Roche & Cie

Newsletter Heritage January 2017

27 Jan 2017

A dwelling tax still heavier for vacant Parisian dwellings.

On Monday 30 January 2017, the Paris Council should adopt a measure increasing the surtax applied to vacant dwellings in the French capital from 20% to 60%.

This surtax, introduced since 2015, requires homeowners in tense areas to pay a 20% residential tax. The city of Paris is entirely concerned.

Last November, the National Assembly allowed the mayors of the municipalities concerned to modify their housing tax. The city of Paris is likely to use this possibility.

The vacancy tax applies to unfurnished and habitable dwellings that have been vacant for at least one year on January 1 of the tax year.

An occupation of more than 90 consecutive days in particular avoids this tax.

As a reminder :

The fact of being located in a tense zone and of being affected by the rules on the capping of rents, implies for the Paris landlords that:

  • When renting a house for the first time, the rent can not be fixed freely. A rent ceiling must be respected: the “increased reference rent”
  • In the case of a relocation, the rent of the new lease shall not, except for exceptions, exceed the last rent applied to the previous lessee;
  • The tenant of an empty rented accommodation who gives leave shall be given one month’s notice;
  • The owner may be affected by the annual tax on vacant dwellings if the dwelling is voluntarily left vacant for at least one year.

CSG and non-residents

In a recent decision of 20 October 2014 the Conseil d’Etat clarified that the difference in tax treatment between non-residents of the European Union and non-residents of third countries was contrary to the principle of free movement of capital Provided for in Article 63 of the Treaty on the Functioning of the European Union (TFEU) and thus violates the principle of equality before taxes.

This decision contradicts the position taken by the tax authorities in a press release of 20 October 2015

These contradictory positions between the judges and the tax administration should soon be decided

By a decision of 25 January 2017, the Conseil d’Etat has decided to refer a case concerning a non-resident “outside Europe” to the CJEU by way of a preliminary question on the application of the Principle of the free movement of capital in the specific case of the social contributions of non-residents imposed since 2012 in France on their economic income.

It shall stay the proceedings until the European Court of Justice has given its decision.

The follow-up to this case before the ECJ should thus allow thousands of non-residents awaiting a decision on their claim whether they will receive the reimbursement of their social contributions.

According to the decision of the ECJ, residents of third countries in the EEA who have lodged a complaint within the limitation period will be able to obtain reimbursement of social contributions from their wealth income collected before 2015.

New obligation of real estate agents

As of April 1, 2017, all real estate professionals have the obligation to display transparently the price schedule for the various services offered (sales mandate, search for rental investment, real estate management proposed at the Location). This information must be accessible from outside its real estate agency and if it has one, on its website.

Real estate advertisements must specify

  • The sale price
  • The amount or scale of the commission
  • A statement specifying the responsibility for payment of the fees.

Concerning the announcements of hirings of a dwelling, the future tenants will have to be warned of the amount of the monthly rent “all included”, the methods of counting the rental expenses, the surface and the commune of the property.

New for furnished rentals

New Diagnostics

Donors of empty or furnished dwellings, rented as their principal residence, will have to provide their tenants, as from 1 July 2017, with two additional diagnoses relating to electricity and gas. This applies to dwellings in a multi-dwelling building whose facilities are more than fifteen years old and whose building permit was issued before January 1, 1975. Other dwellings are affected as of January 1, 2018. These diagnoses will be valid 6 Years (compared with 3 years for a sale).

Affiliation to the R.S.I for non-professional furnished rentals.

In excess of 23,000 euros in annual income and once the accommodation is rented “to a clientele who makes a stay there for a day, a week or a month and does not elect domicile”, the renters in furnished rentals not (LMNP) must join the social security scheme of the self-employed (IHR) and therefore pay social contributions.

They may opt for affiliation to the general social security scheme.

Automatic reporting of revenues by Air BNB platforms

An automatic tax declaration of revenues received via these AirBNB platforms has also been foreseen, but its application is foreseen only from the year 2019.

Furnished apartment: always in BIC

So far, income from furnished leases was derived from income from land when the lease was occasional, while the income from the lease furnished as a customary lease amounted to industrial and commercial profits (BIC).

Henceforth, whether this activity is occasional or habitual, whether the accommodation is rented directly or indirectly, the income comes from the industrial and commercial profits (BIC).

By Muriel Brault

Cabinet Roche & CieChartered Accountant in France (Lyon).
Specialist in Real Estate and Non-Residents’ taxation.