While the short-term rental market is on the rise, the real estate market is starting to run out of steam. In so-called tense areas and agglomerations, it is becoming difficult to find housing.
As the LCD market is gaining more and more ground, the public authorities are pointing the finger at it and want to adapt the regulations to limit its expansion. At the beginning of 2024, two debated projects should be observed: the 2024 finance bill and bill no. 1176 aimed at remedying imbalances in the rental market in tense areas.
Are these imbalances really due to the explosion of the short-term rental market? What changes could these two projects bring and could that threaten LCD investments?
In this article, we will explain to you why this regulatory proposal is scary, when in reality, it will not have an impact on your investment.
The 2024 Finance Bill adopted by the National Assembly will set new regulations for the taxation of furnished tourist accommodation. At the beginning of 2023, furnished tourist accommodation represented 186,000 accommodations throughout France. This type of accommodation is mainly found in departments where tourism is linked to seasonality.
At present, the tax regime for income from the rental of furnished tourist accommodation is simple and considered to be very favorable to the investor. It is the micro-BIC regime that applies as long as the income does not exceed 176,200€ excluding VAT and, in this case, the investor benefits from a flat rate of 50% for furnished tourist accommodation and 71% for classified tourist accommodation. The 2024 Finance Bill, presented by the Minister of Economy and Finance, plans to reduce this tax allowance by increasing it from 71 to 50% for classified furnished tourist accommodation.
Bill No. 1176 also provides for a tightening of the tax regime, with the same reduction in the allowance for classified tourist accommodation, but also for “simple” furnished tourist accommodation: the allowance would increase from 50% to 30% in tense areas (determined by decree, List modified on Aug 25, 2023).
Should we be afraid of this future regulation? Will short-term rentals remain the ideal market to invest?
Finally, this future regulation is causing a lot of noise, but will not bring major upheavals for investors.
It would in fact not have an impact on short-term rental investors: more and more of you are opting for the real regime on which these reforms will have no impact! This regime makes it possible to deduct expenses according to the expenses actually incurred and therefore to be taxed on the result of the short-term furnished rental activity.
The real regime also makes it possible to amortize the value of the property. For investors, it is therefore more interesting than the micro-BIC regime!
Although the finance bill was adopted at the end of 2023 by the National Assembly and the Senate, bill No. 1176 remains... only a proposal! In addition, as the Paris 2024 Olympic Games approach, the public authorities seem to no longer be interested in the short-term rental market. And yes, France will need a lot of accommodations for this event!
The taxation of short-term rentals will have caused a lot of noise in 2023. But in the end, nothing to be alarmed about! If, like the majority of investors, you have opted for the real regime, the finance law will have no effect on your taxation. And if you are subject to the micro-BIC regime, you can change to the real regime and you will quickly find that this tax regime is advantageous! So, no stress, short-term rentals remain an attractive playground for your investments.
If you still have questions about this change in taxation for your investment, our team of short-term rental experts answers all your questions! Do not hesitate to make an appointment.
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