The status of professional furnished landlord, otherwise known as LMP, was for a long time appreciated thanks to its advantageous taxation and its accessibility insofar as this status gives rise to quite appreciable tax advantages to which non-professional landlords are not entitled. Thus, it was attractive to owners looking for an efficient rental investment. However, the 2009 Finance Law has tightened the conditions of access to this status to reserve it exclusively to true professionals. This mainly concerns the conditions of income which are now more complicated to fulfill.
LMP : Only for professionals
The Finance Act of 2009 wished to make the status of lessor in furnished professional so that it keeps its meaning and that non-professional renters called LMNP can not get it as easily as before. This served to limit the tax niches because the professional furnished rentals were sometimes used as a means of tax exemption. In addition, these advantages in terms of tax LMP were not justified and had more and more beneficiaries. Indeed, until 2008, it was sufficient that the total amount of rental income was higher than 23 000€ and that the investor was registered in the Trade and Companies Register (RCS). Many individuals who held a property assets could therefore benefit from these advantages when in reality they could not be qualified as professional renters.
Change of law
There are now three conditions to be considered as a professional furnished renter. The existing conditions remain unchanged: the total amount of rental income of all members of the tax household must be greater than €23,000, registration in the register of businesses and companies. In addition, there is a third condition: the rental income must exceed the other income of the tax household. This third condition considerably restricts the number of investors who can keep the status of professional.
Conditions to be met
These three conditions must be studied more precisely in order to understand them with certainty. First of all, they must be fulfilled simultaneously in order to have the status of LMP, otherwise the renter is automatically considered as LMNP. It should also be noted that the status takes into account the whole tax household. The condition concerning the registration is therefore valid as soon as one of the members of the tax household is registered as a professional furnished lessor. And so, the professional character will be applied for the totality of the rental receipts carried out by the whole of the people who constitute the tax household.
The rule concerning the annual income threshold of 23 000€ applies to the income from acquired rents and includes the rents including charges to which insurance indemnities may be added. The receipts are calculated from the tax household and prorata temporis, i.e. in proportion to the time elapsed. As far as the new law is concerned, the income from the rental activity must be compared to the activity income. These incomes correspond to salaries and wages, industrial and commercial profits (other than furnished rental activity), agricultural profits, non commercial profits and the incomes of managers and partners. This comparison is made at the level of the net taxable amounts.
In conclusion
Finally, these conditions are now more difficult to achieve and many renters are therefore removed from their former status of LMP. It is important to look at the taxation specific to LMPs which is actually one of the main advantages of these rentals. Thus, they lose valuable tax benefits. The law has provided for this by adding transitional measures in order to mitigate these deficits and to make the transition between the old and the new law more gradual. This applies to rentals that began before January1, 2009 and to rentals of residential property acquired before January1, 2009, the revenue from these rentals will be overweighted.
