Last Updated on January 9, 2025
The French budget was approved on December 29. The income tax brackets, ceilings, and allowances, as mentioned in our bulletin, haven’t changed.
However, some new measures were introduced during the review process.
One major update, as anticipated, is a stricter tax regime for French furnished lettings, aimed at addressing the housing crisis in crowded areas. These changes are retroactive, meaning they’ll impact rental income earned in 2024.
Understanding the changes to the Micro BIC tax regime for French furnished lettings
The Micro BIC tax regime, found under Article 50-0 of the French Tax Code, allows landlords to report rental income on their personal tax returns without needing to file detailed business tax accounts and returns.
Instead, a fixed percentage of the income is deducted as notional expenses. This regime is popular with non-French residents who occasionally rent out their holiday homes.
However, the 2024 French budget has introduced significant changes that affect furnished lettings. Here’s a breakdown:
Current system:
- Classified holiday rentals (meublés de tourisme classés) and chambres d’hôtes with annual turnover below €188,700 benefit from a 71% expense deduction.
- For regular furnished rentals, the turnover limit is €77,700, with a 50% deduction.
- Proposed changes:
- Initially, it was suggested to lower the turnover limit to €77,700 for all furnished lettings, with a flat 50% deduction.An additional 21% deduction was proposed for classified holiday rentals in areas without housing shortages (“zones non-tendues”).
- Final amendment:
- The approved changes introduce a much lower turnover threshold of €15,000, with a 30% deduction for all furnished lets.However, classified holiday rentals in “zones non-tendues” can still get a total 51% deduction, but only if the total rental income in the previous year was under €15,000.
This amendment has created confusion because the new Article 50-0 still references the older, higher thresholds, making it unclear how these changes will apply in practice.
The French tax authorities are aware of this issue and might try to fix it later.
What this means for you
- If your rental income exceeds €15,000 in 2024, you may need to switch to a more complex real BIC mode of taxation, which requires formal accounts and business tax returns.
- Some landlords might choose to limit their rental income to stay within the Micro BIC regime, but this could be difficult if bookings for 2024 are already confirmed.
- The situation might still change if the government decides to delay or further amend these rules.
For now, it’s important to assess your rental situation and consider getting professional advice to navigate these changes.
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Q & A
Q: What are the new turnover thresholds and expense deductions for the Micro BIC tax regime starting in 2025?
A: Starting in 2025, the turnover threshold for the Micro BIC tax regime has been reduced to €15,000. Landlords can deduct 30% of their rental income if they rent out a furnished property. Additionally, landlords renting out classified holiday rentals in non-tendues zones can claim a 50% deduction if their rental income from the previous year was under €15,000.
Q: When will the French tax authorities fix the issue with Micro BIC tax regime?
A: Currently, there isn’t a clear timeline from the French tax authorities on when the issue with the Micro BIC tax regime will be fixed.
If you fall under this regime, including the Locations Meublées Non Professionnelles (LMNP) regime Micro BIC, it’s important to stay informed about potential changes that could affect your tax obligations. You should also stay informed on Cotisation Foncière des Entreprises (CFE) tax in France a local business tax that applies if you are a LMNP landlord.
Q: What is the difference between furnished and unfurnished lettings?
A: In France, furnished (“meublé”) and unfurnished (“vide”) rentals differ in lease terms and legal obligations.
Unfurnished rentals typically include only the basic fixtures, so tenants must provide their own furniture, kitchen appliances, etc. Typically these rentals are a minimum 3-year lease.
Furnished rentals on the other hand need to contain essential items to be considered habitable including bedding, curtains or shutters, cooking appliances, refrigerator, kitchenware, table and chairs, etc. These rentals have a minimum 1-year lease.
Q: How do the changes affect classified holiday rentals (meublés de tourisme classés) and chambres d’hôtes?
A: The new tax changes significantly impact classified holiday rentals (meublés de tourisme classés) and chambres d’hôtes by lowering the turnover threshold to €15,000 for all furnished rentals under the furnished holiday lettings tax regime, with a 30% expense deduction instead of the previous 50-71%.
However, note that classified holiday rentals in non-shortage areas (“zones non-tendues”) can still receive a 50% deduction, but only if their total rental income was under €15,000 in the previous year.
These changes reduce tax advantages for higher earners and may push more owners toward long-term rentals or professional registration, and also adds to future investors considering a buy to let property in France reassessing their strategy, as furnished holiday rentals now offer fewer tax benefits compared to before.
Q: Should I consult a professional for navigating these changes?
A: Yes, it’s highly advisable to consult a professional when navigating these changes as the new tax regulations regarding furnished holiday lettings and classified holiday rentals are complex, and the lower turnover threshold and adjustments to tax deductions could significantly impact your rental income and tax obligations.
A professional, such as a tax advisor, can help you understand the specifics of the furnished holiday lettings tax regime, guide you through the process of tax property payment online, and ensure compliance with the new rules, including how to handle local property tax online.
For expert guidance, reach out to PTI Returns today and our team will answer your queries.