Blog | Important rules for a furnished rental activity

Important rules for a furnished rental activity

As a furnished rental provider, you can choose to declare tour revenues under the micro-BIC regime or under the “Reel Simplifie” that is often better.

Try our free simulator to chose the best tax option in your case.

  • Non Professional Furnished Renting  Which regime ?: « Réel Simplifié » or « Réel Normal »?

The regime «réel simplifié» shall apply as of right to the taxpayer whose annual pre-tax revenues ranges between €72 600 and €247 000. It may apply under the preference of the taxpayer when his revenue is below 72600.

When revenue is above €247 000, you have to declare it under the “normal reel” regime and not the simplified one. In the end the regime “réel simplifié” suits most to owners.

  • Calculation of taxable profits

In the case of the regime “réel simplifié”, the taxable benefits are calculated according the rules governing Industrial and Commercial Benefits.

Revenue is composed of the pre-tax rental income, cashed out or not, as well as provisions for charges provided by the contract and accessory recipes.

Consequently, your taxable revenue corresponds to the difference between annual revenue and annual charges plus tax-deductible provisions for depreciation.

The regime “réel simplifié” allows to deduct the following charges from your furnished rental income:

  • Maintenance and repair invoices: only invoices related to maintenance and repairs may be deducted. Important works of construction, reconstruction, enlargement or improvement and all expenditure relating to major building work such as plumbing, roofing work, building a bathroom, central heating or elevator cannot be deducted. Yet their depreciation is taken into account.
  • Land tax (if the property is registered as an asset)
  • Insurance fees (if the property is registered as an asset)
  • Management cost
  • Fees paid to the accountant
  • Litigation expenses in case of procedure with the hirer
  • Utilities service and consumption integrated in the rent (electricity, water, telephone, internet)
  • Loan interest augmented by application fees loan guarantee fees and insurance premiums (if the property is registered as an asset).
  • Registration fees, notary fees related to the acquisition of the good (if registered as an asset)
  • Provision for liabilities Les provisions pour risques (defaut of payment risk for instance)

The regime “réel simplifié” allows to deduct tax-deductible provisions for depreciation

In accounting tax-deductible provisions for depreciation allows taxpayers to recover the cost of property or assets they've “placed in service" in the course of their trade or business. They generally can't deduct the entire cost of an asset in the year of purchase if it's a capital expenditure, but they can break the cost down over a number of years instead in a process known as depreciation

 

In the case of renting out a furnished unit, we estimate the depreciation of the used asset and count it as a charge on the taxable income which reduces the net result by the same amount pushing downward the tax paid on the exercise.

Here are listed the elements subject to depreciation.

  • Depreciation of the facilities (thoses registered as assets)
  • Depreciation of the equipment and furniture (if registered as assets)
  • Depreciation of the important works of construction, reconstruction, enlargement or improvement (if registered as assets)

As you can notice, depreciation is clearly one the key elements of renting. Following the rules can clearly help you save a lot from taxes. It’s often via depreciation that many owners avoid paying a lot of taxes. 85% of them pay very little or even zero taxes.

However, it is good to precise that it is an imperative, while offering a furnished rental service, to seek for help when, doing the tax return when you are in the regime “Réel Simplifié”.

Indeed, one mistake on the cerfa declaration form, or during the calculations can make this regime very binging and less profitable and may force you to appeal for a professional service for the corrective reports of the previous years, which can be particularly costly.

  • What are the concrete obligations

To declare your revenues when in the “Réel Simplifié” you have to address a special declaration n° 2031  via a tele transmission system to the corporate tax authority in charge of your property.

 This tele transmission of your furnished rental income, when in the “Réel Simplifié” regime should contain the following attachments:

  • A simplified balance sheet mentioning the credits and debts noted at the closure of the exercise- attachment n° 2033-A
  • A simplified profit and loss account of the concerned exercise composed of 2 sections (Accounting results and fiscal results)- attachment n° 2033-B
  • A tangilble asset table, amortization table and elements of gains and losses give to the fiscal regime- attachment n° 2033-C
  •  A provision statement, derogatory amortizations and reportable deficits- attachment n° 2033-D
  • A table allowing the calculation of the added value produced during the exercise - attachment n° 2033-E

The benefit is declared, by you, under the control of the tax administration.

The accounting obligations are very few: you have to maintain a log of revenues, expenses, and when it is appropriate a record of assets.

If the owner rents a furnished property, the latter has to contain a list of equipment relative to the comfort of the tenants. This list consists of 11 compulsory equipment:

  • Baking trays
  • An oven and a microwave
  • A table and chairs
  • A complete bed set (bed, sofa + blankets and bedding material...)
  • Lightning
  • Crockery and cutlery
  • Housekeeping staff
  • A refrigerator and a freezer
  • Lay cooking utensils
  • Roll up flaps at bedrooms windows
  • Storage shelf

 

  • The Pros and the cons

Though more complex in term of declarative and accounting formalities, the “Simplifié Réel” regime allows more often to optimise your taxation.

It is frequent that the amount of the amortizations is greater than the 50% of the annual revenues. This is the raison why we offer you your services for your non-professional Furnished rental accounting obligations and your income declaration. Basically propose :

  • An assistance all along your tax return process
  • Our service can generate your “liasse fiscale” and all the necessary attached forms

 

With our assistance you can declare very easily your rental revenues from furnished property and you save a lot on taxes. Do not hesitate to contact us if you have any tax related question !

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