Renting “old” furnished properties under the French “LMNP” regime
Renting a property under the French “LMNP” regime (“location en meublé non professionnel” – non-professional rental of furnished property) isn’t reserved solely for new-builds. What’s the advantage of this status? It allows you to earn rent tax-free. Let’s take a closer look…
The French “LMNP” regime is generally known for its applicability to new rental properties in serviced residential blocks (leisure homes, senior accommodation, business tourism, etc.).
But did you know that the tax regime also applies to an “old” property?
A home rented furnished by its owner, via a furnished rental property contract, allows the latter to declare their rental income under the income category “Bénéfices Industriels et Commerciaux (BIC) non professionnels” – Non-Professional industrial and commercial benefits.
Thanks to this system, the owner is able to amortise their investment. Which means that they may deduct from the rental revenue all expenses associated with the property investment (insurance, maintenance, legal expenses) as well as any loan repayments.
For example: a €200,000 property paid off over 25 years would permit a deduction of €8000 per year. On the same basis, it would also be possible to amortise the cost of any furniture. For example, if the furniture cost €10,000 this expense would be amortised over a ten year period at a deduction of €1000 per annum.
In the end, a rented furnished property brings its owner revenue without the tax burden because the outgoings exceed the receipts. Thus there is no taxable income. There is even a deficit that can be carried forward to subsequent tax years.
Another advantage of the LMNP: the contract duration is short at 12 months, renewable on an annual basis.
Need to know: make sure you have a proper budget to furnish and kit out the property from A to Z. A decree that will come into force after the adoption of the ALUR law of 24 March 2014 sets out a detailed list of equipment that must be provided to the tenant.