Most international owners who set up a business in France use their home as the business premises, in which case the question arises as to whether the business can pay a rent and other charges for use of the property.
To those whose activity is established as a micro-entreprise the option does not exist, due to the absence of a separate legal identity and the obligatory used of a fixed cost allowance to set against liability to income tax.
If, on the other hand, you own your home and it serves as the registered office of your company (SARL or EURL), it is possible to charge a rent and other charges to the company.
This is the case whatever the nature of the business (whether commercial, artisanal or professional) and irrespective of the type of taxation used, whether income tax (impôt sur le revenu) or company tax (impôt sur les sociétés).
The tax authority would normally expect that the rent is actually paid, and in the case of a business using company taxation, a formal lease would need to be in place.
The level of the rent cannot be any higher than the normal rent (valeur locative) that would apply for the space in the locality. The space occupied by the business would also need to be coherent with the nature of the activity.
Although the rent paid by a company is a deductible expense from profit, it is simultaneously income received by the owner, which must be declared as rental income (revenus fonciers) on their annual tax return. The rent would also be subject to social charges (prélèvements sociaux) of 17.2%.
As a result, it is not always evident that charging a rent is beneficial. The operation will only be interesting if the savings made at the company level are greater than the additional income tax and social charges borne by the owner.
It is more likely to be so for a company that is highly profitable, and an owner who has a low taxable income. Conversely, a company with low profits and an owner with a high income would make it less advantageous.
However, in addition to a rent, it is also possible for the company to pay some of the charges of the property.
Under Article 39 of the General Tax Code expenses relating to a residence used as a company's headquarters or address are deductible from the company's profits.
This applies to both SARLs and EURLs, whether they are subject to corporate or personal income tax.
Naturally, only expenses incurred in the interest of the business and not those incurred in the interest of the occupant are deductible.
As many charges will be mixed the tax authority specifies that companies must "make a fair distribution between deductible business expenses and non-deductible personal expenses".
These reimbursements made to the owner would not be benefits in kind or in money, but rather reimbursement of professional expenses that are exempt from taxation.
If they are unable to deduct their living expenses from their company's profits, owners using company taxation may also opt for the deduction of their actual expenses when drawing up their personal income tax return. This would be in lieu of opting for the standard 10% allowance for professional expenses.
These expenses could include a proportion of repairs and maintenance costs, cleaning, taxes, lighting, insurance etc.
The amount deductible must be proportional to the surface area occupied used for professional purposes, which may not itself exceed one room.
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