Tax on Furnished rental – What’s changing in 2024
As we enter 2024, I regret to inform you that there will be significant changes to the tax treatment of furnished rental activities. These changes were debated up to the end of 2023, and generally apply retroactively to 2023 income.
I won’t go into the treatment of professional rental activity and social security contributions here, so as not to complicate this update.
New amounts
In essence, the legislator wishes to limit the use of airbnb-type rentals in densely populated areas, and thus limit the tax appeal of such activity in a bid to limit the rise in property prices.
It would appear that the final text contains some errors and should be amended shortly.
At the time of writing, the new system is as follows:
| “Classic” furnished rental accommodation | Classified furnished tourist accommodation (a change to this system is currently under discussion) | Unclassified furnished tourist accommodation | Bed and breakfast | |
|---|---|---|---|---|
| Income threshold not to be exceeded | 77 700 € | 188 700 € | 15 000 € | 188 700 € |
| Flat-rate allowance | 50% | 71% | 30% | 71% |
The concept of “furnished tourist accommodation” corresponds to an airbnb-type rental activity. The rental of “classified furnished tourist accommodation” requires the property to be “classified” (the idea of stars, like a hotel, awarded by a classification agency). The “classic” furnished rental is linked to a long-term rental (the tenant takes up residence there).
In the case of an airbnb rental, where a taxpayer was entitled to deduct 50% of the expenses on a flat-rate basis, this amount is now reduced to 30%, as in the case of an empty property rental (which is completely illogical when you consider the cost of hiring a caretaker); this is referred to as the “micro-bic” scheme, as opposed to the actual scheme.
Above all, the threshold for benefiting from this regime has been lowered to EUR 15,000, an amount that can quickly be reached in Paris or Nice.
If you exceed this threshold, your income will be taxed under the actual scheme, which means that you will have to keep accounts. This type of additional constraint for a non-resident has serious consequences.
Consequences for people currently taxed under the micro scheme.
As indicated, if income is less than EUR 15,000, it is possible to remain under the micro scheme, but with a higher tax rate.
As an example, I’ll take a non-resident, taxed at an average rate of 20% and 7.5% social security contributions (rate for a European resident, otherwise 17.5%).
| Rent paid by tenant (service included) | Tax Allowance | Taxable base | Tax (20% + 7,5% for social tax) : | Remaining : | |
|---|---|---|---|---|---|
| Previous system | 15.000 EUROS | 50% | 7.500 EUROS | 2.062 EUROS | 12.938 EUROS |
| New system | 15.000 EUROS | 30% | 10.500 EUROS | 2.887 EUROS | 12.113 EUROS |
As mentioned above, it is the consequences of exceeding the threshold that are particularly serious, because in such a case you are obliged to register your business with the authorities and to use the services of an accountant to keep your accounts and file a specific tax return.
Reduced attractiveness of the actual regime.
Aside from the cost of hiring an accountant, the actual taxation system can lead to reduced taxation, as long as the depreciation of the property can be taken into account when calculating the income generated by the activity.
However, here too the legislator (at this stage, only non-professional seasonal rentals) is considering limiting the impact of this option, since the depreciation deducted should be reintegrated into the calculation of the capital gain when the property is sold.
Here again, rapid change is to be expected.
Treatment specific to 2024.
As indicated in the introduction, the new text applies retroactively to 2023, so if the threshold is exceeded, we would already have to look for an accountant to regularise the situation, but it’s going to be difficult to find someone in such a short timeframe.
As the text was adopted in a hurry, the legislator is beginning to realise the practical difficulties that this new legislation is causing, and the administration has just announced that it will be possible to continue to benefit from the previous system for 2023 income.
I suspect that further changes will be made between now and the end of the year.
However, we should start planning now for the 2025 tax return (return in 2024).
Solutions to consider for 2025.
As mentioned above, I suspect that the texts will be amended again between now and the end of the year, but for taxpayers currently taxed under the micro-bic regime, and whose rental income will exceed EUR 15,000 in any one year, there are several solutions to consider:
- switch to the real regime, and immediately find an accountant to do this;
- get your property classified, so that you can benefit from the “Meublés de tourisme classés” scheme;
- mix and match rentals: for example, renting out a traditional furnished property for 9 months to a student or worker, then renting it out on a seasonal basis during the summer.
Cabinet RM would be pleased to discuss these options with you.