You have accepted a foreign posting and living the ex-pat life is about to become a reality: what do you do with your home in France? There are several options, you can sell up before your departure or you can rent out your home, furnished or unfurnished. Whether a posting lasts several months or several years, letting a property furnished is often the wisest option from both a practical as well as a financial point of view.
A furnished let: a practical option for expatriate homeowners
If you are a homeowner heading overseas who believes that the home you are leaving will no longer meet your needs on your return, selling up could be an attractive option from a financial point of view. As it is your primary residence, you would be exempt from capital gains tax and could reinvest the profits in new personal or more financially attractive projects.
However, if you wish to keep the house for your family to inherit, you need to decide whether to rent it out furnished, or unfurnished.
If your house is in a big city, there are two practical advantages to opting for a furnished let. Clearly, the first is that you can avoid having to move your furniture for just a short time. You can also avoid the costs associated with storage.
The second is that the duration of an overseas posting is rarely set in stone: a furnished let allows you to rent out your house for a shorter period than if it is unfurnished and it gives you a certain amount of flexibility when making arrangements for your return. You can rent out your house for a few months or, if it’s your tenant’s primary residence, for a period of one year as opposed to three years for an unfurnished home.
This means that you will be able to terminate the contract annually, giving three months notice. This opportunity would only present itself every three years when letting the property unfurnished, and you’d have to give six months notice.
A furnished property is financially attractive to expatriates
Depending on the type of accommodation, the location and the quality of the furnishings, furnished properties tend to bring in 15 to 20% more revenue than those that are unfurnished. Moreover, from a financial point of view, the revenue that you draw is categorized under ‘industrial and commercial profits’, which is often more advantageous than if it is categorized under ‘income from property’.
You will have a choice between the ‘Micro BIC’ tax regime and the ‘réel’ tax regime. Having worked out the taxable profit (50% of annual revenue for the ‘Micro BIC’ regime, higher amounts for the ‘réel’ tax regime), tax will be calculated using a sliding scale and the family quotient will be set at a minimum rate of 20%, as it is for all French residents.
In practical terms, if you have no other sources of revenue in France (or if they are minimal), tax will be imposed at the standard rate of 20%.
If opting for a furnished let before heading overseas is of interest to you, think about handing over the management of the property to an agent that specializes in this field who will be able to respond to a client’s requirements and specifications. This will help you to avoid potential problems.