How to declare income on your French holiday home
While the taxation of holiday home furnished rentals is not overly complicated, it is important that you understand how it works.
If you’re feeling overwhelmed by the tax related to this statute or even if you have questions about tax regimes, exemptions, and tourist tax; we have asked our partners at French Tax Online to provide the answers. In this article, they consider the specifics of the seasonal rental tax and how it offsets your basic taxes. The goal as an owner is naturally to make your rentals profitable and to optimise your cash flow.
Declaration of income from seasonal rental
When it comes to classical rental, income and charges are also subject to taxation in the case of tourism rental activity. Whether you’re renting out your holiday accommodation for a few weeks a year or all year-long, the rental income received is taxable.
Unlike an unfurnished rental, which would need to be declared in the property income category (or ‘revenus fonciers‘ in French), the furnished rental — be it seasonal or not — is to be declared in the industrial and commercial profits category (BIC).
Depending on the amount of your annual income or your expenses, you must then choose between either:
- The régime micro-BIC, also called régime forfaitaire: this regime has many advantages, such as being relatively simple and allowing you to benefit from a 71% reduction on the rents and collected charges.
- The régime réel simplifié: even though it is much more complex than the micro-BIC, it enables you to deduct property charges and amortisation from your rental income. Nevertheless, you’ll need to keep your accounts and also hire a chartered accountant. They will take care of your annual balance sheet. In order to be registered under the régime réel simplifié, all you’ll need to do is to send a letter to the tax authorities stating your intention, which must be done before February 1st of the first year you wish to be registered.
This option is then valid for two years and is tacitly renewed every two years, unless terminated (‘dénonciation‘ in French).
Tourist tax (‘taxe de séjour’ in French)
Municipalities in “touristy” areas such as the mountains or the seaside, that attract or encourage tourism, may impose the payment of tourist tax. This tax is then collected from people passing through the municipality, i.e. those who are not domiciled there and therefore do not pay their housing tax there.
Two methods of calculation: fixed price calculation vs real calculation
The municipality can choose between two methods to determine the amount of tourist tax that holidaymakers will have to pay:
- Calcul au forfait: each year, the owner must inform the town hall of the capacity of their accommodation as well as the rental period. This information is then used to determine the amount of the tax to pay, which therefore no longer depends on the number of occupants.
- Calcul au réel: the amount of the tax depends on the length of the stay and the number of occupants in the accommodation.
The amount of taxe de séjour
This is set by the City Council and is based on the pricing scale defined by article L2333-30 of the General Code of Local Authorities. Indeed, the price may vary according to:
- The duration of the stay;
- The number of occupants;
- The facilities and nature of the accommodation.
The amount is between €0.20 and €4 per night per person (including a guest room).
Who needs to pay the tourist tax ?
It is the property owners who must pay the tourist tax to the municipality, whether under régime ‘forfait‘ or ‘réel‘. However, you as the owner must authorise the platforms to collect your tax and remit it to the municipalities.
What are the exemptions ?
When the tourist tax is calculated in real terms, some people may benefit from an exemption:
- Minors (under 18 years of age)
- People who have been transferred in an emergency or on a temporary basis
- Employees of the municipality with a seasonal employment contract
- Occupants of premises managed by associations and who benefit from an advantageous rent (the threshold is set by the municipal council)
Whichever plan you choose, you will remain liable for social security contributions at a rate of 17.2%. If you make more than €23,000 in annual revenue, you will also be liable for social security contributions.
In summary, if you are renting out a property, you should carefully study your tax requirements. As you rent out your property, you will generate taxes and social security contributions, a significant burden that was not necessarily taken into account upon purchase. In a classified furnished tourist rental property, you are subject to the BIC régime. If your income does not exceed €176.200 per year, you fall under the régime forfaitaire. The pre-tax exemption is then increased to 71% compared to 50% for a traditional rental. If your annual income exceeds this amount or if your deductible expenses exceed 71% of the deduction, you fall under the regime réel.
To find out more about income declarations and owning a holiday property in France, feel free to contact us at firstname.lastname@example.org
*Many thanks for this article, which is attributable to our partners at French Tax Online.