We recently reported on the introduction of electronic invoicing for businesses, which you can read at Are You Ready for Mandatory Electronic Invoicing.
The reform applies on a phased basis from 1st Sept, to businesses that are subject to VAT (assujetties à la TVA), whether or not they actually charge VAT.
Those within the system generally have to be able to receive electronic invoices through an approved platform.
The guidance initially published specifically dealing with furnished landlords stated that landlords whose rental income was exempt from VAT could nevertheless remain assujettis to VAT and, if they had a business registration (‘SIREN’) number, would therefore have to receive electronic invoices.
That appeared to bring a large number of furnished landlords within the reform, even where their rental activity itself was not subject to VAT.
The latest version of the guidance, published last month, is significantly more nuanced.
It distinguishes between:
an individual (or a property company - société civile), managing property in a private capacity as an exercise of its ownership rights, and:
an investor carrying on a genuine economic activity in a business or commercial context.
The tax authorities now say that, where the individual or company is not already subject to VAT for another reason, there is a presumption that a person who rents out property they own is acting privately and is not assujetti à la TVA.
This is particularly relevant to LMNP (location meublée non professionnelle) owners.
Being an LMNP does not, by itself, make someone an assujetti à la TVA. Nor does having a SIREN number, being taxed under the BIC rules or paying the cotisation foncière des entreprises (CFE) automatically establish VAT status.
For a private individual simply holding and renting out property as part of their personal wealth, the new guidance therefore points towards non-assujettissement, provided the person is not otherwise subject to VAT.
That could mean that many private LMNP landlords do not need to take any action under the electronic-invoicing rules for their rental activity.
The new guidance expressly confirms that landlords who are subject to VAT remain within the electronic-invoicing reform, eg landlords offering para-hotel services.
There is also an important distinction between being subject to VAT and actually charging VAT.
A landlord may be an assujetti even though a particular rental activity is exempt from VAT. In that situation, the tax office says the landlord has no electronic-invoicing emission obligation for the exempt rental activity, but remains subject to the reception requirement and must be able to receive electronic invoices if they have a SIREN number.
A private individual who owns a property and rents it out as part of the ordinary management of their personal assets, and who is not otherwise subject to VAT, now has strong support in the tax office’s own guidance for treating the activity as outside the VAT system.
The guidance states that if a person is in any doubt as to their status they can seek confirmation from the tax authorities.
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