LMNP vs LMP from January 2020

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Martha
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Location: Chamonix

LMNP vs LMP from January 2020

Post by Martha »

Hi there,
Just went to see some new accountants and they told us that a new regulation was very suddenly introduced on 1 jan 2020 so you can no longer declare as LMNP if you turn over more than €23,000 - you have to convert to LMP.

In which case we could become liable for a huge amount of capital gains tax on the big chalet if we moved into it, as it would be coming out of a business. Now, as it happens, the revenue was of course much smaller in 2020 so we think we will be able to sort this out with not too much difficulty. And of course everyone's individual circumstances are different.

But it does appear that there's a big change and a much less favourable tax regime in the future for letting a holiday rental which makes over €23,000 a year, and I wondered if any others here are affected by it and what their choices were?


https://alter-finances.com/actualites-i ... es---.html
Chalet la Foret, Chamonix
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paolo
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Post by paolo »

Hi Martha,

It also says that the rental income needs to make up more than 50% of your household income for you to be LMP. Did your accountant tell you if this is French income only or global income?
Paolo
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Martha
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Post by Martha »

Hi Paolo! They were definite that it's French only. Our French only income is basically only the chalet, the rest is from the UK.
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paolo
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Post by paolo »

Me too, I suppose it was inevitable that they would get rid of the generous conditions for short-term rentals.
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Martha
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Post by Martha »

That's what I was thinking...it wasn't a huge surprise but I've just not heard anyone really discussing it!
Chalet la Foret, Chamonix
Martha
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Joined: Sun Apr 16, 2006 7:01 pm
Location: Chamonix

Post by Martha »

Bit more info here if anyone's interested.

"By simply updating the applicable regimes, has the Social Security Financing Act (LFSS) for 2021, published in the Official Journal, unintentionally dealt a blow to the status of a furnished landlord? This text ratified the suppression, adopted by the Constitutional Council in February 2018, of one of the conditions that distinguished the LMP from the non-professional furnished landlord (LMNP): registration in the Trade and Companies Register (RCS), which automatically triggered the payment of social security contributions. Previously, only those who were registered had to join, and this criterion was often sufficient to distinguish the activity from LMP or LMNP. "Landlords used to be able to opt for one or the other, nowadays they have less control over them", comments Yves Bernard, Expertim's Chairman.
The annual revenue from furnished rentals by the tax household must be more than 23,000 euros;
- These revenues must be greater than the sum of the tax household's professional income subject to income tax.
Automatic switchover
But this clarification of the regime, aligning the fiscal and social plans, has an effect that is not necessarily desirable for everyone. In fact, it results in making all professional renters of furnished accommodation (LMP) subject to social security contributions for self-employed workers (TNS). That is to say, it automatically switches over "those who receive annual income of more than 23,000 euros from the furnished rental activity and whose income exceeds their other income from their other activity", explains Maud Velter, co-founder of the website jedeclaremonmeuble.com. Also subject to social security contributions are renters of furnished tourist accommodation, such as Airbnb, whose annual income exceeds 23,000 euros, with the possibility of joining the general social security system if their income is less than 76,200 euros (instead of 85,800 euros up to now).
What are the financial consequences?
As the rates of social security contributions are variable and degressive, it is not true to say that, on the whole, everyone loses out. "The scheme is not unattractive to very large furnished rental companies, whose income exceeds the Social Security ceilings". On the other hand, the "small" ones, i.e. those with "incomes close to 23,000 euros and low profits, risk being penalised", according to Rania Ihaddadene, consultant at Fidroit. Another problem: in case of non-beneficiary activity, a minimum flat rate of social contributions of 1,145 euros is levied by the Social Security for the Self-Employed (SSI, ex-RSI), giving pension rights.
Attention also needs to be paid to the resale of the property: "Capital gains will be taxed under the professional capital gains regime under the LMP, while it is the regime for property capital gains for private individuals, with allowances and exemption after 30 years that applies in the case of LMNP", adds Rania Ihaddadene. In any case, contributing to the SSI gives access to social coverage, which was sometimes neglected until now. And on the retirement side, the SSI allows to validate 3 quarters per year.
Decree to come
In the absence of details in the LFSS on their entry into force, these amendments would apply from 1 January 2021. And not, retroactively, to 2020 income. However, a decree is expected to clarify this point. In passing, it could remove a few other grey areas, in particular the case of multiple ownership of property. Finally, a way out could emerge: rentals made through legal entities, i.e. companies, could be exempt from social security contributions."



https://www.mieuxvivre-votreargent.fr/i ... b7XFs7AP_4
Chalet la Foret, Chamonix
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