You’re an expat and you want to invest in real estate in France. You may have heard of “LMNP”, but not understand exactly what it entails. You’re an expat or simply a non-resident, and you’re wondering whether you would be entitled to all the advantages of furnished rental and LMNP. Read on – LMNP is a tax status available to all non-residents. But what how can you take advantage of it ? How do you become an “LMNP” if you don’t live in France ? Here, we explain the situation as it applies to you as an expat.
Whether you’re a French resident or not, whether you’re an expat or employed on a local contract, as soon as you buy an apartment in France and furnish it to rent out, you become what the tax authorities call a non-professional furnished lessor (“LMNP”).
This status can be likened to a sort of “auto-entreprise” which allows you to benefit from a number of advantages, especially when you are under the so-called “actuals” regime and that you declare your income as commercial and industrial earnings (“BIC”).
The advantages of LMNP (non-professional furnished property lessor)
It allows you to deduct expenses linked to the furnished let, whether they are for maintenance and repair on the one hand, or management costs, interest on the mortgage or taxes on the other. With “LMNP” status, you can deduct from your rental income the amortisation of your property over 30 years, and also your furniture over a period of 15 years, even if you are an expat.
But what is amortisation exactly? Over the specific periods mentioned above, you are entitled to deduct a certain amount from your rental income to compensate for the normal deterioration of the asset over time. This setup is also a way of reducing the rental income you declare, and so means you pay less tax on that revenue.
Another advantage of “LMNP” is that as soon as you are no longer in a situation of deficit in relation to your property, the status is just as worthwhile. You can, in fact, apply a fixed rate abatement of 50% to revenue earned, up to a limit not exceeding €33,100.
Beware of furnished letting through an “SCI” (non-trading real estate company)
You’ve decided to invest through an “SCI”? Investing in furnished property is unfortunately not the best solution. The risk is, in fact, that your rental income could be considered as being profits from a commercial activity. As such, you would be subject to corporation tax, which would eat away at any profits you make as an “LMNP”.
You still want to go ahead and invest through an “SCI”? In that case, we would advise you to go down the route of renting out an unfurnished property.
I am an expat – how can I become an “LMNP”
There are two possibilities open to you – you can either rent out an old property or a new one.
You’ll find a myriad of new programmes out there (student residences, nursing homes for the elderly, holiday accommodation, etc.), often involving a whole pile of hidden costs or tax advantages not even applicable to expats.
The other option is to invest in an old property, by buying a studio or an apartment in Paris, Lyon or Bordeaux, for example, furnishing it and letting it out. You then become a non-professional furnished lessor and receive rental payments while benefiting from a lower tax bill. My expat can help you invest to take advantage of “LMNP” status, by organising the whole project for you.
You want to invest in a furnished rental ?