increased registration requirements.
There are many who believe that the regulations are being tightened in response to the lobbying pressure from the hotel industry, concerned at the growth in bed and breakfasts establishments across the country, and the impact this is having on their own revenues. Around 1000 chambres d’hôtes open each year, and most of them obtain a less than 10% occupation rate throughout the year. In the vast majority of cases they are people who let out one or two rooms in their house, as a supplement to their other main income.
The change in the regulations does not affect existing rights for a new business to claim exemption from rates, a concession which is limited in duration.