As a non-resident who receives income from real property, is this property income or business income, and how do I declare it ?
Income from property in France or the rights concerning this property (undivided interest, bare ownership, life interest, etc.) or property rights (shares or stock in property companies) and ancillary revenue are taxable as property income or business profits.
Depending on the nature of the property income received (rental income from furnished or unfurnished property, etc.), certain returns or sections in these returns will need to be filled in.
You rent out bare property (unfurnished accommodation)
This income is taxable as property income.
It should be declared under either the simplified tax regime (régime micro-foncier), or the actual tax regime.
The simplified tax regime ("régime micro-foncier") – Filing conditions and obligations
If the gross amount of property income (unfurnished rentals) received by your entire tax household is less than €15,000 (not including service charges), irrespective of the term of the rental during the year, you are automatically subject to the régime micro-foncier.
In this case, supplementary property income return no. 2044 does not need to be filed.
Simply report the gross amount of property income received (amount of rent received less service charges payable by the tenant plus expenses normally settled by owners but charged to tenants plus subsidies and indemnities received) on return no. 2042 (box 4BE). A 30% allowance (fixed assessment of service charges) will be applied to calculate taxable income in the property income category. This allowance will be calculated automatically and should not be deducted.
Taxation of your income at the average rate
If you opt for the average tax rate, you will report your worldwide income (French and foreign sources) so that this rate can be determined. Nevertheless, this rate will only be applied to your French income to calculate the tax.
If you have French and foreign property income, the revenue received for the year will therefore be assessed globally.
Should you exceed the €15,000 threshold for gross property income (not including allowances and service charges), the "régime micro-foncier" can no longer apply to your only french income and you will have to opt for the actual normal regime (see below). In this case, if you file your returns online, you can use the calculation factsheet for your worldwide property income to help you deduct loan costs, and your expenses and service charges concerning property both in France and abroad.
In all cases, you should opt for the average rate and report your global income as only the most favourable taxation method will be applied to you. In this respect, you can consult the “What is the average tax rate and do I qualify for it ?” factsheet in the “Your questions/Our answers” section under the “Tax liability and reporting obligations in France for non residents” heading.
The actual regime – Filing conditions and obligations
If the conditions for entitlement to the "régime micro-foncier" are not met or if you choose the actual regime (option irrevocable for three years), you must file property income return no. 2044.
You must declare the earnings (profit or loss) calculated on return no. 2044 (or the special return no. 2044 for specific arrangements) in return no. 2042 on line 4BA for profits or lines 4BB or 4BC for losses.
Return no. 2044 applies to owners of ordinary property (including property subject to the special deductions provided for by the former Besson and Borloo schemes).
Special return no. 2044 applies to owners :
- who have opted for the deduction in respect of the depreciation of new accommodation units ;
- who are entitled to a specific deduction under the Scellier intermédiaire, Scellier ZRR or Robien ZRR schemes ;
- of special property: properties classified as historic monuments, properties located in a conservation area or related area for which entitlement to deduct expenses under the Malraux scheme has been requested or properties held in bare ownership.
If your only property income derives from shares in property holding companies (SCIs) liable for income tax (SCIs that file return no. 2072)
As from the return for income received in 2019, managers of SCIs taxed under income tax rules must file return no. 2072 online.
This means that if a user reports shares in an SCI when filing a return online, he/she is encouraged to file the return by fulfilling procedures in the special professional account which he/she can, where applicable, set up according to stages that will be explained to him/her.
In such cases, the proportion of profit or loss should be declared directly on return no. 2042. Property income return no. 2044 does not need to be filed.
Please note : whilst the SCI’s manager is responsible for filing return no. 2072 online, the shareholders are liable for the tax on the basis of their share of the SCI’s earnings :
- Return no. 2072-S if the shareholders are individuals
- Return no. 2072-C if the SCI owns a special property (historic monuments), a property in bare ownership or an accommodation unit for which deductions are made for depreciation (“Périssol”, “Besson neuf”, “Robien classique ou recentré” and “Borloo neuf” schemes)
If you no longer receive property income in 2022
You must check box 4BN of return no. 2042.
You rent out furnished property
Furnished rentals come under the business profits (BIC) category, even if the rental is only occasional.
The activity of renting furnished accommodation is deemed to be a non-professional activity when one of the following two conditions is not met:
- The annual revenue derived from this activity by all members of the household is more than € 23,000 ;
- This revenue is more than the income of the tax household subject to income tax (excluding income derived from the activity of renting furnished accommodation)
This covers income from:
- furnished property which you own and that you rent out ;
- bare property that you rent out to another person (or to a management company) which in turn rents it out as a furnished sublet, when the rental is of a commercial nature due to terms and conditions stipulated in the lease executed with this person or company, in particular when the rental enables you to take part in the management, or share the earnings, of a commercial company.
This income is taxable as business profits (BIC) and must be declared in supplementary return no. 2042-C-PRO in the section set aside for this purpose.
The micro-BIC regime - Filing conditions and obligations
The micro-BIC regime applies when the amount of your revenue for the previous year or the year before last does not exceed:
- €72 600 for furnished accommodation unit rentals (€ 77,700 from income received in 2023) ;
- € 176,200 (excluding tax) for renting out bed and breakfast and listed furnished tourist accommodation (€ 188,700 from income received in 2023)
- If the micro-enterprise regime for non-professional furnished accommodation rental applies (boxes 5ND, 5OD or 5PD) a 50% fixed allowance (minimum of € 305) for service charges is applied automatically.
- This allowance is 71% (minimum of € 305) for renting out furnished tourist accommodation, rural guest houses or bed and breakfast establishments (boxes 5NG, 5OG or 5PG).
The actual profit regime – Filing conditions and obligations
If the activity is taxed under the actual regime, return no. 2031 must be filed with the competent Business Tax Department (SIE) in the location of the furnished property (if only one furnished property is rented out) or with the Business Tax Department in the location of the largest furnished property (if several properties are rented out under these conditions). You must declare the earnings calculated on return no 2031 in return no 2042-C-Pro. If there is a mistake, you will have to correct both returns.
Withholding at source and your property income
The property income received by residents and non-residents of France for tax purposes who are taxable in France under domestic law and the provisions of treaties is subject to withholding at source (PAS).
This withholding at source takes the form of instalments debited directly from the lessor’s bank account, including when the micro regime applies.
Instalments are paid on either a monthly or quarterly basis.
The amount of the monthly instalment to be paid from your bank account will be shown once you have filed your return online. You may also opt for a quarterly direct debit in the “gérer mon prélèvement à la source” (Manage my withholding at source) section.
Reminder : consult the treaty executed between France and the country where you are resident. If there is no treaty, the property income of a non-resident derived from properties located in France is taxable in France.
For further information about property income, refer to the instructions attached to the income tax return no. 2042 and the property income return no. 2044 or the special return no. 2044.
Social security contributions - General Social Security Contribution (CSG) and Social Security Debt Repayment Contribution (CRDS) exemptions
Social security contributions apply to French-source property income and capital gains on the sale of property (deriving from property located in France or from the rights attached to this property) received by persons residing outside France.
As from taxation of property income received in 2018 and capital gains on property made as from 1 January 2019, persons who are affiliated to a compulsory social security system, other than the French one, within an EEA country (EU, Iceland, Norway, Liechtenstein) or Switzerland, are exempt from the General Social Security Contribution (CSG) and the Social Security Debt Repayment Contribution (CRDS). Although the United Kingdom left the European Union on January 1, 2021, British residents continue to benefit from this exemption.
Nevertheless, the 7.5% solidarity levy will still be applied to this income.
How to apply your exemption when filing your return
- Indicate the total amount of your property income in box 4BA or 4BE ;
- Check box 8SH (taxpayer 1) and/or 8 SI (taxpayer 2) on return no. 2042 C ;
- In box 8RF, indicate the amount of income exempt from CSG/CRDS, if you are either married or in a civil partnership and only one of you meets the exemption criteria ;
That way, the advance income tax instalments you will be subject to after your income tax return is processed will be calculated without social security contributions, and the 7.5% solidarity levy will be applied to your tax balance.
UPDATED DINR PART - JANUARY 31, 2023