With the surge in popularity of seasonal rentals, there is a growing number of inquiries about the taxation of rental income in our picturesque nation. Depending on the type of rental and chosen regime, various tax options come into play. This article aims to give more clarity about the diverse tax implications for both unfurnished and furnished rentals, concentrating on the taxation of properties owned by individuals.
Hence, it is imperative for foreign companies or non-resident individuals receiving rental income from French properties to declare it in France, without any exceptions!
In the realm of rentals, two primary categories exist: unfurnished rentals and furnished rentals, each carrying distinct tax consequences. Unfurnished rentals are categorized as civil activities, while furnished rentals fall under the commercial activity domain, leading to separate tax systems.
Our primary focus in this article is on the real estate taxation applicable to properties owned by individuals. For information regarding companies, we will explore that topic in a separate article.
When it comes to unfurnished rentals, the rental income is categorized as “revenus fonciers” (property income) and is relatively straightforward to declare, as it is done directly on your personal income tax return. You have two options: the actual regime (régime réel) and the simplified regime (micro-foncier).
When operating under the régime réel, you have the opportunity to deduct specific costs related to property maintenance, including expenses for upkeep, insurance, and property tax. The calculation of taxes and social contributions is based on the taxable income, which is derived from rents received minus the deductible expenses. To declare these deductions, you must utilize form 2044, which serves as an annex to your personal income tax return (form 2042).
The simplified regime (micro-foncier) allows you to benefit from a flat-rate deduction of 30% of your gross rents without the need for any justifications. However, it’s important to note that this regime is limited to €15,000 of property income. Your taxes and social contributions are determined based on 70% of your total income, once you have already subtracted the 30% flat-rate deduction. It is essential to declare this amount directly on your personal income tax return.
When it comes to furnished rentals, whether they are for short or long terms, the taxation structure differs significantly from that of unfurnished rentals, as it falls under the category of commercial activities rather than civil ones. Here’s what you should be aware of:
The initial step involves obtaining a SIREN number from the commercial court registry to declare your furnished rental income. This step is obligatory and usually takes a few days to a few weeks at most.
Once you have obtained your SIREN number, you have the option to select between two regimes: the actual regime (régime réel) and the simplified regime (micro BIC), similar to what’s available for unfurnished rentals.
Under the régime réel, you are allowed to deduct expenses associated with the furnished rental, including costs for repairs, furniture, taxes, and insurance. Moreover, you can also factor in property depreciation, which will lower your taxable profit. Taxes and social contributions are calculated based on this taxable profit, which is derived from the rental income after deducting expenses and depreciation. If your taxable profit is zero, you won’t be liable to pay any taxes. The declaration process is more intricate in this case, as you are required to produce annual accounts using form 2031, which must be electronically submitted to your tax office. Subsequently, you’ll need to report the profit or loss on your personal income tax return.
On the other hand, the simplified regime (micro BIC) allows you to take advantage of a flat-rate deduction of 50% of your gross rents without the need for any justifications. Taxes and social contributions are calculated based on 50% of your gross income after deducting the 50% flat-rate deduction. In contrast to the actual regime, you can declare this directly on your personal income tax return without having to provide annual accounts.