The best tax regime for renting out property
We own a second property in France that we wish to rent out and would like to know if, as French residents and taxpayers, we can benefit from the micro foncier tax regime or if we must get involved in the régime réel? It is an unfurnished property and the income is likely to exceed the €15,000 ceiling for micro foncier but we do not know if this is per person or if this doubles to €30,000 for a jointly-owned property. Also, can you clarify if any expenses allowances are available?
The micro foncier regime is a simplified regime for unfurnished rentals in France which have revenue of less than €15,000. The €15,000 limit is per household (not individual) and, if your turnover is higher, you cannot use it.
If the turnover exceeds €15,000 you must use the régime réel, under which you can deduct real expenses but you must keep proof (ie, receipts etc) in case of checks.
There is already a set inbuilt allowance for expenses in the micro foncier regime as the tax office gives an exemption of 30% of the total income to account for your annual expense spending. When making your tax declaration you state the total revenue and the 30% exemption (abattement forfaitaire) is applied automatically.
It is possible even if your rental revenue is below €15,000 to opt for the régime réel as it allows for refurbishment, renovation or maintenance expenses to be written off, which can be advantageous dependent on their level. However, once chosen, this option cannot be changed for three years.
These regimes apply to properties in France. If your second property was in the UK it would be liable to UK tax under the double-taxation treaty.
This question was answered by Olaf Muscat Baron who is a Fellow of the Chartered Association of Accountants UK, a French expert comptable and an International tax advisor. He is the principal accountant of Fiscaly, an accountancy firm based in the Dordogne.
See www.fiscaly.fr or call 09 81 09 00 15