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Higher taxes for furnished tourist accommodation ?

The Finance Bill for 2024 proposes to tighten up the taxation of rentals of furnished tourist accommodation. The new rules will apply to rents received from 2023 onwards, but some tenants will be able to escape them.

Are you in the seasonal rental business and have your premises been classified as “furnished tourist accommodation”? You could be paying more tax next year, because the tax reform announced by the government last month will indeed be taking place. An amendment to the Finance Bill for 2024 provides for higher taxation of certain tourist lettings from the taxation of rents received in 2023. Here are the details.

Furnished tourist accommodation and micro-BIC: allowance reduced to 50 !

Don’t panic: the reform will not affect all taxpayers who rent out furnished accommodation or seasonal lets. Only those who rent out premises classified as “furnished tourist accommodation” under the Tourism Code and whose rents are subject to the “micro-BIC” scheme will be affected. That’s around 120,000 owners. At present, these tenants are covered by this simplified tax regime for annual receipts of up to €188,700, because the letting of furnished tourist accommodation is treated as a sales activity. They benefit from a 71% allowance on their gross rental income, and are taxed on only 29% of the amount.

The Finance Bill proposes to treat the letting of furnished tourist accommodation as a service provision activity for rents received from 2023 onwards. As a result, these tenants will now come under the “micro-BIC” scheme for annual receipts of up to €77,700, and will benefit from an allowance limited to 50% when calculating their taxable rental income. They will therefore be taxed on 21% more income in 2024 than in previous years. For example, if you earn €20,000 a year in rental income, you will be taxed on €10,000 in 2024, compared with €5,800 previously. If your tax rate is 30%, you will pay €4,720 in tax and social security contributions next year (€10,000 × 47.2%) compared with €2,738 this year (€5,800 × 47.2%). That’s a tax increase of 72.4%!

Good to know: if you are covered by the real BIC system for your furnished tourist accommodation rental income, either automatically (rental income in excess of €77,700 per year) or by option (to be exercised at the beginning of the year), you are not affected by the reform. Your income for 2023 (profit or loss) will be calculated as usual, as the difference between your income and your expenses plus depreciation of the property and furnishings rented out. If you are a professional landlord, you will still be able to offset your deficit against your household’s other taxable income without limit, and if you are a non-professional landlord, you will be able to offset it against your profits of the same type for the following 10 years.

Furnished tourist accommodation and micro-BIC: 21% higher allowance

The government hopes that this tougher tax regime will help to curb the expansion of furnished tourist accommodation in tourist areas, which is contributing to the shortage of primary residences on the rental market. However, to avoid drying up the supply of classified furnished tourist accommodation in non-tensioned areas of the country, particularly in rural areas, the bill provides for an additional tax allowance of 21% to be granted to certain landlords.

You will be entitled to this next year if your premises are located outside the busiest tourist areas and if your gross receipts in 2022 did not exceed €50,000 (a limit adjusted for the length of time you have been in business, where applicable). Once these conditions have been met, you will escape the reform and benefit from a 71% allowance on your gross rental income in 2023, as in previous years.

Good to know: if you are affected by the reform, your tax paid at source in 2023, calculated on your 2021 and 2022 furnished tourist accommodation rents reduced by 71%, will not be enough to cover the tax due on your 2023 rents reduced by 50%. At the end of 2024, the tax authorities will ask you to pay the missing tax.

Other furnished lets: status quo !

The tax advantages of furnished accommodation also remain in force if you rent out furnished accommodation as your main residence or if you rent out seasonal accommodation other than classified furnished tourist accommodation. Your rental income in 2023 will be taxed under the same conditions as in previous years. They will be subject to the “micro-BIC” scheme for gross annual receipts of up to €77,700, and you will be entitled to a 50% allowance. Above this limit (or if you exercise your option at the beginning of 2023), you will be subject to the real BIC regime, and you will calculate your taxable income for 2023 yourself, as you have done in previous years.

You are also not affected by the reform if you rent out bed and breakfast accommodation within the meaning of the French Tourism Code, i.e. if you rent furnished rooms in your own home to passing tourists, along with other services (such as breakfast). Your rental income in 2023 will continue to be subject to the “micro-BIC” scheme up to €188,700 gross annual income, and you will continue to benefit from a 71% allowance. Above this limit (or if you opt in early 2023), you will be subject to the real BIC scheme.

Good to know: the tax exemption for furnished letting (or subletting) of part of your main residence as a bed and breakfast, which applies to annual receipts of up to €760, will be extended until the end of 2026. The same applies to the exemption for furnished letting (or subletting) of part of your principal residence as the tenant’s principal or temporary residence at a reasonable rent (limit set at €199/m2/year in the Île-de-France region and €147/m2/year in other regions in 2023). The former is due to expire on 31 December 2023, the latter on 15 July 2024.

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