Gite Income Taxation
Gite Income Taxation on income from gites and French property needs to be understood by French property owners to estimate the after tax value of French gite income potential.
Gite Income Taxation | Letting Income
Furnished and unfurnished lets are treated differently under the French income tax rules with holiday lets falling within the category of furnished letting.
For tax purposes, letting furnished properties is seen as a commercial activity and the income is therefore taxed as business profits called BIC – Benéfices industriels et commerciaux.
Income from unfurnished letting is not seen as being derived from an activity but from the ownership of real estate and is taxed as income from property and land called Revenus Fonciers.
This distinction also explains why an SCI (société civile immobilière) should not let properties on a furnished basis because it would be deemed to be a trading activity and adverse tax consequences would be triggered, in particular corporation tax. Read about a French SCI Mortgage. and review the latest French Mortgage Rates.
Gite Income Taxation | General Tax Rules
If you are not domiciled in France gite income taxation still applies and you should nevertheless declare the income derived from a French based property to the French Revenue.
In addition, if you are a UK resident, you also need to declare this income in the UK as part of your worldwide income but your gite income taxation paid in France will be allowable through a governmental dual taxation agreement.
In order to avoid double taxation on the same income, there is a treaty in place between France and the UK, which requires the English Revenue to grant you a tax credit equivalent to the amount of the French gite income taxation you have paid.
In France taxation is by household, which means a joint tax form will be lodged by married couples in which the income from all their properties, owned jointly or separately, will be declared. Tax thresholds are also set on a per household, not per spouse, basis.
The tax year is the calendar year, and the income of a given year must be declared during the following year, by May for French residents, and by June for other EU residents.
Gite Income Taxation | Furnished Lets
The gite income taxation regime for furnished lets would automatically fall within the scope of the simplified micro business profit scheme called “micro BIC” provided that the total gross letting income is below the threshold for the calendar year. An automatic fixed allowance of 50% would be applied by current legislation.
These rules were introduced by the Amended Finance Act of 20 April 2009 and as a result the previous threshold of €80,000 and the more generous allowance of 71% have been restricted to properties officially classified as rural gite, chambre d’hotes or meublés du tourisme.
French residents would be subject to tax at their marginal rate of income tax.
Non-French domiciled taxpayers would be taxed at a fixed rate. However there is an option to request the application of the French tax bands of income tax instead of the flat rate if you can prove to the French Revenue that you had previously been a been French tax residents and qualify for a lower tax rate taking into account your worldwide income.
It is possible to opt for the normal scheme (called Réel simplifié) under which accounts need to be prepared. Under this scheme expenses can be fully offset against gite income taxation. For example, if the property is only rented out for three months, only 3/12th of the annual expenses can be offset. Under this scheme any losses can be carried forward to be offset against future furnished letting income.
Gite Income Taxation | Unfurnished Lets
The micro-foncier scheme is automatically applicable to gite income taxation for unfurnished letting where the gross income per household is below the tax threshold and an allowance will be applied. The remaining income will be taxed at a flat rate for non-French tax residents or at the marginal rate of income tax for French tax residents.
It is possible to opt for the normal scheme (called Réel simplifié) if one has sufficient qualifying expenses or can qualify for specific allowances (eg those applicable to listed buildings). However the types of expenses which can be offset are strictly restricted.
Furthermore, French domiciled investors renting new build properties unfurnished may qualify for substantial tax credits against gite income taxation under the generous “Scellier” scheme subject to strict conditions of location, duration of the lease and amount of the rent.
Gite Income Taxation | Current Tax Rates
French tax rates are reviewed annually as part of the French national budgetary process and the current rates are published on the French Government tax website.