Basic french income tax regimes

As a general rule tax issues are rarely simple, particularly where it is necessary to take account of cross-jurisdictional issues, including any applicable double taxation Treaties, as well as conflicts between what the fiscal authorities in each country will recognise, together with additional conflicts between what most people would ideally like to acheive and what the applicable fiscal rules permit.

Tax advice will vary considerably depending upon individual circumstances and it will be necessary to take account of several factors, including :

- whether one is employed, self-employed, retired over 65, retired before 65

- the amount and type of the overall assets involved and where they are situated

- the amount and type of income being received i.e. pension, salary, rental income, etc

- where the income is being received from, and where one is resident and / or domiciled. 

In very broad and general terms, assuming one is a UK resident with a second home in France, the tax treatment by the French fiscal authorities of the rental income you receive arising in France depends upon the particular French tax regime which you adopt, by choice or otherwise.

Here is a very brief outline of the three main French tax regimes to consider in the above situation :

1. BIC - Bénéfice Industriel et Commercial - location en meublé - par un non-professionel - Régime Micro Entreprise :

The régime Micro Entreprise is the French tax regime which is likely to be adopted by most non-French residents renting out property in France, unless rental income is being received under a "leaseback scheme" in which case the régime réel simplifié should be adopted in order to obtain the best tax advantages.

The régime Micro Entreprise can be adopted where the rental income received is less than 76,300 euros per annum. The rental income is deemed to be 29 % of the gross rental income, and the resulting figure is taxed at a maximum of 33.33 %.

Under the régime Micro Entreprise no VAT is charged on the rental income nor is any due to the French fiscal authorities.

2. BIC - Bénéfice Industriel et Commercial - location en meublé - par un non-professionel - Régime rél simplifié  :

Under the régime réél simplifié one is taxed on the actual profit after deduction of allowable expenses. The tax declaration to the authorities is made annually. The reason the régime réel simplifié is adopted in the context of "leasebacks" is that VAT may be recovered in respect of the purchase of the new property at 19.6% albeit that it must be charged on the rental income at 5.5%. For more detail in this context please see the section on leaseback elsewhere on this website.

3. Régime rél normal  

Under the régime réel normal one is taxed on the actual profit after deduction of allowable expenses as per the régime réel simplifié, however the tax declaration to the authorities is made quarterly rather than annually. The régime réel normal is obligatory where income exceeds 763000 euros per annum for "sales" activities, and 230000 for "service" activities. Rental income is deemed to be derived from a "sales" activity.