YOUR PROPERTY OWNERSHIP STRUCTURE
Your property can be held directly or through a company : a «SARL de Famille» (family owned limited liability company)
- Direct ownership allows simplified management of your assets but does not avoid the situation of joint ownership between your heirs.
- Our advice: the creation of a «SARL de Famille» (family owned limited liability company) which allows your property holding to be consolidated through several generations, and to anticipate the transfer of your estate with a favourable tax treatment.
- A point to note: the creation of an «SCI» («Société Civile Immobilière» – specialist type of French property company) should be avoided. In fact, an SCI which operates a furnished lettings business is subject to corporate tax. This regime is unfavourable regarding the capital gain arising in the event of the disposal of your asset.
REPORTING YOUR FURNISHED LETTINGS INCOME UNDER THE MOST BENEFICIAL TAX REGIME
Your furnished letting income can be declared under the «micro-BIC» rules (micro business) or the «régime réel d’imposition» (tax regime based on actual revenues less expenses). These two schemes should be compared in order to choose the one which is most favourable.
- Declaring your rental income under the «micro BIC» rules allows the deduction of a lump-sum allowance of 50% of the gross rent received. You will then be subject to income tax and social contributions on 50% of your annual revenues.
- Our advice: opting for the simplified tax scheme «régime réel simplifié d’imposition» allows all eligible expenses relating to the holding of the property (upkeep, repairs, insurance, loan interest…) to be deducted from your rental income. In addition, and most importantly, each year depreciation amounting to 2% to 3% of the value of the asset will be allowed. In this way, the taxation of your rental income will be greatly reduced, even nil over several years (with no negative impact on a potential capital gain in the event of a disposal).
BEAR IN MIND THE YEARLY TAX REDUCTION OF €915!
- The Amending Finance Act for 2015 comes with a nice surprise for furnished lettings activities. Taxpayers who opt voluntarily to be taxed under the method «régime réel d’imposition» (note that bookkeeping is required) receive a tax reduction up to €915 each year (subject to belonging to an accredited management centre).