The article below has previously appeared in leading market
publications or our own booklets or newsletters.
Please note that the law may have changed since the date of
publication and that information given on this website does
not constitute legal advice. Please read our disclaimer.
If you let out French property, the rent you charge might not
only cover annual maintenance and other expenses, but also
leave you with surplus income to pay for your own holiday.
With careful planning, more systematic lettings could also
earn you enough to recover your initial capital outlay and
borrowings. You may even decide to buy more property to let
as a business!
Income generated from French lettings is frequently not
declared to the French tax authorities. Many UK residents
have wrongly been led to believe that the reporting of their
French rental income to the UK Inland Revenue is sufficient
and absolves them from any need to declare the rent to the
But under Article 5 of the 1968 France-UK double tax treaty
France has the principal right to tax French rental income.
The French tax paid is then set aside against any UK tax
liability arising from the same source. Rental income is
always French-source income if it relates to a property in
France. It does not matter if both landlord and tenant reside
in the UK or where the rent is paid or what currency the rent
is paid in.
The widespread failure of UK lessors to declare their French
rental income in France has to date been encouraged by the
apparent nonchalance of the French tax authorities. But it
now seems that the latter are becoming more efficient at
collecting tax from UK and other foreign landlords.
The French tax authorities may tax up to three years in
arrears and usually add interest and penalty charges on late
Rental income profits (or losses) must be reported on the
normal French income tax return (Cerfa 2042) and submitted to
the Centre des Impôts des Non-Résidents (Paris)
before 30 April each year following the French tax year end
of 31 December.
Calculation of the net taxable income varies depending on
whether the letting is furnished or unfurnished. Furnished
lettings qualify as a business for the purposes of French
The method used to determine the taxable income varies
depending on the level of annual turnover from the preceding
year. Where this does not exceed (currently) FRF 500,000
income tax is calculated on 30% of the rent. The abatement of
70% is supposed to cover all expenses. If the turnover
exceeds FRF 500,000 the “simplified real” regime
or “normal real” regime applies. The normal
regime requires the preparation of detailed accounts and
involves compliance formalities similar to a company liable
to French corporation tax. The simplified version, allowed
where turnover does not exceed FRF 5 million, follows the
same rules but the level of formality is reduced.
Taxpayers can opt out of the regime prescribed by law and
choose a more formal one. Elections must be sent in writing
to the tax office. The implications of a change of tax regime
must be carefully weighed as in many cases the option used is
French income tax is not the only tax charge applicable to
French rental income. Some rentals may be subject to TVA (at
a reduced rate of 5.5%) and exempt TVA rental income in
excess (currently) of FRF 12,000 per annum is usually liable
to a local tax on leases called droit de bail at a rate of
2.5% and an additional tax of 2.5% if the property is over 15
Since 1999 the droit de bail has not applied where the gross
rental income is under FRF 36,000. The charge was abolished
as of 1 January 2020. The additional contribution of 2.5%
does, however, remain applicable.
The supply of food, telephone and other services is subject
to TVA at the standard rate of 19.6%. Where an establishment
provides accommodation on a full board or half-board basis,
the reduced rate of TVA may apply to three-quarters of the
total amount charged.
Businesses whose annual turnover is below (currently) FRF
500,000 may trade outside the scope of TVA. Small businesses
which exceed the above turnover limits may still benefit from
a simplified TVA regime, as long as their turnover does not
exceed FRF 5 million. The simplified TVA regime allows these
businesses to make one annual TVA return as opposed to one
A business registered for TVA will be in a position to
receive, where appropriate, refunds of TVA paid for the
running of the lets and any renovations of the letting units.
Nevertheless, any payment of this tax cannot be reclaimed if
the business was not registered for TVA at the time the
liability was incurred.
Stephen Smith is a specialist in French property (purchases
or sales), tax and estate planning and wills. For further
information please contact Stephen Smith by e-mail at
email@example.com (Telephone: 01473
437186 Fax: 01473 436573).