Foreign residents who have acquired an exceptional property in France (villa on the French Riviera, luxury chalet in Megève, mansion in Paris) may be tempted to rent out their property. If you are domiciled in France, there are specific tax rules for renting luxury properties. Michael Zingraf Real Estate helps you understand the taxation that governs rentals in the luxury real estate market.
Taxation applicable to the rental of prestigious properties
The French tax regime is attractive for real estate investors, regardless of nationality. It is particularly interesting for owners who wish to renovate the properties they have just acquired. This is a means for the French government to preserve the national real estate heritage!
The real regime for rental income
To avoid paying too much tax on rental income, as an owner of prestigious properties, you will have an interest in opting for the real regime by deducting from your rental income:
- Maintenance work carried out on the rented properties (landscaping, cleaning, repainting, roof cleaning);
- Property tax;
- Bills for concierge services;
If, after deducting these maintenance expenses, there is still rental profit, it will be added to your overall income. This profit will therefore be subject to your personal income tax, social contributions (CSG and CRDS).
Taxation applicable to the rental of renovated prestigious properties
Acquiring and renting renovated prestigious properties offers more significant tax advantages. Two types of regimes are applicable:
The deficit regime
If the amount of renovation, maintenance, and improvement work on the prestigious residence exceeds the rental income, there will be no rental profit. The owner will be subject to what is called a deficit. This amount will be carried forward to future years or deducted from the owner's overall income, up to a limit of €10,700 per year, for a maximum period of 10 years.
The Malraux Law scheme
The Malraux Law concerns prestigious properties with very high prices located in protected or preserved areas. This law allows for investment in a character property and provides a number of tax deductions. The owner is entitled to a tax reduction equivalent to 30% of the work done on properties located in a protected area. The reduction can be 22% of the work done on properties located in what is called a Zone of Protection of Architectural, Urban, or Landscape Heritage (ZPPAUP). The only limitation to this scheme is that it is not possible to deduct more than €400,000 in work over a period of 4 consecutive years. This scheme is in effect until December 31, 2022.
Michaël Zingraf Real Estate: a team of professionals at your service for your tax optimization projects
With over 40 years of experience in luxury real estate, the Michaël Zingraf Real Estate teams are at your disposal to offer luxury properties that meet the criteria for tax optimization schemes in France.