In French real estate, VAT, leaseback schemes, and furnished rentals often challenge property owners. In this article, our goal is to simplify the complexities and clarify the legal obligations tied to the “BIC para hotelier” status. We’ll focus particularly on its implications in the context of furnished rentals with para-hotelier services.
Understanding VAT in Furnished Rentals
Typically, both unfurnished and furnished rentals are not subjected to VAT registration, alleviating concerns for most property owners. However, investors engaging in the leaseback scheme or VEFA 1 for a newly acquired property enter the realm of VAT obligations.
The “BIC para hotelier” Legal Status
The leaseback scheme’s legal status, “BIC para hotelier,” differs from LMNP (Loueur en Meublé Non Professionnel) in French real estate. This involves furnishing rental properties with para-hotelier services, including breakfast, linen changes, personalized key handovers, and regular cleaning.
Owners offering three or more of these services must collect VAT on the rent received. Additionally, those with a commercial lease (bail commercial) and a management company are subject to the same requirement. When signing such leases, exercising caution is crucial due to the complicated and potentially costly termination process. This may involve an “indemnité d’éviction,” equivalent to three years of rent.
Legal Obligations as a BIC Para-hotelier
Property owners operating as BIC para-hoteliers face specific legal obligations. Firstly, they must register with the greffe du tribunal de commerce to obtain a SIREN number. Afterward, individuals must declare rental income and expenses using an annual account, typically filled out with a 2031 form. Subsequently, they report profits or losses on their personal tax return (form 2042).
VAT management is a crucial aspect of the BIC para-hotelier status. French tax residents are responsible for managing their VAT, submitting regular returns using forms 3310 and 3517. In contrast, non-French tax residents with a management company delegate VAT tasks, needing only a VAT refund request (form 3562) for expenses at the year’s end. This distinction simplifies tax responsibilities for non-residents.
Claiming VAT on Property Purchase
To claim VAT on property purchases, owners need to register with a SIREN number. Subsequently, they must request a refund from the local tax office using standard VAT forms (number 3310). Our dedicated team at French Tax Online is equipped to assist you with this process.
VAT Regularisation
For property owners, the concept of “VAT regularisation” during property sales warrants attention. If property rental ceases before the 20-year mark, a pro-rata refund of initially claimed VAT becomes necessary. For instance, selling a property after 15 years would require refunding five-twentieths of the initially refunded VAT amount.
To conclude, navigating the intricacies of VAT, leaseback schemes, and legal obligations in the context of French furnished rentals with para-hotelier services demands careful consideration. Our team at French Tax Online is committed to assisting you in managing rental income, VAT refunds, and returns. Feel free to reach out to us via email or directly on our website for expert guidance.
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