For furnished rental taxation, if the amount of rent including charges is less than or equal to €32.900, the regime that applies is a flat-rate tax regime, known as micro-industrial and commercial profits (or micro-bic) or micro-enterprises.

This regime is simple in its tax declaration:

Only the amount of revenue received during the year should be specified in the Industrial and Commercial Profits section of your income tax return ( cerfa n°2042 C ).

Rents include charges, which are all the receipts you receive from your tenants for the rental.

Then, the application of this tax regime by the tax authorities gives you a flat-rate deduction of 50%. Thus, you will only be taxed on 50% of your income.

However, note that the ceilings and the reduction are different if you are classified as furnished tourist accommodation. 

Your tax rate will depend on the total amount of your income and therefore your tax bracket. 

It should be noted that with this type of regime, the flat-rate deduction acts as a deduction of expenses, you will not be able to deduct any expenses (loan interest, work, repairs, etc.)

To determine whether this actual regime is more appropriate, you will need to carry out a comparative calculation between the different reporting regimes. The actual regime will be more interesting if your expenses are greater than 50%.

For the landlord, the status of non-professional furnished rental (LMNP) is sometimes the most interesting tax regime. In fact, it allows you to deduct from furnished rental income, in addition to current expenses, a portion of the value of your real estate in the form of depreciation.

     For rental income above €32, the actual regime is required or before as an option.

The option to the actual system must be made before February 1 of the declaration year; unless terminated, it is valid for a period of two years.

This means you can deduct your actual expenses from the actual amount of your rent in the form of depreciation to achieve a reduction in your tax liability.

You will deduct the following charges from the rents received:

– Establishment costs, such as notary fees or company formation fees for example;

– Maintenance, improvement and repair costs;

– Local taxes;

– Management and insurance costs;

– Loan interest;

– Depreciation of furniture and improvements: this is carried out over a period of 5 to 10 years, i.e. a rate of between 10 and 20% per year.

– Real estate depreciation of premises: the purchase price of the accommodation is not a deductible expense but must be depreciated according to its lifespan. If this is estimated at 50 years, 2% of the price of the property is deducted each year during this period.

Real estate depreciation by components

In this practical part, the depreciation rules are detailed in different components, each with a specificity on their duration.

Ex: land, building, electricity, carpentry, plumbing, etc.) each having their own depreciation rule. We therefore speak of depreciation by components.

For example, for a home purchased for €200.000, you can deduct €2.000 from the rental amount each year.

        All your furnished rentals will be treated under the same tax regime. In fact, you must treat your rental income as a whole, which means that the expenses of one rental can be charged against the profit of another rental.

It is this result in its entirety which will be retained as the basis for taxation; it will therefore be either a deficit or a profit.

If it is a profit, it will be combined with your other income and will be subject to income tax.

If it is a deficit, it will be carried forward for 10 years on the profitable income.

And not on the taxpayer's total income... (to benefit from this imputation on the totality of your income you must have the status of professional furnished rental company).

However, this regime involves certain constraints. Indeed, it involves keeping accounts.

Form 2033 involves the preparation of a mini balance sheet with a schedule of depreciation and fixed assets.

It is therefore imperative to seek assistance from an expert approved by the tax administration.

Do you need advice on the best tax strategy to adopt? Contact our experts.