Income from the rental of furnished premises of which you are the owner, as well as income from the sub-letting of furnished premises of which you are the tenant, are subject to income tax in the category of industrial and commercial profits (BIC).
Furnished rental is the provision of furnished living quarters, including all pieces of furniture necessary for the normal living of the tenant (Order No. 2015-981 of July 31, 2015).
The furniture rental business is carried out on a professional LMP basis, subject to the following two conditions (Article 155, IV of the General Tax Code):
- The annual income received from this activity by all members of the tax household exceeds 23,000 euros;
- receipts exceed the income of the taxable household, in the salary categories of Art. 79 CGI (including pensions and life annuities, as well as the income of managers and partners referred to in article 62 CGI), industrial and commercial profits, other than profits derived from the rental of furniture, agricultural profits and non-profit profits.
The professional LMP or non-professional LMNP nature of a furnished rental is assessed at the tax household level and applies to all furnished rentals in the tax household.
Your income tax reporting obligations
To be able to report your furniture rental income, you must file Return No. 2042-C-PRO to supplement your tax return (No. 2042).
Your obligations depend on the tax treatment of your activities.
Micro mode
The micro-mode is applied when the amount of your income for the previous or the year before does not exceed:
- €72,600 for rental of furnished residential premises;
- €176,200 for the rental of classified guest rooms and furnished tourist premises.
If you are a non-professional rental company:
- Enter on lines 5ND, 5OD, or 5PD the total amount you received (rent, fees billed to the tenant, and fee reserves) for rentals, excluding rentals of guest rooms and furnished vacation rentals. Fixed discount of 50% (minimum 305 euros) representing fees will be applied automatically;
- indicate the total amount of your income from renting classified tourist housing or guest rooms, lines 5NG, 5OG, 5PG. Will apply fixed discount of 71% (minimum 305 euros).
Note: If your furniture rental income is already subject to social security contributions by the social security authorities, enter the amount of your income on lines 5NW to 5PJ generally, or on lines 5NJ to 5PJ for rooms and tourist accommodation. Therefore, the corresponding income will not be subject to social security contributions by the DGFiP.
If you are a professional rental company, please enter the amount charged on the 5KP to 5MP line.
Real mode
If your activity is taxed under the real regime, you must submit for each of your properties a declaration No. 2031 to the enterprise tax office (SIE), in the place where the property is located, if you rent out a single furnished property; if you have several properties, then either at the place of your main residence, or where the main property is located.
When filing an income tax return for unprofessional landlord:
- If you are a member of the organization "organisme de gestion agréé" and use the services of a professional accountant called a visor, indicate the amount of your profit calculated in your declaration No. 2031, fields 5NA, 5OA mlm 5PA or fields 5EY, 5FY or 5GY (income from foreign sources with a tax benefit equal to the French tax);
- If you are not a member of the "organisme de gestion agréé" and do not use the services of a professional accountant called a visor, indicate the amount of your profit in boxes 5NK, 5OK or 5PK or boxes 5EZ, 5FZ ou 5GZ (income from foreign sources with a tax benefit equal to French tax).
Indicate the amount of shortage for the year of boxes from 5NY to 5PZ. Report in Boxes 5GA to 5GJ the non-deductible amount of the non-professional furnished rent shortfall for previous years.
If your rental income was already subject to social contributions, enter the amount of your income in lines 5NM - 5MM. Therefore, the corresponding income will not be subject to social security contributions by the DGFiP. Enter the deficit for the year attributable to social security agencies on lines 5 WE - 5 YF.
Household losses from non-professional rental property activities can only be offset against income from the same activity over the next ten years.
These deficits are not deductible from gross income, income from other business activities carried out on a non-professional basis, or profits derived from rental activities carried on on a professional basis.
If you are professional company for rental properties, enter the amount of your income calculated in your return No. 2031, field 5KC, 5LC or 5MC, or field 5DF, 5EF or 5FF (income from foreign sources with tax relief equal to tax in France). Or, if you are not a member of the organisme de gestion agréé or if you do not use the services of a professional accountant called a visor, enter the amount of your profit in boxes 5KI, 5LI or 5MI or boxes 5DG, 5EG or 5FG (income from foreign sources with tax benefit equal to French tax).
Income from the rental of non-professional furniture declared under the micro-regime or under the real regime will automatically be subject to social security contributions if they have not already been subject to social security contributions by the social authorities. Do not report them in the "Income Subject to Social Security Tax" section of Form 2042-C-PRO.
Obtaining a SIRET number, fixed contribution from companies, VAT, etc.
As a furnished rental company, professional or non-professional, you must follow certain procedures:
- get a SIRET number,
- make contributions to the Contribution Foncière des Entreprises (CFE).
Depending on your situation, you may also be responsible for paying CVAE and TVA value added taxes.
Social contributions
The rates of these social contributions range from 35 to 40% on rental income for professional landlords.
In addition, LMP landlords must pay Urssaf a minimum flat rate of €1,145 even if they manage to deduct all of their rental income.
Example 1
Monsieur Dupont is the owner of a studio and a two-room apartment, which he rents furnished for 800 and 1,200 euros per month. It is not registered with the Trade and Companies Register (RCS). In total, Mr. Dupont's income is 24,000 euros per year. It is subject to LMP status.
Monsieur Dupont, like many LMP and real estate landlords, deducted many of the rent payments on his income statement. He subtracted so much that his net result became negative. Mr Dupont will therefore have to pay a minimum flat rate of social security contributions of €1,145. And this is even if he completely destroys his profits through expenses.
Example 2
Another example, Madame Duchemin also owns a studio and a two-room apartment, the rent for which is 24,000 euros per year. She is also not registered with the RCS. Of her €24,000 annual rent, she declares €3,000 as profit, taking into account the various deductions to which she is entitled. So, she will have to pay social security contributions ranging from 35 to 40% of profit. That is, in this case 40% * 3000 = 1200 euros.
Social contributions upon sale
The tax paid by LMP landlords on the resale of their property depends on the length of time they have owned the property, the difference between its purchase price and the sale price, and the tax status of the landlord (LMP or LMNP) at the time of sale. As a reminder, an LMP landlord is subject to the professional capital gains regime, while an LMNP landlord is subject to the private capital gains regime. Let's look at an example.
Example
Let us first take the case of Monsieur Dupont. He bought his studio in the year N for 200,000 euros and performed work in this studio for 20,000 euros. He decides to resell his property in year N+4. The sale price is €300,000, so the gross capital gain is €100,000. Mr. Du Pont depreciated his home over 30 years, his furniture over 5 years, and his major works over 10 years. Under these conditions, a total of €35,333 of depreciation accumulates.
If Monsieur Dupont is in LMP status at the time of sale, in 2021: he will pay a total of €48,275 in capital gains tax. This calculation first includes so-called "short-term" capital gains (subject to income tax and social security contributions of 35 to 40%), which corresponds to the depreciation of the property. He then adds up the so-called "long-term" capital gains corresponding to 30% of the difference between the sale price and the purchase price.
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