3. Business Registration as a Landlord
- ‘Professional' and 'Non-Professional' Landlord
- Definition of ‘Landlord of Furnished Accommodation’
- Local Council Registration/Authorisation
3.1. Professional and Non-Professional Landlord
If you are resident in France and you let residential property you may be required/entitled to register as a business with the regulatory authorities. It will depend on the type of accommodation.
There is no requirement (or entitlement) to register as a business if you let unfurnished accommodation, as the letting of such accommodation is not considered to be 'commercial' (business) income.
Nevertheless, it is possible to register as a professional landlord for the letting of bare commercial/industrial/office property (locations d’immeubles nus à usage professionnel).
If you let furnished accommodation the rental income is considered to be fiscally ‘commercial’ and you can register it as a business.
However, the legal and tax status applicable to furnished lettings has always lacked some clarity; whilst the activity is taxed as a 'commercial' activity it is considered to be a 'civil' activity in law.
Those who let furnished accommodation are either 'professional' or 'non-professional' landlords:
- Loueur en meublé professionnel (LMP)
- Loueur en meublé non professionnel (LMNP)
However, this is a legal distinction and neither status implies any particular kind of tax regime, although tax advantages can be obtained with LMP status.
A professional landlord of furnished accommodation (loueur en meublé professionnel - LMP) is a landlord whose your gross annual receipts from furnished accommodation exceed €23,000pa, which is also greater than the other income of the fiscal household.
The rule operates pro rata in the first year.
Accordingly, if you meet the two criteria given above you are automatically considered to be a professional landlord and you must register as a business.
Non-residents would be considered LMP if their rental income from France exceeded €23K and their France taxable income was less than this figure. Income taxed wholly outside of France is not taken into consideration. The adminstrative doctrine states: 'Pour les non-résidents, la prépondérance des recettes s'apprécie en tenant compte de l'ensemble des revenus des contribuables et, plus largement, du foyer fiscal sous réserve que ces revenus soient imposables en France en application de la législation fiscale française et, le cas échéant, des conventions fiscales internationales. Les revenus perçus par les non-résidents imposables uniquement à l'étranger ne sont pas retenus.'
Although in discussing the income test many commentators only consider business/salaried income relevant to the calculation of 'other income', a strict reading of the law suggests that pension income also comes within the definition. However, it does seem most tax offices are prepared to accept the narrower definition, which is also supported by the general advice on the government's public information website.
Until recently it was also a requirement in law that to obtain professional status it was necessary to register with the Registre du Commerce et Sociétés (RCS), a task which was often difficult to accomplish due to the civil nature of the activity.
In 2018 the French Constitutional Court ruled it an illegal requirement that to be an LMP you were also required to registered with the RCS, as the letting of furnished accommodation was not considered to be, in a legal sense, a commercial activity. Nevertheless, although no registration with the RCS is necessary, you are required to obtain a business registration number and pay social security contributions.
Although the double condition above may be difficult to achieve, there are some important tax advantages from being a LMP.
These advantages are:
- You can set off losses against the totality of your other earnings, not merely your furnished rental earnings;
- The property is exempt from liability to wealth tax;
- There are potential concessions on capital gains tax, with complete exemption after you have run the business for at least 5 years, although social security contributions apply on short-term gains.
- There are concessions on inheritance tax as the property will be assessed as a business asset.
You should take good professional tax advice on these potential benefits as a complicated set of rules applies. In addition, you will be subject to the usual social security contributions payable by a business owner.
In relation to those who let a property for short-term furnished lettings (day, month) through on-line platforms such as Airbnb the question of business registration arises. Strictly speaking, where receipts exceed €23,000pa they are required to register as a business, but in response to a parliamentary question the government have stated that where the property is managed via an estate agent this is not necessary. The reasoning is that the agent will be subject to social security contributions through the fees they charge.
In their reply they state:
Cette exclusion s'entend au sens strict et ne s'étend pas aux mandats que peuvent obtenir des plateformes numériques pour recouvrer l'ensemble des cotisations à partir des transactions effectuées par leur intermédiaire. Les revenus tirés d'une mise en location par le biais d'une agence professionnelle bénéficiaire d'un mandat de gestion relèvent toutefois de la gestion du patrimoine privé et doivent à ce titre être déclarés à l'administration fiscale dans le cadre de la déclaration de revenus afin d'être assujettis aux prélèvements sociaux sur les revenus du capital au taux de 17,2%.
Those who do not meet the tests set out above are considered to be a non-professional landlord - loueur en meublé non professionnel (LMNP).
The legal picture is, however, complicated because it is possible to register a small furnished lettings business as a 'micro-entrepreneur ' despite not realising the turnover threshold, although you would not have LNP status unless the two conditions above (€23,000 receipts over 50% greater than other income) were achieved.
Thus, it is possible to be business registered as a landlord of furnished accommodation without having 'professional' status.
It should also be noted that even though you may not be a professional landlord, and whether you establish yourself as a micro-entrepreneur, you are required to obtain a business registration number (Siret) by declaring your activity with the commercial court - Greffe du Tribunal de Commerce. This does not mean you are also registered with the Registre du Commerce et Sociétés (RCS) . It is merely for administration (taxation) purposes, including the payment of business rates (unless otherwise exempt).
Those who run a chambre d’hôte as their main professional activity are required to register it as a business.
Chambre d'hôte owners are also required to pay social security contributions if their net profit exceeds €5,268 per annum (2019). This figure is equivalent 13 % of a notional figure called the plafond annuel de la sécurité sociale for 2019 (13% of €40,524), revised each year. The ceiling is €41,088 in 2020.
You social security contributions will depend on the type of accommodation and the nature of your business registration, if any, which we set out in later pages.
One advantage of business registration is that it grants you automatic access into the health system, useful if you are an early retiree not otherwise able to obtain health cover through the state system.
If you seek registration as a micro-entreprise business we can undertake the process of registration for you for a modest charge. You can contact us at Landlord Business Registration.
If you let both unfurnished and furnished accommodation, then each will be considered separately for tax and business registration purposes.
We say more about this in the next section on the Taxation of Rental Profits.
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 business 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. Local Council Registration/Authorisation
Beyond business registration there are also separate registration procedures with the local council for the short-term letting of furnished accommodation (location de meublés de tourisme), which apply to all landlords of this type of accommodation.
Within major urban areas (population greater than 200,000) more stringent registration procedures apply with the local council for letting furnished accommodation on a short-term basis.
In these areas you may be required to obtain change of use authorisation; if you let your own furnished home (résidence principale) for more than 120 days a year a change of use authorisation is also required. These controls are in place to limit activities by Airbnb and similar platforms, who are bound by reporting procedures.
You can read more at Permits for Letting Furnished Property in France.
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