Tougher Controls on Rural Gîte Tax Breaks
Wednesday 03 February 2016
Rural gîte owners now need to have their property inspected and rated if they are to retain preferential tax treatment.
Micro Tax Regime
There exist a variety of tax regimes for landlords of property in France, depending on the type of property and its location.
One of the most generous of these regimes is the 'micro' (or 'forfait') regime granted to rural holiday gîte owners.
They benefit from:
- A preferential cost allowance of 71% against rental income, meaning that tax is liable on only 29% of income.
- A higher maximum permitted turnover of €82,200.
- Potential exemption from the local rates - the taxe d’habitation, the taxe foncière and the cotisation foncière des entreprises (CFE) - in rural development areas.
This is in contrast to the standard 'micro' 50% cost allowance and €32,900 maximum turnover that is available on most other types of furnished lettings.
Since 1st January the Loi de Finances 2016 abolishes these concessions for rural gîtes per se, stipulating that only those that have accreditation as a meublé de tourisme classé will be entitled to continue to benefit from the tax concession.
In practice, since 2010 rural gîte owners have been required to make a declaration to their local mairie informing them that they are running a 'meublé de tourisme'. This description has been used in the absence of a statutory legal definition of a rural gîte.
It is to deal with this lacuna that prompted the change in the law.
However, the government have taken the opportunity to toughen up the rules by requiring those who seek the higher 71% allowance to formally seek a rating as a meublé de tourisme from one of the accreditation agencies. In other words, to become a meublé de tourisme classé.
We are aware that some local tax offices have previously insisted that only those gîtes with a rating could obtain the 71% allowance, but this has been local interpretation, not national law.
The new law is no minor technical change, for there are potentially significant cost implications on owners to obtain and maintain such an accreditation, particularly if they wish to obtain a suitable rating.
Merely signing up with the Gîtes de France network would not be enough to obtain that status, which is only accorded to those properties classed through the French national tourism development agency, called 'Atout France'.
Under the system of classification meublés de tourisme are subject to a ranking of 1 to 5 stars, according to a points system.
There are 112 control criteria covering three main areas of the property - equipment and facilities, customer service and accessibility and sustainable development.
In order to obtain a ranking you need to arrange for one of the accredited bodies from Atout France to undertake an inspection, following which you are offered a certificate of classification, which you are free to accept or refuse.
The evaluating body gives you a certificate in the month following their visit. The inspection certificate includes a proposal for a decision on classification of your furnished to the category mentioned in the inspection report.
The cost of the inspection varies by area and type of property, but is not infrequently several hundred euros. The greater risk is that to obtain a strong rating it might be necessary to carry out significant works or provide new services to the property
An Alternative Option
As an alternative to the micro regime is it possible to adopt the régime réel, in which you deduct actual eligible costs against rental income.