Furnished rental, professional or non professional regime?

The july 15, 2020

Since the end of the lockdown, while some expected a slowdown in the real estate market, we can see on the contrary that the strong interest of the French in real estate has not waned.
Wishing to invest in real estate for frnished rental, some of you, fearing to be qualified as professionals, questioned us as to the scope of this statute.
Today, Wealth A7 enlightens you: furnished rental, professional or non professional regime?

Furnished rental combines the rental of furnished accommodation and the rental of equipped professional or commercial premises. Unlike bare rental, rents from furnished rentals are taxable in the category of industrial and commercial profits (French 'BIC'), which follows a much more advantageous regime than property tax.

When an individual carries out furnished rental, he is therefore obligatorily taxable in BIC, whether he acts as a professional or not. However, two sub-regimes are likely to apply to it:
• The professional furnished rental scheme: French 'LMP';
• The non-professional furnished rental regime: French 'LMNP'.

The LMP status applies to the investor under two cumulative conditions:
- the annual revenues including tax withdrawn from this activity by all the members of the tax household exceed 23,000 €; and
- these receipts exceed the other professional incomes of the tax household.

As long as at least one of these two conditions is not met, the LMNP status applies. There is no intermediate status. Therefore, the entire tax regime of your furnished rental business depends exclusively on these two conditions.

Example 1:
Mr. FEUILLET, unemployed, drew income from his furnished rental activity in 2019 equal to € 40,000. His wife, Mme FEUILLET, is a civil servant and won € 70,000 in 2019.
In 2019, the tax household effectively derives more than € 23,000 in revenue from its furnished rental activity. However, since the professional income of the household exceeds the income from furnished rentals, Mr. FEUILLET has the status of LMNP.

Example 2:
Mr. MODINI is single. His salaried activity provided him with € 20,000 in net income in 2019. In addition, over the same year, his furnished rental activity generated € 25,000 in income.
M. MODINI fulfills both conditions: he therefore has the status of LMP.

The distinction between the LMNP and LMP statutes has three main tax consequences:
- treatment of deficits in furnished rentals;
- the taxation of capital gains in the event of the sale of furnished rented property;
- submission of goods to the real estate wealth tax.

Would you like to know more about the impact of the tax qualification of each of these two statuses? Want to know which one is more beneficial for you? Wealth A7 advises you in the choice of the goods to acquire, in the choice of your status, and can even avoid you the status of LMP while you exceed the thresholds if you make a vacation rental. If you would like to benefit from enlightened and personalized advice, contact us!

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Article by : Vincent IZARD

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