Rental income: tax tips for French property owners

There are tax implications to consider when renting out your French property on a long-term basis, as Debbie Bradbury explains

UNFURNISHED PROPERTY

Long-term unfurnished rental income is classed as ‘private’ income with no need to register it as an activity, but with the obligation to declare the annual income in France and pay income tax and social charges in France on the ‘profit’.

There is a choice of tax regime according to

certain criteria:

Where annual turnover is less than €15,000 you have the choice of Micro or Réel.

Where annual turnover exceeds €15,000 you are obliged to be on the Réel regime.]

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On the Micro regime, you simply declare your annual gross turnover and a fixed tax-free allowance of 30%

is applied.

On the Réel regime (profit and loss), you have to complete an annex 2044 to the French income tax return, deducting allowable expenses of mortgage interests, agency fees, taxe foncière, insurance, communal charges (co-propriété) if an apartment, maintenance and repairs. The net profit is then declared for tax purposes.

Note: there is no depreciation value on unfurnished rental income!

Non French resident – you will have to pay a minimum of 20% in income tax, plus 15.5% social charges, giving a total of 35.5% of your ‘profit’ payable in France.

UK resident – your French income also has to be declared on your UK tax return; a tax credit will be applied for income tax/social charges paid in France.

FURNISHED PROPERTY

Long-term furnished rental income is classed as a commercial activity and as such must be registered with the authorities, with the obligation to declare the annual income in France and pay income tax (and social charges*) in France on the ‘profit’

There is a choice of tax regime according to

certain criteria:

Where annual turnover is less than €32,900, you have the choice of Micro or Réel.

Where annual turnover exceeds €32,900, you are obliged to be on the Réel regime.

On the Micro regime, you simply declare your annual gross turnover and a fixed tax-free allowance of 50% is applied (or this increases to 71% if you have a tourist classification certificate).

On the Réel regime (profit and loss), you have to submit a full set of audited accounts to the French tax authorities as well as an income tax return. All expenses related to running the activity from your premises are deductible, as well as a value for depreciation, which works out to around 3% of the value of the buildings. Any deficits are carried forward over a certain number of years.

Where you are in deficit, you will have no French income tax or social charges* to pay.

If you are non French resident, you will have to pay a minimum of 20% of your ‘profit’ in income tax in France.

*There are no social charges currently applied to furnished rental. As above, for UK residents, this income also has to be declared on your UK tax return.

Debbie Bradbury is the co-ordinator of English-speaking clients at SAREG chartered accountants

Tel: 0033 (0)4 50 25 23 97

www.sareg.com