Income from Holiday Rentals

Renting out a holiday home in France can be an attractive source of income. However, it is essential to be aware of the tax and administrative obligations that come with it. In this article, we discuss the key points of attention for owners who wish to rent out their second home in France.

Registration and Classification

Since the introduction of the ‘Loi Le Meur’ on November 21, 2024, the regulations surrounding the rental of furnished tourist accommodations have been tightened. Owners who wish to rent out their property temporarily must apply for a registration number from the municipality where the property is located. This number must be included in all rental advertisements. Additionally, municipalities may require a permit for the conversion of a property into a tourist accommodation. Failure to comply with these obligations may result in penalties, such as the removal of advertisements or fines.

An additional advantage of having your property classified as a "meublé de tourisme" is the tax deduction. Classified accommodations qualify for a flat-rate expense deduction of 71% on gross rental income, meaning that only 29% of the income is taxed. For non-classified accommodations, this deduction is limited to 50%.

Tax Obligations

Income from renting out your French holiday home is taxable in France. Depending on the amount of your gross rental income and whether or not your property is classified, you can choose between different tax regimes:

• Micro-BIC Regime: This simplified regime applies if your annual rental income remains below a certain threshold (€77,700 for non-classified and €188,700 for classified accommodations in 2024). You benefit from a flat-rate deduction (50% or 71%) and pay tax on the remaining amount.
• Régime Réel: If your income exceeds the threshold or if you choose to, you can opt for this regime. It allows you to deduct actual expenses and depreciation from your rental income, which can be beneficial if these costs exceed the flat-rate deduction.

Additionally, you may be subject to social contributions and local taxes, such as the Cotisation Foncière des Entreprises (CFE). It is advisable to consult an accountant to assess your specific situation and ensure compliance with all tax obligations.

Energy Performance and Sustainability

A key aspect of the Loi Le Meur concerns the energy performance of rented accommodations. Since November 21, 2024, properties in certain municipalities must have an Energy Performance Certificate (EPC) with a minimum rating of E to qualify for rental as a meublé de tourisme. From January 1, 2034, this requirement will be tightened to a minimum rating of D. This means that owners may need to invest in energy-saving measures to meet these standards.

Conclusion

Renting out your French holiday home can be financially rewarding, but it comes with several administrative and tax obligations. It is crucial to be aware of local regulations, properly register and classify your property, and comply with tax and energy performance requirements. By following these steps, you can legally and efficiently benefit from renting out your second home in France.