I have had an ‘avis de 1er acompte 2018’ through the post recently, reminding me that our income tax declaration is likely to be somewhat complicated this year and I had better start simulating it…
Would appreciate some help, advice, comments or constructive criticism of my approach to all this. I’ll be as brief and clear about the context as possible but please bear with me because it is complicated, so here is the background:
We have rented out a small furnished duplex via Tourist Office, Airbnb, Booking.com, leaflet advertising, any other method we can since 2014. The duplex is an annex to our main residence which already had its own front door and we completed the separation by a dividing wall
We set up an Autoentrepreneur status and duly paid quarterly cotisations, as we understood that my husband needed to do this in order to have a ‘status’ as an independent worker and therefore Carte Vitale etc. I am the main breadwinner, a salaried employee of a company and therefore with the CPAM.
Talking to a retired English friend who rents out an apartment, it seemed that autoentrepreneur status was not required and rental income could simply be declared on the household income tax declaration and tax duly paid (no cotisations to RSI required). Hubby would be covered under my health regime (CPAM and mutuelle) as a house-husband (exactly as the equivalent housewife would be). We were frustrated by paying thousands of euros in cotisations but realising that he would be entitled to no benefits such as sickness cover or retirement provisions because he was not earning and therefore declaring enough. I spoke to the regional tax helpline early last year and they agreed with this logic. Confirmed by a lawyer also.
We therefore went ahead and closed down the Autoentrepreneur regime as of 31st May 2017. With the intention of declaring the income under that regime for 5 months and then simply as ‘location meublé’ income for the rest of the year.
We spent most of the year buying a house that was the only remaining part of a multi-building site that we bought in 2014 and on which sits our main residence, the existing rental apartment and other buildings. We put this house into full-time rental operation under the same conditions as the apartment from November 2017 (much Booking.com, some Airbnb and some direct bookings).
However, in projecting our 2018 revenues and the tax and social charges that will be automatically applied by declaring on the impôts revenues, it looks as if we may be better off by re-starting a company after all.
So, the question becomes ‘regime simplifié’ or ‘régime réel’… people always seem to say stick to the simplifié if you can, to avoid the complexity and costs of full accounting procedures. But this article is quite clear that the regime réel would, in almost all circumstances, be more advantageous:
It certainly looks as if deducting all our mortgage interest and equipment / works amortisations plus any expenses (we have very little of those) would effectively wipe out our tax and social charges liability.
But, only worth it if paying an accountant costs less than our tax bill would be… I have seen from other posts that some people are paying circa 2 000€ pa for accounting services.
Has anyone switched to ‘régime réel’ for this reason? How was the experience? Benefits and pitfalls to avoid, please?
Also, anyone a member of a Centre de Gestion Agrée? Any advice on how to choose one and whether it offers the benefits alluded to in the article i.e. help with accounting and can offset cost of this as an expense in itself?
We went down the régime reél route, for similar reasons. And so far it has proved it’s worth as we have yet to pay any tax on our locations meublées (we have two) because of the depreciation. (But what a daft idea, to depreciate a building that is rising in value!..we also find it daft that we can claim things like the taxe de séjour against tax).
There are rumblings that if your turnover is above 23,000 you will get hit hard by a new 2017 requirement for paying extra social charges and GSG, but this is all very muddy at present. We haven’t explored this further as will stay below the threshold by ones means or another, but if you are renting out several different places then perhaps you need to look into this too.
I’ve never heard of the centre de gestion, but yes the accountants fees are set against tax too.
(Forgot to add that the other decision making factor was that paperwork is not a problem for us, so the need to provide the details to accountant each year doesn’t put us off, wheareas some people loathe it.)
We were told (ComCom meeting) when they introduced taxe de sejour in 2016 that we didn’t need to declare monies taken to pay for TdS - as it’s a tax paid by the “locataire”, not the owner. It does of course has to be declared and paid to the tresor/tourist office.
We are probably saying same thing in different words… yes I “collect” TdS from the locateurs, and hand it on to the Trésor Public. However, it passes through our bank account, so has to be accounted for in our annual profit and loss account, but is netted off. If you are using micro-bic or AE regime then I guess you don’t have the same sort of accounts…
Do you know: if our expenses end up being higher than our tax and charges on the gite, does this also reduce overall household income tax or only applicable to the gites revenue part?
The apparent advantages of being a member of the CGA (cost 100-200€ pa, to be confirmed) are that your taxable revenues are not increased by 25% as is the case if you are not a member or do not have your accounts done by a member of the Order of Expert Accountants. They also give all sorts of other tax and general economic help and advice and membership can, to an extent, ‘protect’ you against claims by the taxman because they are supposed to keep you on the straight and narrow.
Can I ask roughly what you pay for accountancy? In terms of paperwork, I’m not sure at this stage what will be involved. What do you mean by it not being a problem for you?
I assume we will have to just provide the annual statements of income from Airbnb and Booking.com plus a list of our direct bookings plus receipts for expenses and our ‘tableau d’amortisation’ for the mortgage plus any other items to be depreciated.
Am I being naïve on this point? Is there much more to it? If so, the treatment of this data by the accountants can’t cost a fortune, surely?? (please!)
The gîte accounts are separate, so doesn’t affect overall household taxes (sadly).
And the paperwork is roughly what you’ve said, plus bank account statements, and our invoices. It’s not complicated, but some people seem to dislike printing out, keeping and ordering every scrap of information and receipts for everything. Especially with so much on line now. Also, over the years we’ve now got into a routine, for example we do a mega-shop for cleaning materials and office supplies once a year which simplifies things.
I’m not sure why you now think it’'s better to have a business structure rather than just declare it directly as either microfonciere (if your expenses are less than 30%) or reel (if expenses are higher than that). Do you get more allowances or something if you’re a company? Would that outweigh the other cotisations?
Do you have to have an accountant to declare reel if you’re not a company? I declare my UK rental as micro fonciere normally but this year and last year my expenses are quite high so I was thinking of changing - but I understand once you declare as reel you have to continue to do so for 3 years - and I don’t think I’ll have as many expenses next year.
It doesn’t affect me at the moment because I presently have no French income to be pushed up into the next tax bracket but I need to understand this as I’m planning to start managing a couple of French rentals myself soon and that’s when such things will make a difference to me. So I’d be grateful for any help towards understanding how to do this
One of the things that concerns me about putting the rent through a business rather than just declaring personally is if I didn’t exceed the 9807€ threshold I’d have to pay supplementary PUMa cotisations and that would be on my UK rental income (whatever amount exceeded the threshold when added to my French rental income), which I currently pay no social charges or tax on in France. I have an S1 at the moment so I’m trying to figure out what benefit I’d end up with if I had to run French short term rental income under an ME scheme (opening me up to the health cotisations on UK rental income as well as higher cotisations on the French rental income) rather than just declare it directly.
You can declare reél though your income tax declaration, but I think only a short list of items can be set against profit. So, if you want to offset the depreciation costs of the building and the equipment against your profits then as I understand it you have to have a profit & loss account certified by an accountant. This is what was explained to me by an accountant, but as ever there are possibly other interpretations…
Micro fonciere for unfurnished and micro bic for furnished but the distinction I’m concerned about is those versus reel, ie declaring gross and being given an allowance or declaring gross and listing all expenses and whether in the case of furnished property it’s better or worse to run it under a business structure rather than just to declare it personally, whether with or without an accountant.
My UK property is rented unfurnished (and so far declared as micro fonciere but expenses this year and last year have been heavy) but I’m not sure which way to go with my French properties. I’m leaning towards furnished as it seems less risky because of the way the law is on the side of long term tenants. I won’t at this stage have enough French rental income to have to be a professional landlord.
The key is having accountant certified profit & loss account I believe, and I have no idea whether it’s as easier to do that with a company as without one. We have a société de fait, which cost next to nothing to set up and is a sort of pseudo company (we do have a SIRET number tho’) but allows us both to participate in generating money from our common property. And then the outcome goes on our joint household tax return.
(I have a feeling that if one was being very picky then one person using AE status to run a gîte in a building that actually jointly owned would actually be counter to individual AE status, but I can’t imagine anyone would ever challenge this)
However, I am not an expert, but just felt that our accountant’s advice was trustworthy so accepted it.
Yes I have a problem in that one house I may rent is still in joint names with my ex (though he’s given up all rights to in during our divorce - but it would cost me thousands to get it put into my name only) so I understand I can’t run that as a gite under ME/AE anyway. The other house I’m thinking of what to do with is in my name only. I could consider moving back into the ex marital home and then running two houses that are in my name only as gites, in which case I’d be able to do it under the AE/ME scheme if that worked out the best way to do it.
My UK rental income is declared in the UK but also has to be declared in France (who give a credit for any French tax or social charges generated) so it has the effect of pushing any French taxable income up into a higher bracket. A consideration for me if I run a business (as opposed to just declaring the income personally) is that I’d lose my S1 which presently covers my healthcare. If I run a business that generates less than the threshold for PUMa, then in addition to the business cotisations I’d become liable to supplementary cotisations of 8% of global capital income over the threshold - which would include my UK rental income. So I need to take that into account as well as whatever tax and social charges or business cotisations would be due on the French rental income.
You have one house still in joint names. Please, take good advice and have it changed into your own, single name. It should not cost thousands to do that through a Notaire.
I know first-hand just how these things can complicate an inheritance and/or a sale.
With regard to ‘company or no company’, we have organised a meeting with an accountant next week who will advise as to the best structure or set up for our circumstances (which may or may not be applicable to yours) so I’ll try to remember to post an update and let you know what they said…
If your furnished rentals (in France) are more than your other income then I believe you have to set up a business but not if they’re not - but you can still choose to if you want to, for instance if you want healthcare cover and pension cover and it works out more economical than just declaring the income on your tax return and joining PUMa as an inactive and you have other pension arrangements or don’t foresee making enough business contributions to gain a pension worth the effort.
I’ve read the article again and as far as I can see the article is only talking about whether you declare micro bic or reel - not whether you run your rentals through a business or not. Or am I missing something?
Stella I’ve tried talking to various notaires about putting the property in my name and they all think it will be very expensive. It’s complicated and personal so I’ve sent you a PM.
