The LMNP tax system is based on the status of Furnished Renter, this tax system can be applied to a secondary activity when it concerns the Non-Professional Furnished Renter. When the commercial activity is based as a main activity, the tax is called Professional Furnished Renter.
This tax allows beneficiaries to include rents from real estate investments in the Industrial and Commercial Profits category. The BIC allows for the reduction of several expenses.
Eligibility conditions for the LMNP tax regime
Regardless of the legal regime and the nature of the furnished rental, an owner-landlord is subject to the specific tax regime. Unlike bare tenancy, which is subject to the property income tax system, LMP taxation is subject to the industrial and commercial regimes (BIC). LMNP status is granted by meeting certain criteria: no member of the tax household is registered with the RCS as a professional landlord. It is also necessary that the rental income does not exceed 23 000 €/year or 50% of the owner’s total income.
Taxation of tax benefits LMNP
The principle of the furnished renter is the microenterprise scheme at the time when the annual turnover does not exceed the microenterprise ceilings. The threshold of this ceiling is pro-rated in the event of the start of activity during the year. The advantage with LMNP taxation is that the beneficiary does not have to keep proper accounts. In addition, he is entitled to a lump-sum allowance that will be subject to the amount of income tax. The flat-rate allowance applies to part of the lessor’s turnover in furnished accommodation. The beneficiary can also choose for the actual plan.
In addition to the option and the revenue cap, the lessee lessor subject to the actual regime must keep proper accounting records. The LMNP tax system complies with: the BIC rules, it can deduct interest and any borrowings from income, acquisition costs such as registration fees, routine maintenance and repair work, as well as the depreciation of the purchase price of the property and non-deductible major works.
Which new properties are affected by the LMNP?
The LMNP rental property investment necessarily concerns a new property rented as a service residence. The offer applies to tourist residences, business residences, senior citizens’ residences, students’ residences or institutions for the accommodation of dependent elderly people (EHPAD). To simplify this commercial activity, a management company can be used. This real estate administration professional is responsible for renting the property, finding tenants and making rent payments.