French Landlords in Tax Puzzle

Tuesday 01 September 2009

What is the business and fiscal status of landlords of furnished accommodation? New regulations seek to clear up a long-standing uncertainty. 

The regulations set out in greater detail the substance of a change in legislation that occurred at the end of last year.

'Professional Landlord'

The main thrust of the change is to tighten up on the tax status of ‘professional landlord’ limiting it to those who are registered with the Chambre de Commerce, with an annual gross rental income of at least €23,000, which must also be greater than your other total income.

Those landlords who have 'professional landlord' tax status do obtain more favourable tax concessions.

Interestingly, the social security insurance fund, the Regime Social des Independants, has taken a more restrictive view of what constitutes a ‘professional landlord’ arguing that mere registration with the Chambre de Commerce will suffice.

This implies that a landlord of furnished accommodation registered with the Chambre de Commerce will be liable for the fully panoply of social security contributions, where previously this was not the case.

'Landlord of Furnished Accommodation'

The definition of a ‘landlord of furnished accommodation’ for tax purposes has also been more narrowly circumscribed.

Where a range of services are provided as part of the letting then the business is now required to register within the hotel and related sector, not as a landlord.

Nevertheless, landlords of chambres d’hotes and rural gîtes are still able to retain furnished landlord tax status, provided the services are ancillary to the main letting.

The tax cost allowance for landlords of furnished accommodation using the tax status of ‘micro-entreprise’ has also been reduced from 71% to 50%.

Once again, however, those running a chambre d’hote or rural gîte retain their tax status, as they will continue to receive a cost allowance at the rate of 71%, provided services such as cleaning and change of linen are offered with the letting.

It is only landlords of furnished accommodation let on an annual basis with the tax status of 'micro-entreprise', who will now only be entitled to a reduced allowance of 50% against costs.

In short, for most small landlords, it is very much a case of plus ça change..., despite all the brouha!

Auto-entrepreneur

It is also possible to register as an auto-entrepreneur to obtain business registration as a landlord, although this does not grant the tax concessions available to a ‘professional landlord’.

If you are registered as an auto-entrepreneur then Chambre d’hote and rural gîte owners will pay social security contributions at the rate of 12% of gross turnover.

In the light of the changes that have been introduced we have substantially revised our Guide to Business Registration, as well as the Guide to the Taxation of Rental Profits.

This article was featured in our Newsletter dated 01/09/2009