in a tourist residence?
The advantages of investing in a tourist residence. Easy to both invest and use your property for a few weeks every year.
Attractive tax treatment, a good return on your investment and worry-free management… “Ready-to-live-in” tourist residences and apartment hotels offer numerous advantages for their owners: no rental management, less maintenance, regular rental income streams. Therefore non-professional landlords of furnished accommodation are able to invest in real estate and take holidays in their apartments for a few weeks every year. SNRT, the professional trade association representing tourist residence and apartment hotel operators, provides you with a summary checklist and information on the current tax environment for tourist residences.
Choose your property carefully
When buying real estate, location is crucial: at the foot of ski slopes or in a good, accessible location on the mountain; close to the sea or to nice places in the countryside; near the city centre for apartment hotels.
The potential investor must carefully vet the property developer and operator and all of the points listed in the “Preliminary information handbook” provided by SNRT.
Look for “love at first sight”! If you would like to spend your holidays in a specific residence, there’s a pretty good chance that others may wish to do so as well. Indeed, you may purchase based on a cash rental arrangement + a number of weeks’ personal use.
This was the original tourist residence formula that underpinned the success of the concept.
LMP and LMNP status
To obtain professional landlord of furnished accommodation status (Loueur en Meublé Professionnel – LMP), investors must be registered as professional landlords in the Registre du Commerce (Trade and Companies Register), their gross annual rental income from furnished accommodation must be greater than €23,000, and also be greater than their other sources of taxable household income.
Any landlord of furnished accommodation who does not comply with these three conditions is a non-professional landlord of furnished accommodation (Loueur en Meublé Non Professionnel (LMNP)).
Non-professional landlords of furnished accommodation may amortise their property and deduct amortisation expense from their other income within the same category.
They declare their rental income in industrial and commercial income (Bénéfices Industriels et Commerciaux (BIC)), either under the flat-rate tax regime (régime forfaitaire), or direct tax regime (régime réel). Investors frequently opt for the direct tax regime as this allows them to offset borrowing costs, other taxes, the cost of work carried out, co-ownership costs and amortisation expense, etc., against rental income. If investors have taken out a loan to finance the acquisition of the property, this enables them to receive rental income net of tax for a 15- to 20-year period.
Recovery of VAT
Investors buying an apartment in a tourist residence with hotel-grade services may opt to pay VAT on their non-professional furnished accommodation rental activity. They may then recover the VAT paid when they acquired the property over a 20-year period.
The property must therefore be kept for 20 years so that the investor does not have to pay back one-twentieth of the VAT recovered for each remaining year.
Otherwise, this problem can be surmounted by selling the apartment “with a lease attached”.