Non-Professional Furnished Rental (LMNP) Regulation
The Location Meublée Non Professionnelle (LMNP) is a tax regime in France designed for individuals renting out furnished properties without it being their primary business activity. This scheme provides specific fiscal benefits and obligations for those looking to invest in furnished rental real estate.
Definition of LMNP
A landlord is considered a non-professional furnished rental landlord (LMNP) if:
- Annual rental income from furnished rentals does not exceed €23,000,
- Or, rental income remains less than other household income (such as salaries, pensions, etc.).
If the rental income exceeds these thresholds, the landlord moves into the Professional Furnished Rental (LMP) regime, which has different fiscal rules.
LMNP Requirements
a. Registration and Activity Declaration
- The LMNP landlord must register with the Commercial Court Registry to obtain a SIRET number.
- This declaration identifies the landlord as an individual engaged in furnished rental activities.
b. Compliance with Furnishing Standards
The property must meet habitation and furnishing standards required for furnished rentals, including minimum furniture that allows the tenant to live comfortably (bed, table, dishes, refrigerator, kitchen appliances, etc.).
c. Rental Contract
The rental contract for furnished accommodation typically has a one-year renewable term (nine months for students). The lease must specify the rent, charges, and condition of furnishings.
Tax Regime for LMNP
Income from furnished rentals is classified as Industrial and Commercial Profits (BIC), not rental income as with unfurnished properties. LMNP landlords can choose from the following tax regimes:
a. Micro-BIC Regime
- If annual rental income does not exceed €77,700 (2024 limit), the landlord can benefit from the Micro-BIC regime.
- This regime offers a 50% tax allowance on rental income, meaning only 50% of the rent collected is taxed.
b. Standard Regime (Réel Simplifié)
- Beyond the €77,700 threshold, or if preferred, the landlord can opt for the standard regime.
- Under this regime, landlords can deduct all expenses related to the rental activity, including loan interest, maintenance, insurance, and management fees.
- The standard regime also allows for property and furniture depreciation, reducing taxable rental income.
Depreciation
One of the main benefits of the standard regime for LMNP is the ability to depreciate the property and furnishings. This allows the owner to deduct part of the property's and furniture’s value each year, thus reducing taxable income.
- Property depreciation: generally over 20 to 40 years.
- Furniture and equipment depreciation: over 5 to 10 years.
Additional Obligations and Benefits
a. VAT Declaration
LMNP rentals are generally not subject to VAT. However, if the landlord offers hospitality services (breakfast, regular cleaning, reception), VAT may apply.
b. Exemption on Capital Gains
Upon sale, capital gains from LMNP properties are taxed as personal property capital gains, with deductions based on holding duration and total exemption after 30 years.
Censi-Bouvard Scheme
Investors in serviced residences (such as tourism residences, elderly care, or student housing) may benefit from the Censi-Bouvard scheme, which offers a tax reduction of 11% of the purchase price (up to €300,000) over nine years. This scheme can be combined with LMNP, provided the property is rented in a serviced residence.
Advantages of LMNP
- Attractive taxation: LMNP reduces taxes through depreciation and favorable tax regimes.
- Flexibility: The status is available to a range of investor profiles and is less restrictive than unfurnished rental.
- Variety of properties: Investors can rent various property types, including apartments, tourism residences, student housing, and elderly care facilities.
Summary
The LMNP status is a flexible, advantageous option for investors aiming to reduce taxes through furnished rental activity. However, it requires careful compliance with fiscal and regulatory obligations to maximize its benefits.