The furnished rental market has long been popular with investors in France.
The strong demand for such accommodation from the tourist industry has been backed by favourable tax incentives.
Landlords of furnished lettings are granted a tax allowance of 50% against rental income, rising to 71% in the case of classed accommodation (meublé de tourisme classé) and chambre d'hôtes.
Alternatively, landlords can charge actual costs against rental income, including loan interest and depreciation, which can often enable them to go for years without being taxed.
However, the growth in the number of short-term furnished rentals in areas of housing stress, notably through such platforms as Airbnb, has resulted in shortages of long-term rental properties and rent hikes.
In 2021 a powerful parliamentary committee recommended that the tax rules for furnished accommodation be aligned with those for unfurnished lettings.
Under that scheme the tax allowance for costs is lower, at 30%, and for those adopting standard profit and loss accounting there is no provision for depreciation.
The committee recommended the abolition of the separate treatment of furnished lettings and the creation of a single tax regime for both furnished and unfurnished lettings.
The recommendations of the committee were not adopted by the government, but during the passage of the Finance Act at the end of the year an amendment was proposed which attracted a lot of support, and echoed many of the sentiments of the parliamentary committee, stating:
"This amendment aims to reintegrate income from furnished tourist accommodation... into the ordinary law on the taxation of property income. In the current framework of taxation of the owners of these rentals benefit from undue tax advantages which only increase the pressure on real estate in tense areas and in particular in large cities."
The proposal continued: "The amendment is mainly aimed at Airbnb offers. Airbnb has led to a shortage of accommodation and a surge in rents in many large cities, particularly in Paris. Many districts have been emptied of their inhabitants, leading to the closure of shops, schools and simply the end of neighbourhood life. This amendment thus aims to rebalance the market by reforming the taxation of short-term rentals."
Although, once again, the amendment was not accepted by the government, the Minister of Housing, Olivier Klein, later announced in a radio interview that a review, which could lead to a fiscal rebalancing was under way, stating: "There are tax niches (for seasonal lettings) that seem to me to be too advantageous today compared to what is possible when you rent your flat for a long period. France is a tourist country, I'm not saying that everything should be stopped, but I think that there should be more justice in the tax relations that one has with one's furnished tourist accommodation and those that one has with a classic furnished accommodation or long-term accommodation. We are working on this."
There has been no further announcement about the review, so there are no details on its scope (whether restricted to areas of housing stress or the whole country), or the timescale.
Nevertheless, there are now many influential voices in France arguing that the tax incentives towards furnished lettings, notably those of a seasonal nature such as Airbnb, are too generous and that a reform of the system is now due.
A suivre.
Related Reading:
