January 2024 French Tax Bulletin - Changes to the Furnished Lettings Tax regimes
January 2024 French Tax Bulletin - Changes to the Furnished Lettings Tax regimes
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 2024 French tax Budget voted in on 29 December 2023, contains an unexpected and drastic change to the taxation of French furnished lettings activities. This was mistakenly kept in the final version of the budget and may be overturned but it remains to be seen if this will happen on time for the tax returns due in May & June of this year.
The indexed scale rates, tax limits & allowances remain as stated in our previous bulletin.
The 2024 French tax Budget voted in on 29 December 2023, contains an unexpected and drastic change to the taxation of French furnished lettings activities. This was mistakenly kept in the final version of the budget and may be overturned but it remains to be seen if this will happen on time for the tax returns due in May & June of this year.
The indexed scale rates, tax limits & allowances remain as stated in our previous bulletin.
Très bonne année 2024 à tous nos lecteurs.
The French budget was voted in on 29 December 2023. The indexation of the French tax scale (barème) income bands, tax ceilings and allowances as stated in our November 2023 bulletin remain unchanged. However, some measures were amended and added during the consultation process.
As expected, one of the main changes affects French furnished lettings through a harsher tax regime aimed at easing the housing crisis in overpopulated regions of France. Regrettably, the finalised provisions impact retrospectively and will affect 2023 rental income.
Scope of the Micro BIC tax regime and changes to the set deductions
The Micro BIC regime, codified under Article 50-0 of the French Tax Code, allows taxpayers to report their turnover on their personal income tax return without the need to produce and file business tax accounts and returns. A set percentage of the turnover is deducted to cover all the activity’s expenses. Furnished rentals fall into the commercial activity category and may therefore qualify for the Micro BIC regime. This is very popular with non-French resident taxpayers who occasionally rent out their holiday home when not using it.
Set annual turnover thresholds determine whether a commercial activity is assessable by default under the Micro BIC regime. Where this applies, taxpayers may still opt for the standard or simplified itemised regimes (régimes réels), which are compulsory if the turnover exceeds the set thresholds.
Until now, the Micro BIC regime applied to furnished lettings as follows:
During the consultation process, a further amendment was introduced to suggest a €15,000 turnover threshold (instead of €77,700) and 30% deduction (instead of 50%) for all types of furnished lets, keeping nonetheless an extra 21% deduction (i.e. 51% in total) for meublés de tourisme classés in the “zones non-tendues” but only if the total rentals of the household in the previous calendar year do not exceed €15,000.
This latest suggestion was voted in, but the new Article 50-0 still refers to the “€188,700 turnover and 71% deduction category” for classées properties and chambres d’hôtes so their treatment post budget is not entirely clear. Indeed, from a strict reading of the amended Article, one could take the view that these lettings are not affected, although this was understood not to be the legislator’s intention. As a result of all this, we now have a confusing “hybrid” Article 50-0 FTC which is set to apply to 2023 income.
This blunder opens the door to different interpretations. At this stage, it is impossible to reach a definite conclusion, and this will complicate the 2023 income reporting. The French Administration is fully aware and although they have announced that they will endeavour to correct the issue, there is no guarantee this will happen before the filing deadlines of May/June 2024.
For some, the changes may have a deferred impact and the position may be clarified in the meantime. Indeed, exceeding the turnover limit for one year only, does not preclude the Micro BIC regime; For this, the threshold needs to be exceeded in both of the immediate previous two years.
For example:
Given the impact of the pandemic in 2021 some businesses will probably remain within the Micro BIC scope for 2023 but will be subject to the 30% or 51% reduced deductions. The drastic drop in the turnover threshold, will eventually increase the number of letting activities having to report under the itemised regime; for some, as early as 2023. Since this regime requires the preparation of formal accounts under French accounting standards and the filing of business tax returns, in addition to personal returns, landlords will need to promptly assess their situation in case they need to appoint a French accountant.
Going forward, some landlords may prefer to limit their rental income to remain under the Micro BIC regime. This will be tricky as most 2024 bookings will have been confirmed by now. It is difficult to appreciate how this change can alleviate the French housing crisis in certain regions unless the government’s objective is to reduce the appeal of short-term lettings and thus incite some owners to simply sell up.
The situation may still evolve if the administration decides to defer the implementation of the new measure until the reporting of the 2024 income or to introduce further changes. We can only hope that we will not have to wait until the 2023 income tax forms and guidance notice to be published to take stock of the full impact of these changes.
The French budget was voted in on 29 December 2023. The indexation of the French tax scale (barème) income bands, tax ceilings and allowances as stated in our November 2023 bulletin remain unchanged. However, some measures were amended and added during the consultation process.
As expected, one of the main changes affects French furnished lettings through a harsher tax regime aimed at easing the housing crisis in overpopulated regions of France. Regrettably, the finalised provisions impact retrospectively and will affect 2023 rental income.
Scope of the Micro BIC tax regime and changes to the set deductions
The Micro BIC regime, codified under Article 50-0 of the French Tax Code, allows taxpayers to report their turnover on their personal income tax return without the need to produce and file business tax accounts and returns. A set percentage of the turnover is deducted to cover all the activity’s expenses. Furnished rentals fall into the commercial activity category and may therefore qualify for the Micro BIC regime. This is very popular with non-French resident taxpayers who occasionally rent out their holiday home when not using it.
Set annual turnover thresholds determine whether a commercial activity is assessable by default under the Micro BIC regime. Where this applies, taxpayers may still opt for the standard or simplified itemised regimes (régimes réels), which are compulsory if the turnover exceeds the set thresholds.
Until now, the Micro BIC regime applied to furnished lettings as follows:
- For rented property registered as meublés de tourisme classés or chambres d’hôtes and with a turnover in either of the previous two years below €188,700. In this instance, they benefitted from a 71% set deduction to cover all expenses.
- The threshold was €77,700 if the property was not classée with a 50% set deduction.
During the consultation process, a further amendment was introduced to suggest a €15,000 turnover threshold (instead of €77,700) and 30% deduction (instead of 50%) for all types of furnished lets, keeping nonetheless an extra 21% deduction (i.e. 51% in total) for meublés de tourisme classés in the “zones non-tendues” but only if the total rentals of the household in the previous calendar year do not exceed €15,000.
This latest suggestion was voted in, but the new Article 50-0 still refers to the “€188,700 turnover and 71% deduction category” for classées properties and chambres d’hôtes so their treatment post budget is not entirely clear. Indeed, from a strict reading of the amended Article, one could take the view that these lettings are not affected, although this was understood not to be the legislator’s intention. As a result of all this, we now have a confusing “hybrid” Article 50-0 FTC which is set to apply to 2023 income.
This blunder opens the door to different interpretations. At this stage, it is impossible to reach a definite conclusion, and this will complicate the 2023 income reporting. The French Administration is fully aware and although they have announced that they will endeavour to correct the issue, there is no guarantee this will happen before the filing deadlines of May/June 2024.
For some, the changes may have a deferred impact and the position may be clarified in the meantime. Indeed, exceeding the turnover limit for one year only, does not preclude the Micro BIC regime; For this, the threshold needs to be exceeded in both of the immediate previous two years.
For example:
- The turnover threshold is exceeded in 2021 and 2022; the itemised regime will apply for 2023 income (regardless of the effective income generated that year) and with no option for the Micro BIC.
- Assuming the 2023 turnover falls below the €15,000 limit, the Micro BIC will apply by default for the 2024 income, but, with an option for the itemised regime, to be filed at the time of the 2024 return submission.
| Tax Years | 2021 Turnover | 2022 Turnover | 2023 Tax Regime | Deductions |
| General Furnished Lettings | below €15,000 below €15,000 below €15,000 below €15,000 |
below above below above |
Micro BIC Micro BIC Micro BIC Itemised regime |
30% 30% 30% Itemised |
| Meublés de tourisme classés in non qualifying areas "Zones Tendues" Meublés de tourisme classés in qualifying areas "Zones non-tendues" subject to total rentals in previous calendar year |
below €15,000 below €15,000 below €15,000 below €15,000 below €15,000 below €15,000 below €15,000 above €15,000 |
below above below above below above below above |
Micro BIC Micro BIC Micro BIC Itemised regime Micro BIC Micro BIC Micro BIC Itemised regime |
30% 30% 30% Itemised 51% 30% 51% itemised |
Given the impact of the pandemic in 2021 some businesses will probably remain within the Micro BIC scope for 2023 but will be subject to the 30% or 51% reduced deductions. The drastic drop in the turnover threshold, will eventually increase the number of letting activities having to report under the itemised regime; for some, as early as 2023. Since this regime requires the preparation of formal accounts under French accounting standards and the filing of business tax returns, in addition to personal returns, landlords will need to promptly assess their situation in case they need to appoint a French accountant.
Going forward, some landlords may prefer to limit their rental income to remain under the Micro BIC regime. This will be tricky as most 2024 bookings will have been confirmed by now. It is difficult to appreciate how this change can alleviate the French housing crisis in certain regions unless the government’s objective is to reduce the appeal of short-term lettings and thus incite some owners to simply sell up.
The situation may still evolve if the administration decides to defer the implementation of the new measure until the reporting of the 2024 income or to introduce further changes. We can only hope that we will not have to wait until the 2023 income tax forms and guidance notice to be published to take stock of the full impact of these changes.
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.
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