French Gites 4 of 5 - Non Professionals

In an earlier blog post I noted the difference between LMNP and LMP. I will talk first about the tax Implications of LMNP. The concept of LMNP is that the gite business is business income.

Assuming your gite has an official star rating (not just a gites de France rating to note) you have two choices on taxation up to turnover of EUR 77 700. Note both of these are less generous than they used to be. Also the limit is much lower if you have an unclassified gite (30%)

Choice 1 – simple – is the default 50 percent allowance basis - though in some cases 71 percent. If your gross turnover – so before deducting agency fees – is 30 000 euros, you are assumed to have costs of 50% ie 15000 euros. Then you pay tax and social security on 15000 – social charges now at 18.6% (up from 17.2%) and income tax at your marginal rate so 0,11,30% etc

Choice 2 – not simple – is to opt for regime reel. You need to opt for this with the tax office. Then you need to keep detailed records of the costs and deduct these instead of the 30%/50%/71%. The care point here is you have to start capitalising costs above a certain level and then take these as depreciation over time. The good news is that you can charge part of the costs of your house here so the building part...potentially leading to a lower bill than choice 1.

The bad news with choice 2 is when you sell. As well as reducing the assumed costs to (normally) 50%, recent law changes say that when you sell your house in the end much of the depreciation you claimed will be taken into account on the sale of the house. It used to be this deduction was essentially free money – now it is not.