Non-residents are taxable on their French source income only. As a non-resident owner of property in France, you will be liable to pay income tax on your rental earnings. There is no lower threshold, therefore you would be obliged to file a Déclaration des Revenus to report any rental income on an annual basis- returns are filed in April/May of the following year.
Depending on the terms of the double taxation treaty between France and your home country, the tax collected in France can be offset against that of your country of residence. According to the standard wording of the majority of international tax treaties: if tax paid in France is more than that due in your country of residence, then you will not be required to pay further tax in your country of residence.
How is rental income taxed in France?
In France, rental income is taxed according to the applicable regime, which depends on whether you let out furnished or unfurnished property.
Renting furnished property
For furnished rentals, there are two main tax regimes: micro-entreprise and regime réel:
This regime is used by most landlords of furnished property, and can only be selected when the total income of the year is less than 176,200 euros.
Under this regime, the standard tax rate of 20% will be applied to 50% of the income, this is a fixed allowance for expenses. For registered furnished tourist accommodations or guest rooms, this fixed expense allowance increases to 71% of rental income.
In addition to the income tax, there will also be social charges called ‘prelevement sociaux’ at a rate of 17.2% or 7.5% for EU residents, which is also applied to 50% of the income.
If you are in the early stages of renting out your property and your costs are high, using this regime for calculating tax due may be seen as a disadvantage, as your actual expenses are not deductible. This means you cannot record a loss and carry it forward into the following tax year. On the other hand, if your expenses are minimal, then this would be the most simple and tax-efficient approach.
When your income exceeds 176,200 euros, you would be subject to this regime where the tax payable corresponds to your profits—the difference between your total income and the deductible expenses and depreciation. You can also apply for this regime voluntarily.
All the costs you incur as a landlord will be deductible under this regime, this includes expenses such as maintenance and repair costs, property taxes, management fees, professional fees, mortgage interest, and insurance costs.
The net income after these deductions are made, are also taxed at the standard rate of 20%, and social charges are also calculated at 17.2%, or 7.5% for European residents.
If you record a loss, you can carry it over to future years and apply it to profit earned in the same category.
Renting unfurnished property
Income from unfurnished property is treated differently for tax purposes and is considered as non-commercial income in France.
If your property is unfurnished and the rent received is less than 15,000 euros, you would be subject to this regime. This would involve reporting your gross income, and a 30% allowance will be automatically applied to your tax calculation —this percentage is to cover allowable expenses for letting the property without reporting the actual costs. The tax is then calculated on the remaining 70% of your revenue.
Regime des revenus fonciers
Should your income exceed the threshold of 15,000 euros, you must declare under the regular regime for rental income (Revenus Fonciers), and if your expenses exceed over 30% of your gross income, you would also opt for this full regime.
Under the full regime, you can claim a range of rental expenditure. This includes mortgage interest, administrative expenditure (for instance agency and condominium management fees), legal fees, and repairs and maintenance expenditure .
Not deductible are costs such as utilities bills, travel costs for the owner to inspect the property, and advertising expenditure. However these are not the kind of costs that are typically incurred for long-term unfurnished rental.
As a non-resident, you are only liable for wealth tax if the net value of your property in France exceeds 1,300,000 Euros – evaluated on 1st January.