Buying a small studio and furnishing it to rent out to students on a turnkey basis is a good way of building up your heritage thanks to an investment that has long proven itself.
As with any financial investment, it is essential to ensure the profitability of your project before you start. However, the taxation applied to the income you will receive weighs heavily in the balance.
Rent without being professional
As soon as you rent one or more furnished dwellings, without this constituting your main activity, you fall under the rental status of non-professional furnished (LMNP). In detail, this regime applies when all the rents received over a year are less than 23,000 euros or, more generally, when they are lower than the sum of all the other income of your tax household.
That said, your activity must still be declared to the authorities. To do this, you must register for free in the Sirene directory, with the registry of the commercial court on which the property concerned depends. The number issued must then be reported on your additional income statement. In addition, any new rental property must be subject to a "declaration of opening a new establishment" under the same conditions.
Taxation at micro-BIC
Unless you get a tax rebate under a rental investment assistance scheme, the rents that you will receive are taxable. As a non-professional furnished rental company, these sums are by default subject to the micro-BIC regime, i.e. they are taxed in the industrial and commercial profits category of your tax notice on the returned.
This simplified tax system allows you to dispense with the services of an accountant, since a flat-rate reduction of 50% is automatically applied to the rents received, in order to take into account your charges and miscellaneous costs. Good news: all furnished rentals bringing in less than 70,000 euros excluding taxes per year have benefited from this advantage since 2018, whereas a ceiling of 32,900 euros in rental income applied before that date. In addition, you will not pay taxes if your annual income is less than 305 euros. Note: guesthouses and furnished accommodation benefit from a 71% reduction for micro-BIC, as long as they bring in less than 170,000 euros excluding tax.
The advantages of real taxation
Beyond 70,000 euros of rental income per year, the legislation requires you to declare your receipts to the real simplified regime. At first glance, only real estate tycoons are affected. It is however false! Small donors may also have an interest. Below this threshold, you can voluntarily choose this method of declaration, by exercising the necessary option by means of a letter addressed to the corporate tax service (SIE) on which you depend. Please note that this must be done before February 1 of the first year for which you wish to benefit.
In this context, it is up to you to deduct your costs from the rents collected. At the top of the list, the charges, the interest on the loan and the amortization of the purchase price of the property can be taken into account, as can the cost of the renovation works. According to Amarris Immo, an accounting firm, “On a property worth 150,000 euros, rented 500 euros per month with a marginal tax bracket of 30%, there is a tax saving of more than 1,400 euros the first year with the real regime, ie 14,000 euros in ten years ”. The downside: in addition to the detailed calculations, it is also necessary to make a special declaration of results which is accompanied by various accounting documents, requiring good knowledge in the matter, even the use of a professional.
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