What is LMNP status?
In application since 1947, the LMNP status is a French tax optimisation scheme that allows you to become the owner of a furnished holiday let (new or not), generally in a residence with reception and services but also in new developments where concierge rental services including breakfast delivery (or bread/croissant delivery).
LMNP status can be granted to you when you wish to make a rental investment in a holiday home. This tax-free system is generally used to build up assets and benefit from advantageous tax measures; it offers you, as an investor, sustainable and, as the case may be, tax-free rental income.
The conditions needed
Several conditions are required to obtain the status of Furnished Non-Professional Renter:
Buy a new or resale furnished apartment;
Rent the property to a physical or legal person;
Receive rental income not exceeding €23,000/year or 50% of the total income;
Put your investment in your own name or through a family company subject to personal income tax (SARL, EURL, SNC). Contact us for more info as our legal department can assist you in setting up a French company.
Opt for the simplified tax regime.
Did you know that?
If you meet all these conditions but the rental income exceeds 23,000 euros, you take the status of Professional Furnished Renter (LMP).
What are the tax benefits of LMNP status?
This French property investment scheme provides you with several tax benefits:
VAT recovery (20% on the total amount of the property) if you invest in a new tourist residence;
Deduction of borrowing interest and management expenses;
Guaranteed profitability, whether or not the property is leased;
Deduction of rental income from all expenses related to your investment:
Your mortgage interest;
Property tax (taxe foncière);
Residence service charges;
The fees of the accounting firm;
Depreciation of movable and immovable property (the most important part of this investment, contact us for more info).
Did you know that?
Investing in this type of investment allows you to have additional tax-free income. Thanks to depreciation, the status of non-professional furnished rental company cancel out the tax on income received. Another advantage of this property investment scheme is that these rentals are not subject to geographical zoning.
It is, therefore, an ideal sustainable investment for:
generate additional income and enjoy a second home for a few weeks a year;
prepare for your retirement;
build up your capital;
increase your assets;
protect your loved ones.
How does capital cost allowance work?
In the case of furnished rentals, you can depreciate up to 85% of the real estate value of your purchase, as well as 100% of the furniture, excluding the value of the land (12.5%).
Depreciation in LMNP is straight-line over the normal useful life of the asset:
7 years for furniture and equipment (1/7th each year over 7 years)
30 years on the property asset including parking (1/30th each year over 30 years based on 90% property asset price.
The depreciation of your asset, as well as its furniture, lets you generate an accounting deficit and reduce the taxable accounting result to zero. In the event of a loss, unused depreciation value is deferred indefinitely.