We have reported previously on the changes afoot to the taxation of income from holiday lettings (meublés de tourisme).
Last year, as a transitional measure, the fixed tax allowance for landlords using the 'micro' system of taxation was reduced from 50% to 30%, in areas of housing stress.
Since then the topic has been widely debated in the French parliament, and a largely cross-party consensus has emerged on a more wide-ranging, permanent change to the law.
Several legislative proposals contain the following measures.
Mandatory Registration
Currently, most landlords seeking to let furnished accommodation on a short-term basis must declare the activity to the local council. In some major urban areas, prior authorisation is required. In future it is proposed that all short-term furnished lettings must be declared, irrespective of location. It will also apply to principal residences let out on a short-term basis. The property will receive an identification number, which must be used in all advertising.
This measure, which will be specified in more detail by decree, will come into force in 2026.
Quotas and Days
In municipalities where the tax on vacant housing applies, as well as in municipalities where more than 20% of the housing is second homes, town halls will be able to set quotas for furnished tourist accommodation and even define areas in which only the construction of main residences will be authorised.
In addition, from 2025, all local councils will be able to reduce the number of days that a principal residence can be used for short-term lettings to 90 days instead of the current 120 days.
The powers of mayors to sanction will be increased in the event of non-compliance with these rules.
Apartment Blocks
The regulations that govern the management of co-ownership properties (co-propriétés) must state whether short-term lettings are prohibited or authorised. In addition, existing regulations can be amended by a two-thirds majority (and no longer unanimously), provided the co-ownership already prohibits commercial activities outside the dedicated lots.
Conversions into furnished tourist accommodation must be reported to the managing agents (syndic) and communicated to the co-owners at the next general meeting.
Energy Requirements
New rentals with a G rating will not be permitted from 2025, with the minimum rating requirement to rise again in 2028 and in 2034. In effect, furnished lettings will be subject to the same regulations as unfurnished lettings. Mayors will also be given new powers of enforcement and sanctions.
Taxation
For all unclassed short-term furnished accommodation, irrespective of location, the flat-rate allowance (for those who use the 'micro' system of taxation) on income will be reduced from 50% to 30%. The maximum turnover will be €15,000. The change will create parity with the taxation of unfurnished rental income.
In the case of classed short-term furnished accommodation, the allowance will be reduced from 71% to 50% from 2025. The income ceiling will also be reduced from €188,700 to €77,700. This change will apply in equal measure to chambres d'hotes.
The rates and thresholds will apply irrespective of the location of the property, unlike this year.
However, long-term lettings of furnished accommodation will continue to receive an allowance of 50% against rental income, for those using the 'micro' system.
Depreciation
Separately, landlords who use profit and loss accounting (régime réel) for their furnished rental income can currently deduct depreciation. If they sell the rental property the depreciation is not included in the calculation of the capital gain, thereby reducing the taxable gain. Under the proposed measure this tax advantage will be removed, with depreciation added back into the capital gain. Thus, for a landlord who purchased a property for €150,000 and later sold for €230,000, having depreciated the property by €20,000, the capital gain on which tax will be calculated will rise from €80,000 to €100,000. This measure is proposed by the government.
In order not to disturb the current market, the change will apply only to new lettings since 1st Oct 2024.
Uncertainty
It remains to be seen how many of these measures are passed into law, as some are contained in the draft budget for 2025 which has yet to be passed by the French Parliament, where the government does not have a majority.
Advice
If you seek advice on any matter in this article contact our Property Clinic, and one of our advisors will get back to you.
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