During the reporting of land income, it is frequent that the lessors property owners mistakenly report their income induced by furnished rental in the land income category (valid for empty rental), whereas this income are recognized as industrial and commercial profits (BIC), most often more advantageous to the owner. Indeed, may he benefit from micro BIC tax regime with 50 % of lump-sum allowance or from the normal regime , the property lessor of a furnished property usually benefits from it.
Industrial and commercial profits (BIC): what is it?
Industrial and commercial profits (BIC) are the incomes resulting from activities made by natural persons that have a commercial, industrial or craft activity.
Furnished rental of living premises are considered by the tax administration as a commercial activity. The incomes generated by furnished rental are thus industrial and commercial profits.
How to chose your tax regime in furnished rental: micro-BIC or standard
Two tax regimes can be used to report your furnished rental income: the micro-BIC or standard tax regime.
If the BIC income of the taxable household generated by furnished rental are of or inferior to € 32 900, the tax regime by default will be the micro BIC.
In this case, a lump-sum allowance of 50 % (71 % if the apartment is classified as tourism furnished property ) is made on the entire income amount.
What are the report requirements?
The report requirements are very simple as one will only have to report the totality of BIC revenues on the 2042 CK PRO (cerfa 11222) declaration form and to enclose it to the tax report of the general income tax.
The standard regime for furnished rental
If the BIC income is superior to €32 900, the tax regime is necessarily the standard or “real”. In this case it is possible to deduce from the taxation:
- the property tax
- maintenance and reparation bills
- small equipment bills (dishes, small household appliances, decoration, linens, etc.)
- rental management fees
- insurance fees
- accounting fees
- accounting expert fees
- process fees in case of disagreement with the tenant
- consumption charges (electricity, internet, telephone, etc.) included in the amount of the rent
- loans interests and application fees
- the registration fees and the notary costs when the furnished rental begins on the year of the acquisition of the property
Besides those deductions, the standard or real regime enables to deduce the depreciation:
- of the apartment (apart from the value of the land)
- of the furniture and materials
- of the works (other than of repairing and maintaining)
The amortization consists in deducing every three years a part of the property’s value. In practice, one will be able to deduce approximately 3% of the apartment’s value, of 20 % of the furniture’s value and of 10 % of the works expense (other than maintenance and reparation).
What are the report requirements?
The report requirements consist in establishing a French tax form 2031 (cerfa 11085) and its annex document 2033 (cerfa 10956) which will allow to determine the tax result of the furnished rental, then to report this result on the 2042 CK PRO (cerfa 11222) report form that is to be attached to the tax income form.
How to skip from micro-bic to a standard tax regime?
Property owners making less than € 32 900 and whose deductible expense and amortization are superior to the half of their BIC income should adopt the standard or real tax regime.
The deadline to do the formalities is different for the property owners who begin their activity of furnished rental than those who already reported their rental income under the micro bic regime:
- For the property owners that begin their activity of furnished rental: it is possible to cancel the option for the standard tax regime until the filing date of their first 2031 report (that is beginning of may of each year). The option can be attached to the report.
- For landlords who reported furnished rent income under the micro bic the previous year: you will have to cancel the option before the 1st of February of the year you wish to be subject of taxation under the standard regime. For instance, to report your income of 2015 under the standard tax regime, the option must be cancelled before the 1st of February 2015.
For further information about the reporting of furnished rental incomes, please visit jedeclaremonmeuble.com…
If the rented premises are empty or bare, the income generated by its rental will be under the land income taxation.