French Furnished Lettings – Latest Development in the Taxation of some Furnished Lettings

Please note that the changes to the furnished rental income taxation described in this bulletin have evolved since and refer to the April 2024 Bulletin Update.

The change to the conditions of application for the Micro BIC tax regime for furnished lettings voted as part of the 2024 French tax budget, have thankfully been revisited by the legislator, ahead of the French tax season, but only for those who are not registered as meublés de tourisme classés or chambres d’hôtes.

We refer our readers to our January bulletin which detailed these changes and as a follow up, we outline the latest development which cancels part of the retrospective effect of the new legislation.

Article 45 of Law No. 2023-1322 of 29 December 2023 on Finance for 2024 modified the condition of application for the micro-BIC regime for furnished rental activities.

The reduction of the annual turnover threshold from €77,700 to €15,000 for those not registered as meublés de tourisme classés or chambres d’hôtes meant that many would have to file business tax returns in addition to their personal tax forms, as well as maintain French accounts for their activity. As a practical example, anyone with a turnover in excess of €15,000 in both 2021 and 2022, would have to apply the itemised business regime for 2023, supported by French accounts.

Given the lack of forewarning and the changes’ retrospective effects, the French Administration have now announced that those concerned may rely on the legislation’s old version (Article 50-0 CGI) for their 2023 income. Therefore, if their 2021 or 2022 turnovers were below €77,700, they can still apply the Micro BIC in respect of their 2023 rental income. The old legislation also refers to the higher 50% set deduction, but in the absence of any clarification, we prefer to take a prudent approach on whether this will still be granted for 2023. We remind our readers that the new set deduction was reduced to 30%.

Since the above concession is not aimed at taxpayers who have registered their rentals as meublés de tourisme classés or chambres d’hôtes, it is logical to deduce that the legislator’s intention was to keep the higher Micro-BIC turnover threshold of €188,700 for these types of lettings. This is an issue that we had flagged up in our previous bulletin. Nevertheless, with the drop of the set deduction from 71% to 30% and the strict conditions to benefit from an increased set deduction of 51%, the meublés de tourisme classés & chambres d’hôtes activities may well fare better under the itemised regime.

Although we welcome this latest development, it has sadly not clarified all angles of interpretation. We can only hope that the 2023 tax forms will properly reveal the impact of these changes and allow taxpayers to adapt their activities for the future.

This publication has been carefully prepared, but it has been written in general terms and should be seen as containing broad statements only. It cannot be relied upon to cover specific situations without obtaining professional advice.

BDO is the brand name of the BDO network and for each of the BDO member firms.