Letting a property in France
At James Howes & Co, we have many non-French-resident clients with properties in France which generate rental income.
In France there are several different methods (known as régimes) for taxing rental income. It can appear quite complicated to a non-expert and so this article aims to give a simple English-language overview of the options available to you as a French landlord.
The simplified régime (micro régime)
Landlords receiving rental income up to € 15,000 p.a. (unfurnished lettings) or € 72,500 p.a. (furnished lettings) qualify to submit their return under a so-called micro régime. Under this system the taxpayer receives a flat-rate deduction in lieu of actual expenses in an amount of of 30% (unfurnished lettings) or 50% (furnished lettings) of the gross rents received. The régimes are known as micro-foncier (unfurnished letting) and micro-BIC (furnished letting).
The advantage of this system is that you do not need to keep a record of actual expenditure, nor - in the case of furnished letting - carry out complicated depreciation calculations under which the property needs to be split into components and depreciated at varying rates. The disadvantage is that actual expenditure will in many cases exceed 30% or 50% of rental income, so that you will not benefit from the full tax saving which would be available under the normal income and expenditure method.
The normal income and expenditure method (réel normal régime)
Under normal accounting rules actual expenditure incurred is allowable against rents (rather than only a flat-rate deduction) to arrive at the net taxable profit figure. This is often advantageous but, on the other hand, requires more record-keeping and accounting fees. This is why each situation needs to be assessed on a case-by-case basis.
Landlords with annual gross rents in excess of the above thresholds must declare their rental income under one of the réel régimes, and those below the thresholds may opt to do so if they wish. The two réel régimes are known more specifically as revenus fonciers for unfurnished letting and bénéfices industriels et commerciaux or "BIC" for furnished letting.
Landlords will be able to deduct the following expenditure from their gross rental income to arrive at the net profit figure:
- Repairs and maintenance;
- Local taxes;
- Agency fees;
- Loan interest;
- Depreciation (furnished letting only).
Income tax calculation
It is the net profit, after deduction of actual or deemed expenditure, to which we subsequently apply the sliding tax scale for French residents, or the flat-rate of 30% for non-French-residents.
Rental income from French properties must always be declared in France, even if you are not resident in France. Most countries require their residents to declare their worldwide income, meaning that foreign rental income is potentially assessed to tax twice. Accordingly most countries have concluded tax treaties with France so that double taxation is avoided. Most treaties provide that the country in which land and property is situated has taxation rights, and the country of the owner’s residence which grants the tax relief.