The Property Owner’s Blog
Furnished Rental: LMNP and Para-Hotel Status
Which tax regime should you choose for your rental investment?
Furnished rental investment attracts many owners, particularly due to the advantageous tax regimes it offers.
However, it is essential to choose the most suitable tax regime to optimize your property’s profitability. Two main statuses exist: the Non-Professional Furnished Lessor (LMNP), which is accessible and advantageous for individuals, and the para-hotel status, which is more demanding but offers interesting opportunities. But what are the differences between these two regimes? What criteria should you consider to make the right choice?
Discover the specifics of each status and their tax implications.
The LMNP Status
To be eligible, the owner must not receive more than €23,000 in rental income per year or more than 50% of their total income.
2 tax regimes are possible:
- The micro-BIC regime: if your rental income is less than €77,700 per year, you benefit from a 50% flat-rate allowance on your income, thus reducing your taxable base.
- The actual regime: it allows you to deduct all expenses (loan interest, property depreciation, works, management fees, etc.), often more advantageous for optimizing taxation.
The main advantage of LMNP lies in the possibility of depreciating your property, which often allows you to reduce taxation to zero for several years.
Simplified and advantageous taxation
The Para-Hotel Status
The para-hotel status is similar to traditional hotel activity and applies to rentals that offer at least 3 of the following services:
✅Breakfast
✅Regular cleaning during the stay
✅Provision of household linen
✅Personalized welcome and reception
One of the main attractions of the para-hotel status is the possibility of recovering VAT on the purchase of the property and associated expenses. However, this regime is subject to more stringent obligations, notably registration with the Trade and Companies Register (RCS) and the payment of social contributions on the generated income.
In terms of taxation, para-hotel operators fall under the Industrial and Commercial Profits (BIC) regime, with two options:
- The micro-BIC regime (if revenues do not exceed €188,700) with a 71% allowance.
- The actual regime, where the property can be depreciated and all expenses deducted.
A stricter framework, but significant advantages
LMNP or Para-Hotel Status?
Which choice to make?
The choice between LMNP and para-hotel status primarily depends on your objectives and your commitment to rental management:
- Are you looking for a simple and less restrictive regime? The LMNP under the micro-BIC regime is ideal.
- Do you want to maximize profitability by optimizing taxation? The LMNP under the actual regime allows for property depreciation and minimizes taxation.
- Are you aiming for an investment with VAT recovery and para-hotel services? The para-hotel status is more advantageous but requires more rigorous management and social contributions.
Depending on your situation and ambitions, a thorough study of your project with a real estate tax expert is recommended to choose the most suitable status.
And you, which regime do you prefer for your rental investment?
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