You own a property that you rent out as furnished accommodation and you are wondering how to declare your rental income.
Furnished rentals are subject to a different tax system than empty rentals. You have to declare the rental income as Industrial and Commercial Income (BIC), and not as land income, as for empty rentals.
This amounts to considering the activity of furnished rental as a commercial activity.
This has several structural implications:
A furnished rental, as a commercial activity, must produce a
income statement and a balance sheet
The property, as an asset recorded on the balance sheet, can be depreciated for accounting purposes, which creates a significant depreciation charge. This depreciation strongly absorbs the rental income and thus reduces the taxable base.
The way you declare your rental income depends on the tax system you have chosen: Micro BIC or Simplified Real
1- Micro BIC
The tax system called "micro BIC" (Industrial and Commercial Profits) is the simplest.
You will have to report the total of your receipts on the supplementary income tax return "non-salaried professions" n° 2042 C Pro on line 5ND under the heading industrial and commercial income, non-professional or professional, depending on your situation.
Your taxation will be in accordance with the income tax scale, after a flat-rate deduction of 50% with a minimum of 305€ representative of the charges. You are therefore only taxed on 50% of your revenue.
The tax rate then depends on your marginal tax rate, which is the total amount of your income.
However, you will not be able to deduct any of the expenses related to the rental of your property.
If you do meet the means test and have opted for the flat-rate withholding tax, you must enter your income on line 5TB.
To subscribe to the micro BIC tax system, your rental income must be less than €70,000 before tax.
2- BIC Simplified Real
The real tax system is the system to which you must subscribe if your rental income exceeds €70,000.
It allows you to deduct expenses from rental income, including the acquisition cost of the furnished rental in the form of depreciation. This means that you will declare your rents and deduct your expenses for their real amount, and no longer at a fixed rate.
The following expenses are deductible:
- Set-up costs (notary or company incorporation fees)
- Maintenance and repair costs
- Local taxes
- Management and insurance fees
- Loan interest
- Amortization of furniture and improvements
- Depreciation of premises
The simplified real regime is more complex than the micro BIC regime. If you subscribe to it, you will have to keep a rigorous accounting as well as a depreciation plan.
From a tax point of view, you have to fill in the declaration n° 2033 including a balance sheet, a table of fixed assets and depreciation and a statement of provisions.
By delegating the management of your furnished property to France Ermitage, you can free yourself from all these steps.
In fact, we keep your accounts on a daily basis and send you clear and accurate statements at the end of each quarter.
In addition, we simplify your tax return procedures
by providing you with the annual figures.
We also propose to make for you the declarations and payments to the Tax Center.
Do not hesitate to contact us for more information!