The government has launched the first phase of a recalibration of the tax breaks on rental income from holiday lettings.

As we have been reporting this year, the government is under pressure to increase the supply of long-term lettings in areas of housing stress.

It follows a report last year from an inter-ministerial committee that the growth in short-term furnished lettings has been to the detriment of the supply of long-term rental properties, and that is has also pushed up house prices.

Most of the enmity has been directed at Airbnb type lettings, but the solutions as proposed will affect all short-term furnished lettings.

Under a draft law contained in the finance bill for 2024, the tax allowance for classified short-term lettings (meublés de tourisme classés) for those who have opted for the micro-BIC form of taxation, will be reduced from 71% to 50%.

The maximum turnover granting entitlement to the allowance will also be reduced from €188,700 to €77,700, a change that will affect few landlords.

Moreover, the change will only apply to properties in areas of housing stress. Rural properties will in general therefore continue to benefit from the higher allowance, provided their turnover does not exceed €50,000 a year.

The proposals do not affect the allowance for chambres d'hôtes, which will also remain at 71%.

The change will take effect from 2023, for rental income received this year, taxed in 2024. Landlords who use profit and loss accounting under the régime réel are unaffected by these proposals.

However, the government has stated that a more substantial reform of the taxation of the sector is planned for 2024.

Amongst the ideas being considered is aligning the taxation of furnished rentals with that of unfurnished rentals. That could mean a common tax allowance of 30% or 40% under micro-BIC, and the abolition of

depreciation to a furnished rental under the régime réel, which can often neutralise any taxation.