Para-hotels are attracting growing interest among real estate investors looking for tax optimization solutions in France. Presented as a superior alternative to classic furnished rentals, it promises major tax advantages: VAT recovery, exemption from capital gain after five years, full deductibility of expenses... However, behind this attractive window lies a particularly demanding legal and fiscal regime.
This article offers a detailed analysis of the para-hotel regime: access conditions, fiscal implications, risks to anticipate, and arbitrations to consider in order to integrate this regime into a coherent wealth strategy.
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Para-hotels differ from furnished rentals by the provision of services similar to those of hotels. The General Tax Code (article 261 D, 4° b) considers that an activity is of a para-hotel nature when at least three of the following four services are effectively offered to customers:
• The physical reception of the persons accommodated,
• The supply of household linen,
• The breakfast service,
• Regular cleaning during the stay.
Recent tax case law is strict on the effectiveness of these benefits. Thus, the absence of formal proof of a service (such as intermediate cleaning) may be sufficient to reclassify the activity as a simple furnished rental, with all the tax consequences that this implies.
However, it is accepted that these services may be subcontracted to a concierge, provided that the lessor remains the effective organizer of the service.
The tax authorities could call into question your para-hotel status.
One of the main challenges of the para-hotel regime is its qualification as a professional. Unlike furnished rentals, where professional status (LMP) is determined at the level of the tax household, para-hotels require direct, personal and ongoing involvement of the operator.
This involves:
• An effective presence in the management of the activity (customer relationship, management of service providers, organization of services),
• An entry in the Trade and Companies Register (RCS),
• Affiliation to the Social Security for Self-Employed Persons (SSI).
In practice, a passive investor or a manager in a main activity with little time will have the greatest difficulty in justifying the professional nature of his para-hotel activity, even with the support of a manager or a concierge service.
The main attraction of the para-hotel regime is the possibility of recovering VAT on expenses related to the activity:
• Acquisition of new goods or with heavy work,
• Renovation work,
• Furniture, household appliances, current expenses.
However, this recovery is not unconditional. The operator becomes subject to VAT, which implies:
• An invoicing of 10% VAT on rent and services,
• Keeping accounts subject to VAT,
• An obligation to maintain coverage for 20 years (with regularization in the event of sale or cessation).
⚠️ In case of transfer within 5 years after completion, VAT will be due on the sale price. After this period, the VAT initially recovered will be adjusted by 20ths.
Para-hotel operators are subject to the professional capital gains regime, like professional furnished rental companies. As such:
• The capital gain is calculated on the basis of net book value (purchase price less depreciation),
• Depreciation is reinstated and taxed in the short term,
• A total exemption is possible after 5 years if the revenue is less than €250,000 per year.
However, short-term capital gains remain subject to social security contributions, even in the case of tax exemption.
🚫 A non-professional operator will not be able to benefit from the regime of capital gains for individuals, nor from the exemptions from the professional regime, making resale fiscally penalizing.
One of the attractions highlighted is the possibility of blaming deficits on total income. In reality, this advantage is rarely effective:
• Deficits resulting from activity are mainly due to the depreciation of the property,
• However, depreciation does not create a fiscal deficit attributable to total income,
• They can be carried forward indefinitely to the future profits of the activity.
In practice, it is therefore rare to generate a real fiscal deficit.
Under certain conditions, assets allocated to a professional para-hotel activity may be excluded from the Real Estate Wealth Tax (IFI) base. For this:
• The activity must actually be carried out primarily,
• The operator must be affiliated to a social regime in connection with the activity.
This exemption is therefore reserved for operators who are significantly involved in the activity.
The para-hotel regime is attractive in theory, but demanding in practice. It requires:
• Real and regular involvement,
• Active and structured management of the activity,
• Rigorous forecasting of the consequences in terms of VAT and capital gains.
Recommended profile to take advantage of it:
• Professional operator (residence manager, in-house concierge...),
• Full time real estate investor,
• Heavily renovated or new investment project (to optimize VAT recovery),
• Ability to adapt rates to integrate the impact of VAT on rents.
Para-hotels are not a regime of convenience. It is aimed at committed profiles, able to assume active management, a clear legal structure, and accounting rigor. In return, it offers a range of significant tax optimizations: VAT recovery, deductible depreciation, capital gains and IFI exemptions.
But for the passive or casual investor, it represents a risk of fiscal recovery and unfavorable regimes, which often outweighs the expected gains.
Before opting for this diet, it is highly recommended that you:
• Carry out a personalized feasibility study,
• Be accompanied by a chartered accountant specialized in real estate taxation,
• Arbitrate real tax benefits in light of administrative burden and risk.
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