Rental investment

TAX OPTIMIZATION OF YOUR RENTAL INVESTMENT:

France has the reputation of a tax hell, but actually it is compensated by many tax loopholes. In some cases, the French government sets special rules and softer taxation in order to attract investment in given sectors.

Les régimes « Loueur Meublé Non Professionnel » (LMNP) et « Loueur Meublé Professionnel » (LMP) sont des dispositifs mis en place pour stimuler le secteur immobilier locatif.

Non-Professional Rental of Furnished Property The schemes "Non-Professional Rental of Furnished Property" (in French “Location Meublée Non Professionnelle " shortened in LMNP) and "Professional Rental of Furnished Property" (in French “Location Meublée Professionalle shorthened in LMP) belong to those tax loopholes created in order to stimulate real estate sector with the following expected effects:

  • Increase the number of properties for rent on the market (LMNP Classic)
  • Attract private investments into fields such Student residences or retirement homes where offer is far from matching demand.

THE ADVANTAGES OF FURNISHED RENTAL REGIMES - LMNP or LMP

The LMNP (Non-Professional Rental of Furnished Property) and LMP (Professional Rental of Furnished Property) differs only according to the incomes they generated and what percentage they represent in the overall investor’s incomes.

If your rental incomes are over 23 000 €/year and represent more than 50% of your total incomes then you are considered as a professional. For non-residents French tax administration will only take into account incomes generated in France. So over 23 000 €/year of rental income you’ll be seen as a professionnal.

Compared to an empty rental, the difference is huge.

We swap from a civil status:

Empty rented real estate estate income
to a commercial status where are generated Industrial and Commercial Profits

Furnished rented real estate Industrial and Commercial Profits
Under the LMNP or LMP regime, taxes are calculated on the basis of rents net of all deductible expenses and are therefore greatly reduced or nil.

This advantage of LMNP taxation is valid in both new and second-hand real estate markets.

Determination of LMNP tax deductible expenses

Whatever the applicable regime (furnished rental taxation or empty rental), the tax administration offers two options to determine the deductible expenses on turnover of rented real estate:

Option 1: Flat-rate estimate of deductible expenses per year

  • Empty rental (micro-estate regime): yearly expenses are estimated at 30% of rental incomes
    - Investors will therefore be taxed on 70% of the rents collected
  • Furnished rental (LMNP – Micro-BIC regime): yearly expenses are estimated at 50% of rental incomes
    - Investors will therefore be taxed on 50% of the rents collected

Option 2: Determination of the actual amount of deductible expenses.

Apart from current management expenses, furnished rental taxation makes it possible to integrate depreciation and amortisation of the property into deductible expenses, whereas this is not the case in empty leases.

This effectively erases almost all taxable income and makes it possible not to pay taxes on rents (or very little).

Based on the furnished rental (LMNP or LMP) regime we offer 3 types of investment in the new or in the second-hand market:

  • In classic furnished rentals: payments of your rents are guaranteed by an insurance against outstanding payments and you benefit from the very advantageous taxation of the furnished rental regime.
    Your income is guaranteed except in case of absence of tenant. You can take back your property for your personal use at any time.
  • In rental Senior Residence: payments of your rents are contractually guaranteed (11-year contract) by the managing company – who is your actual tenant - and you benefit from the very advantageous taxation of the furnished rental regime.
    Your income is guaranteed even in case of absence of tenant. You do not have the personal use of the property as it is exclusively intended for rental.
  • In rental Student residence: the payment of your rents is contractually guaranteed (11-year contract) by the managing company – who is your actual tenant - and you benefit from the very advantageous taxation of the furnished rental regime.
    Your income is guaranteed even in case of absence of tenant. You do not have the personal use of the property as it is exclusively intended for rental.

Some examples of managed senior residences:

Alès – L’OstalBéthuneCharnay-les-MaconChatellerault

Managing companies are chosen among the most solid ones of the field dealing with hundreds of residences in France and abroad.

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