CFE (Cotisation Foncière des Entreprises)

The French professional tax does not apply to the landlords who let unfurnished properties.

The landlord who lets a furnished property must pay the professional tax under normal conditions. However, the tax can be avoided if:

• You accidentally rent out a part of your personal habitation (without a regular period).
• You rent out part of your main residence furnished (even on a regular basis), provided that the rent remains reasonable, and the rented space is the tenant’s main residence (it is the same exemption as for income tax).
• You rent out part of your personal habitation as a countryman gîte.
• You rent out part of your personal habitation as a leasehold property under the conditions provided by the law.
• You rent to a professional leaseholder who sublets. NB: A contract with an estate agency is not sufficient to avoid the professional tax.

Exemption from French professional tax is automatic. However, the local council can withdraw the right to exemption from points 3), 4) & 5).

Landlords who rent a furnished property must pay the professional tax to the French tax authorities. This position has been debated by tax lawyers who believe that non-professional landlords should not pay the CFE tax. The French Supreme court has put an end to the debate by confirming the position of the tax authorities.

In it’s ruling of 24 March 2006, the French court stated that a rental activity is always a professional activity for the purposes of the CFE tax. The French court does not take into account the professional or non-professional status of the landlord. What matters is that the accommodation service is organized by the landlord himself. In the case of a leaseback, the rental is organized by the professional leaseholder, so it is the professional leaseholder who pays the professional tax.