Taxation of rental income

FRENCH TAX RESIDENT
Progressive tax rates apply – additional social contributions are due on net taxable income (passive income) at a flat rate of 17.2%.

NON-RESIDENT FRENCH TAX
Non-residents are only subject to French taxation on income sourced in France. They are subject to a two-tier minimum tax rate. In addition, social contributions apply on net taxable income (passive income) at a flat rate of 17.2%, or 7.5% for residents of the EU, the UK, and Switzerland (subject to conditions).

IMPORTANT NOTICE
For individuals domiciled outside France or residing in France, the Ruyter case law applies to social contributions on property income (capital gains and rental income) derived from French real estate.
These rulings apply to individuals affiliated with a social security system other than the French system: i.e., a compulsory statutory social security scheme in an EU country, the European Economic Area (EEA), or Switzerland.
– Even after Brexit, UK residents or non-residents affiliated with National Insurance may still qualify for exemption.
Both residents and non-residents are subject to tax on rental income, as rental income is taxed in the country where the property is located. Rental activity may be either furnished or unfurnished.
Depending on the type of rental, the applicable tax regime differs, and the tax implications must be carefully considered.

TAXATION OF FURNISHED RENTAL
The property must be equipped with sufficient furnishings to meet the tenant’s basic needs. Income from this type of rental is declared under Industrial and Commercial Profits (BIC).

Micro BIC
Criteria: rental income below €15,000 per year (threshold increased to €77,700 for long-term rentals, classified tourist rentals, and guest rooms).
Taxation: 30% allowance; taxation applies to 70% of rental income (50% allowance for long-term rentals, classified tourist rentals, and guest rooms).
No additional expenses can be deducted beyond the allowance.

Actual regime (Régime réel)
Criteria: income above €77,700 per year or optional election by the owner.
Taxation: owners are taxed on net income, with the ability to deduct all property-related expenses. Tax applies only to net income.

Local regulations may restrict furnished rental activity in cities such as Paris, Nice, or Bordeaux.

TAXATION OF UNFURNISHED RENTAL

The property must be rented without furniture. Income is declared as property income (rental income).

Micro Foncier
Criteria: rental income below €15,000 per year (mandatory for 3 years).
Taxation: 30% allowance; taxation applies to 70% of rental income. No additional expenses may be deducted.

Actual regime (Régime réel)
Criteria: income above €15,000 per year or optional election by the owner.
Taxation: the owner declares net income, meaning gross income minus all property-related expenses (repairs, management fees, etc.). Tax applies only to net income.