A Comprehensive Guide to Furnished Rentals in France: Income for Non-Professionals (LMNP) and Professionals (LMP)

Furnished rentals in France, whether for non-professionals (LMNP – Loueur en Meublé Non Professionnel) or professionals (LMP – Loueur en Meublé Professionnel), present unique opportunities for investors and property owners. However, managing these rentals requires a solid understanding of the legal, accounting, and tax requirements. This article explores the essentials of managing furnished rentals, highlights the differences between LMNP and LMP, and explains how professional accounting services can help you optimize your rental business.

What Are LMNP and LMP?

Furnished rental properties in France fall into two main categories:

• LMNP (Non-Professional Furnished Rentals): Designed for individuals who do not make furnished rentals their primary profession.
• LMP (Professional Furnished Rentals): For those who exceed certain income thresholds or have rental income as their main source of income.

Each status comes with specific legal and tax implications that must be carefully managed to maximize returns and comply with French regulations.

Accounting and Legal Services for Furnished Rentals

Managing a furnished rental property involves several accounting and legal steps. Here’s what is typically required:

Legal Formalities

1. Declaration of the Start of Business
   • Official registration of your activity as an LMNP or LMP.
2. Addition or Removal of an Establishment
   • Managing changes when acquiring or selling a property.
3. Registration with an Authorized Management Center (CGA)
   • Ensures compliance and improves tax management efficiency.
4. VAT Options
   • Evaluate whether to opt for VAT depending on your rental structure.

Accounting Management

1. Bookkeeping and Financial Records
   • Accurate tracking of income, expenses, and assets like furnishings.
2. Investment Registration
   • Detailed documentation of property acquisitions, renovations, and furnishings.
3. Bank Loan Management
   • Recording and managing property-related loans.
4. Rental Income and Expenses
   • Tracking rents, operating costs, and other financial transactions.

Tax Obligations

1. Corporate Property Rates (CFE)
   • Management of corporate property taxes for rental properties.
2. VAT Management
   • Preparation and submission of quarterly or annual VAT returns.
   • Assistance with real estate VAT reimbursements.
3. Income Tax Returns
   • Compilation and submission of the necessary data for your annual income tax return.

Specialized Support

Whether you manage traditional furnished lets, tourist accommodations, or seasonal rentals, professional accountants can provide tailored services to ensure compliance and streamline operations.

Tax Optimization for Furnished Rentals

Furnished rental income in France is taxed under two regimes:

1. Régime Micro (Simplified Regime)
   • Offers a standard deduction for expenses (e.g., 50% for most rentals).
   • Suitable for small-scale operations with lower expenses.
2. Régime Réel (Actual Regime)
   • Allows you to deduct actual expenses, such as loan interest, renovation costs, and depreciation.
   • More beneficial for high-income or high-expense properties.

Choosing the Right Tax System

Selecting the appropriate tax regime can significantly affect your profitability. A professional accountant can analyze your investment, compare the tax options, and provide detailed estimates to minimize your tax burden.