According to the latest Social Security financing law (LFSS) for 2021, the status of the furnished rental company could now lose its advantages, if certain conditions are not met.
A significant change in status
One year after the modification of the tax text easing the conditions for becoming a professional furnished landlord (LMP), it is the social text that is in turn adjusted. Published in the Official Journal on December 15, 2020, the Social Security Financing Law for 2021 revealed a significant change in the status of the LMP and the non-professional furnished rental company (LMNP).
According to a decision of the Constitutional Council, to benefit from the status of professional furnished rental company, it is no longer compulsory to register with the trade and companies register (RCS) since the finance law for 2020.
Also, this condition being removed, it is now sufficient that the rents derived from the furnished rental activity yield more than € 23,000 per year and be greater than the sum of the professional income of the tax household subject to income tax, to be considered as a professional furnished rental company.
In other words, once these two conditions are met, individuals renting furnished accommodation will automatically switch, sometimes without even knowing it, from the status of non-professional furnished rental to the status of professional furnished rental.
An impact that can be costly
While until now the profits of professional rental companies who were not registered in the Trade and Companies Register were subject to simple social security contributions, the rate of which was set at 17.2% of their profits, it is a whole another story looming with this diet.
With this financing law, and in particular these two conditions, professional and non-professional furnished rental companies are subject to social security contributions, including tourist accommodation rental companies, if their income exceeds 23,000 euros.
The rates of these social contributions will vary, between 35 to 40% of the profits made through furnished rental activities. It is the same when the furnished rental activity is not profitable, the minimum subscription fee will amount to 1,145 euros.
Until now, keeping the LMNP regime to benefit from the real estate capital gains regime for individuals was advantageous. Indeed, this regime provides for an allowance linked to the period of ownership of the property and allows exemption from income tax beyond 22 years of ownership and deductions after 30 years.
And a salty addition when reselling
Also pay attention to the resale of the property. Capital gains will be taxed under the professional capital gains regime in LMP. Short-term capital gains (depreciation deducted from tax since the start of the furnished rental activity) will then be subject to social security contributions of around 35% (compared to 17.2% for social security contributions).