In the following lines, you will find a brief summary of the tax regimes and schemes applicable to seasonal rentals in France. You will equally find the novelties in social matters applicable in France since 1 January 2017.
Revenues from the furnished rentals are commercial in nature and fall under the category of Industrial and Commercial Profits.
The profit is taxed according to the scale in force for French residents (+ CSG CRDS of 15.5%). Non-residents are subject to a minimum tax rate of 20% (+ social contributions of 15.5%).
Moreover, if the hirer provides in addition to the rental of para-hotel services, he will have to charge VAT. However, there is a VAT deductible scheme if the para-hotel hirer carries less than € 82,800 in revenue per year.
Since January 1, 2017, furnished renters making more than 23,000 € in revenue per year are treated as social professionals and are required to pay contributions.
The contribution rate and the basis of calculation depend on the renter’s tax system:
Mr. X receives € 25,000 in seasonal rental income. His rents being less than 33.100 € per year, he decides to opt for the “micro” scheme. Its social charges will represent 22.7% x 25.000 € = 5.675 €.
The following year, Mr. X decided to opt for the real regime:
Annual Revenue: 25.000 €
Annual deductible expenses: 16.000 €
The basis for calculating social contributions will be € 9,000, its social security contributions should average € 4,050.
If the result of the rental activity is zero
The renter may find himself in the situation where his rental income will exceed the threshold of 23,000 € but because of the importance of his expenses, his result will be zero. If he is affiliated to the IHR, he will still have to pay the minimum contributions. According to the website of the RSI, these contributions amount to 1,198 € in 2017.
Several cases can be distinguished:
Let us verify, if our forecasts of the real estate market made at the end of 2016 turn out to be correct in 2017.
Meilleursagent publishes the 89th edition of its monthly barometer of residential property prices in the ten largest cities in France.
Although the recent rise in mortgage interest rates remains contained, creditworthy households are accelerating their purchases to benefit from the windfall. Some very good records benefit from even lower rates up to 1% over shorter borrowing terms.
However, candidates for home ownership are fully aware that the exceptionally cheap credit will not last; As evidenced by the upward movement in rates recorded since the end of last year in the vast majority of lending institutions.
In addition, households are also faced with the recovery – confirmed and accentuated in this March barometer – of the rise in real estate prices in most major cities. “Under these conditions, buyers feel they need to accelerate their purchases before rates go up when prices are already climbing,” explains Sébastien de Lafond. What they do not pay to their banker through the low rates is partly in the price of the good they are willing to pay to the seller. The low rates mechanically fuel inflation. “
More so, than the impact of next less attractive credit conditions, it is that of the rise in prices in the big cities that reinforces the feeling of urgency.
According to the barometer, prices in Paris rose by 2.4% by the 1st of March and the averages are similar to the peaks of 2011. The phenomenon is spreading to the Paris suburbs. In the small crown of the city, the increase reached 1.2% since the beginning of the year and 0.9% in the large corona.
In the capital, anticipate notaries Paris-Ile-de-France, in their real estate conference of February 23: “According to our indicators on advanced pre-contracts, the price per square meter would reach 8,520 euros in April, an Annual increase of 5.6%. “
In the regions, the rise in prices is more or less pronounced according to the metropolitan areas concerned. Two groups are distinguished. The first, like Paris, unites Bordeaux, Lyon and Nantes. These cities are experiencing strong price increases.
Bordeaux, for example, rose by 2.3% in February, up 4.3% from 1 January 2017 to 9% year-on-year. In Lyon, despite a start of the year down, the increase is + 5.4% over the past year. In western France, prices in Nantes climbed 0.8% in February and 2.2% from 1 January and 4.3% in one year.
The second group: Marseille, Montpellier, Toulouse, Strasbourg, Nice and Lille. Prices remain virtually stable with year-over-year increases between 0% and + 2%. In detail, we note:
Marseille (+ 2.1% over one year),
Montpellier (+ 1.7% over one year),
Toulouse (+ 2% over one year and + 0.4% since 1 January),
Strasbourg (+ 1.1% over one year and price stability in February),
Nice (+ 1.3% over one year),
Lille (+ 0.8% over one year, despite the declines in January and February (-1.6% over two months).
In the Lille metropolis, according to MeilleursAgents.com, “these are mainly due to the implementation of the rent framework that limits the hopes of return of investors. “
The taxation in France of international successions or inheritances is provided for in Article 750 Ter of the French General Tax Code.
The following shall be subject to the transfer duties free of charge:
– Movable and immovable property, whether owned directly or indirectly, situated in France, where the deceased is not a fiscal resident in France. Property situated in France and owned by a non-resident may be taxed in France in respect of inheritance tax.
– Movable and immovable property situated in France or outside France, received by the heir or legatee who has his fiscal domicile in France. However, this provision applies only when the heir has had his fiscal domicile in France for at least six years during the last ten years preceding that in which he receives the property. Thus, where the heir of an international succession is a tax resident in France, the entire estate received by the latter is subject to French inheritance tax.
– The deceased is a tax resident in France;In general, inheritance taxes will have to be paid to France if:
– The heir is a tax resident in France;
– The movable or immovable property transmitted is in France;
You will agree that the definition of the person liable for inheritance tax in France is very broad. This situation regularly results in double taxation; In France and in the country of the deceased or heir.
To avoid the risk of double taxation, and to determine the country where inheritance taxes should be paid, many countries have signed tax treaties with France. (Contact us for a specific tax treaty)
It is important to note that the objective of a tax treaty is to avoid the double taxation of the same income, that is to say, where the same person is taxable in respect of the same income, fortune or succession or gift by more than one State.
In a country where there is no inheritance tax (for example Portugal), the tax treaty can not be applied and inheritance taxes will be payable in France.
The sale of works of art is subject to a specific VAT regime. The tax base but also the applicable rates depend on the quality of the seller but also on certain tax options taken by him.
The sale of works of art (within the meaning of Article 98 A II of Annex 3 to the CGI) by the artist or his successors in title is subject, since 1 January 2015, to the reduced rate of 5, 5%. The artist liable to VAT may in return deduct from this collected VAT, the VAT deductible on his acquisitions.
Artists may benefit from a VAT exemption regime if their turnover does not exceed € 42,900 per calendar year. The franchise regime applies to original works produced by the artist, but also to limited reproductions, provided they are signed by the author and numbered. This regime does not apply to the sale of works of other persons, the artist then becoming a trader.
|Type of work or operation||VAT RATE|
Importing works of art, collectors’ items or antiques (from the European Union or not)
|Assignment of copyright (right of representation, reproduction, adaptation, exploitation) and interpretation||10 %|
|Sale of an original work by the author or his successors||5,5 %|
|Sale by a third party (art gallery, merchant, intermediary acting in its own name)||20 %|
|Sale of cultural property not considered a work of art:
– Drawing of architect, engineer and other industrial, commercial, topographical,
– Hand-crafted item,
– Painted canvas for theater decors or studio backgrounds,
– Articles of jewelery, jewelery or goldsmiths’ wares,
– Piece of cabinetry more than 100 years of age (considered an object of antiquity),
– Photographic posthumous proof (not signed or authenticated by the artist).
In this case, there are several scenarios:
The gallery will also be able to opt for a VAT margin scheme: by this option the galleries can request that the VAT be collected only on the profit margin they realize. In this case, they nevertheless lose the right to deduct the VAT paid on the purchase price of the work.
Where it is not possible to determine precisely the purchase price of the transferred work, the galleries may, under certain conditions, calculate the margin at a flat rate by retaining 30% of the sale price, exclusive of taxes, for the work.
Taxation of race horses;
Investment in a racing horse can be particularly interesting. However, among the 8,000 French owners of racing horses, only a handful of them will actually make a fortune. The others, at best, will reimburse the expenses incurred.
Overview of this type of alternative investment.
The foal from the moment of his birthday until the end of the year of birth, can be negotiated from 4.000 € to 12.000 €. However, prices vary according to origin and ancestors’ origin, place of birth, etc. Sometimes a foal can negotiate on a higher basis, although it is particularly risky to invest heavily in a racehorse of which one knows almost nothing of its intrinsic qualities.
The Yearling is the horse born on January 1st or after January 1st until January 1st of the following year. Its value is determined by its pedigree, its athletic qualities, its precocity and the evaluation of its potential. The price range remains large, but on average Yearling is negotiated between 30,000 € and 100,000 €.
The pre-trained 2-year can also be sold on a wide range of prices, even larger than the yearling, knowing that prices can rise with certain thoroughbreds having already proved themselves. However, the investor has a better view on the qualities of his racing horse, his potential is precise, and the gains to come also.
The racehorse can be purchased during training, with the owner. For this type of mount, the minimum purchase price is already almost inaccessible for most investors.
The protrusion can also bring back enough to ensure a part of the maintenance of the racehorse. The breeding is negotiated from 300 € but can also reach exorbitant prices as soon as one considers horses having obtained good results in competition, a horse in good health can carry between 5 and 10 protrusions per month.
In order to determine the taxation on race winnings, it is necessary to define the degree of intervention of the owner
In order to be a non-intervening owner and to benefit from the exemption from race winnings, the owner entrusts the exploitation of his horse’s racing career to a professional, if this is not the case the owner is intervening and is taxed at BNC scheme, non-professional or professional with the possibility of deducting deficits. The capital gains are in turn after various allowances integrated into the income of the owner.
Race gains realized by the owner of a racehorse without ground or non-breeder who confers his horse to a coach without exercising any diligence in order to create a source of income do not constitute taxable products And are therefore exempt from income tax. Only profits or gains from the sale of horses are taxable, in this case, after tax reductions to the IRPP.
Race gains and gains realized by owners who do not fulfill the aforementioned exemption condition and the profits or gains realized by groundless breeders from the sale of their horses are taxable in the category of non-commercial profits .
Professionals: When the activity deployed by the owner is of a professional nature, the deficit is deducted from the profits of the same nature made during the tax year by the members of the tax household. In the absence of such profits, the deficit is chargeable to the total income under the conditions of ordinary law.
Non-professional: When the activity is not professional, the deficit is not deductible either from a professional profit or from the overall income. It can only be applied against profits from similar activities in the same or the following five years.
Established in 1962 by André Malraux, the Malraux Law allows to deduct tax on the amount of work realized in the context of a restoration of classified property. This system appeals to private investors to rehabilitate the “Patrimoine de France” that is french heritage.
Since January 1, 2013, the Malraux device has been targeting French resident taxpayers who invest in apartments to be renovated and intended for rental.
To benefit from Malraux device benefits, you must meet the following requirements:
The 2017 Malraux scheme gives the right to an income tax reduction calculated on the amount of restoration work undertaken by the taxpayer in the amount of:
– 30% for buildings located in a Remarkable ans approved Heritage Site PSMV (protection and development plan), QAD (old degraded districts) and NPNRU – Old safeguarded areas;
– 22% for buildings located in a remarkable heritage site with approved architectural and heritage valuation plan (PVAP) or whose restoration program has been declared to be of public utility. – Former ZPPAUP and AVAP.
The amount of work for the calculation of the tax reduction in Malraux 2017 law is retained within the annual limit of € 100,000.
When the property is held in undivided ownership, each undivided beneficiary shall benefit from the tax reduction calculated on the fraction of eligible expenses corresponding to his rights in undivided ownership.
Saved areas having “a historical, aesthetic or similar character to justify the preservation and enhancement of all or part of a group of buildings” and recognized as such by order of the prefect of the department.To benefit from the tax reduction, you must invest in an immovable located in a “remarkable heritage site”, that is to say:
Districts with a high concentration of degraded old housing, the list of which is to be fixed by decree, can also benefit from the tax reduction.
With a Malraux device, a lessor must annually inform the “Declaration No. 2042 Complementary”. In the first year, he must also enclose a letter of commitment.