Numerous facilities make it possible to stimulate real estate purchases, and to boost the new real estate market in France, making it difficult to go through the multitude of advantages available in order to maximize real estate investments, hence the status of Non-Professional Furnished Rental Company. (LMNP). Since 1947, the LMNP status has made it possible to invest in furnished property, while benefiting from tax advantages. The LMNP status offers depreciation on property and furniture. Additionally, rental income is considered business profits (BIC), instead of property income.
What is LMNP status?
Also called LMNP furnished rental (non-professional furnished rental), income from the mobile home enters the BIC – Industrial and Commercial Profits tax system. Unlike the traditional tenure of bare rental, furnished rental allows you to depreciate real estate and furniture. When deductible charges and loan interest are no longer sufficient to erase the tax income to be declared, depreciation makes it possible in most cases to obtain rental income net of taxes during the period of repayment of the loan having financed the operation and even beyond.
Although subject to the BIC tax regime, capital gains are the same as those of individuals, i.e. an exemption after 22 years. Social security contributions are completely exempt after 32 years.
How to obtain LMNP status?
The LMNP status does not impose any particular conditions, other than not being a professional renter, making less than €23,000 in annual income as a tenant, or receiving less than 50% of the income as a tenant. Then, you must sign a commercial lease for a minimum period of 9 years, and furnish the accommodation according to the law.
As a general rule, obtaining LMNP status is therefore based on certain requirements, including:
- Becoming a non-professional owner of furniture, generating rental income of less than €23,000 and not being registered in the commercial register as a furniture rental company.
- Rent one or more apartments, declare the activity to the tax services.
- Leases must be for a duration of 12 months or 9 months for students as their main residence.
- The apartment must be sufficiently furnished and equipped so that the tenant can live there with only their personal belongings.
- For a shorter rental, a seasonal rental, prefectural authorization is necessary in cities with more than 200,000 inhabitants, Paris and those in the departments of Hauts-de-Seine, Seine-Saint-Denis and Val-de-Marne.
- LMNP tax benefits
Particularly stable and governed by the civil code, the LMNP status allows loan interest to be subtracted from taxes, but also ownership costs, installation costs, maintenance and repair costs. As well as the depreciation of furniture for a maximum period of seven years, and the depreciation of the property for a maximum period of 30 years. Therefore, the LMNP status, in order to make a real estate investment, is particularly interesting for any buyer wishing to build up a sustainable income.
For your next real estate purchase, LMNP status is a way to become an owner without a deposit, in order to build up retirement capital for yourself. Then, you can generate rental income without any management difficulties, while reducing your taxes by up to €6,000 per year. Finally, it is a way to ensure the future of your loved ones, and even the pleasure of the present, by taking advantage of the weeks of availability if you buy a tourist residence.