Renting Out A French Property – Income Tax Implications
Published: www.frenchentree.com, January 2012
Renting out property in France covers a wide variety of scenarios and permutations. For example you could be a UK resident looking to rent out your French holiday home on short term lets on a seasonal basis. Or you could have plans to be a ‘professional landlord’, resident in the UK or in France, letting out furnished or unfurnished accommodation to long term tenants.
Under any scenario you will not be surprised to learn you will be liable for tax on your rental income! – in France, and possibly also in the UK.
Whether you live in the UK or France there are a number of different French income tax regimes applying to rented property which determine the amount of net income you will actually be taxed on. These regimes depend on whether you let furnished or unfurnished accommodation, and the exact nature of your rental activities.
The regimes are summarised in the table below:-
|Furnished Accommodation||Unfurnished Accommodation|
|Tax Regime||Micro BIC (1)||Micro BIC (2)||Regime Réel||Micro Foncier||Regime Réel|
|Tax Allowance||50%||71%||Actual Costs||30%||Actual Costs|
Note: Micro BIC (2) relates specifically to owners of rural gites, résidences de tourisme and chambres d'hôtes, who offer limited services, such as linen provision and cleaning as part of their rental activity.
Under the ‘Micro’ regimes the net rental income assessable to French tax is determined by deducting a fixed percentage of your gross rental income or business turnover. Under the Regime Réel options you can deduct your actual costs. This latter option is more suited to professional landlords of long term rental accommodation who are able to employ the services of an accountant to manage tax returns and advise on what costs are allowable and accepted by the French tax authority. These include general management costs, property taxes and managing agent costs.
If you are renting out French property as a UK resident you will be liable to French income tax on your net rental income, after deduction of the allowances applied under the relevant tax regime.
In addition, you will also need to declare the rental income to HMRC in the UK to be assessed for UK income tax. You may be eligible for concessionary tax treatment under the scheme for "Furnished Holiday Lettings in the UK & EEA" if you operate your holiday letting as a business within certain qualifying criteria.
The UK/France double taxation treaty gives relief for tax paid in France against liability to tax in the UK. This means that where the UK tax liability on your rental income is greater than the tax payable in France, the difference is payable in the UK. Unfortunately however, if the UK liability is less than the French tax paid you will not get a refund of the difference!
For UK residents French income tax is payable at a set rate of 20% of the net rental income, after allowances. (It is possible to have the income assessed to see if a lower rate of French tax could be applied. But to check this you would need to complete a full French tax return declaring your total worldwide income from all sources to the French tax authority. And the result could actually be that a higher tax rate applies. Not surprisingly, most UK residents renting out property in France opt for the set 20% rate!)
Since 2012, UK residents have also been subject to social charges on their French rental income, although France’s right to levy such taxes on non-residents is currently being challenged by the European Union.
For French residents how you are taxed on the net rental income, after allowances, depends on whether you are receiving the income as additional personal income or as net profits from a separately constituted business, which includes operating under the popular ‘auto-entrepreneur’ status.
Most owners of furnished accommodation will have rental income taxed as additional personal income at their marginal household rate. Social charges are also payable.
If you are looking to be taxed on rental income as net profit from a formal letting business then you will normally need to employ an accountant to advise on the most appropriate business structure, any business registration requirements, selection of the most beneficial tax regime for your circumstances and scale of operation, and to manage your accounts and tax reporting. Professional landlords who operate a registered business are also liable for French social security contributions.
All information in this helpsheet is based on our understanding of current French and UK tax rules and legislation which are subject to change.