my leaseback

pierrot - here is a brief summary of both

Non-Professional Lessor of Furnished Accommodation (LMNP) status

The LMNP status will enable you to enjoy a certain number of tax advantages (Not all tax advantages are open to non-residents), you will be diversifying your investments and providing yourself with an extra source of retirement income

The status: This can apply to new or old properties. Income (rent) is taxed as a business profit. Lessors may be individuals or legal entities.

Deductible charges:

• Purchase fees (fees, finance, registration duties, etc). Deduction of these fees may be spread in equal portions (amortised) over a maximum of 5 years. You can also charge them to a single tax year.
  
• Loan interest linked to the purchase.
  
• Management charges (accountant, legal advice, etc).
  
• Land tax.
  
• Repair and maintenance expenses.
  
• Joint ownership charges.
  
• Operation deficits, should they occur, cannot be set against overall income but can be carried forward (max 5 years) on to income of the same type (Non professional business profits)

VAT recovery: If the property is rented via a commercial lease to an operating company that sub-lets it furnished with hotel-style service, the non-professional lessor of furnished accommodation will be subject to VAT. The VAT is either reduced from the purchasing amount or recovered after the purchase of the property. The recovery often takes at least 3 months after signature of the deed. However, the lessor must repay the VAT collected on the rental income (5.5%).

Depreciation: The building (not including land) is depreciated in line with deferred depreciation rules over a period of between 20-30 years. Depreciation is noted in the accounts every year. On the other hand, from a tax point of view, it is only chargeable up to the value of rental income less other charges, the excess being carried forward without restrictions? In no circumstances can depreciation contribute to deficit. Furniture depreciated in line with deferred depreciation rules over a period of between 5 to 10 years.

Appreciations: Appreciations & depreciation in value come under the private appreciations system:

• Short-term appreciations are those that occur in the 2 years following the purchase. After an allowance of 915€ per year has been applied, they are added to taxable income.
  
• Long-term appreciations are those that occur more than 2 years after purchase

Professional Lessor of Furnished Accommodation (LMP) status

With this status, you can exempt overall income and rental income from taxation and benefit from highly advantageous rules regarding transfer and taxation on appreciations. Its main advantages are: diversified investments, tax savings, regular, high income, a property portfolio exempt of wealth tax and the creation of an extra source of retirement income.

The status: This can apply to new and old properties. Income (rent) is taxed as a business profit. The lessor may be one or more individuals or legal entities. However, it is only for those people who have funds to make one or more investments large enough to reach the threshold of 23,000 Euros (including VAT) in annual rent (this threshold rises prorata temporis if the activity starts during the year) or representing at least 50% of their income in France;

It requires registration in the Register of Commerce and Companies. You may invest in your own name or through a family company subject to personal income tax (Private Limited Companies, Private Limited Companies under sole ownership, exclusive of service).

This status also requires you to undertake declaration and accounting obligations applied to companies (keeping accounts). Deductible charges: - Purchase fees (fees, finance fees, registration duties, commissions, i.e. around 15% of the total investment). Deduction of these fees may spread in equal portions over a maximum of 5 years. You can also charge them to a single tax year. - Loan interest linked to the purchase - Management charges (accountant, legal advice, etc) - Land tax - Professional tax - Repair and maintenance expenses - Joint ownership charges

The noted tax deficit is deducted from the lessor's other taxable income, whatever its nature. This therefore generates tax savings in proportion to the marginal tax band.

VAT recovery: Investment in a holiday home entitles you to recover the VAT of the purchase price 19.6%) If the property is rented via a commercial lease to an operating company that sub-lets it furnished with hotel-style service, the professional lessor of furnished accommodation (LMP) will be subject to VAT; He may then recover the VAT paid on the purchase of the property and its associated charges (19.6%). However, he must repay the VAT collected on the rental income (5.5%)

Depreciation: The building (not including land) is depreciated in line with deferred depreciation rules over a period of between 20-30 years. Depreciation is noted in the accounts every year. On the other hand, from a tax point of view, it is only chargeable up to the value of rental income less other charges, the excess being carried forward without restrictions? In no circumstances can depreciation contribute to deficit. Furniture is depreciated in line with deferred depreciation rules over a period of between 5 to 10 years.

Appreciation: When the activity of the Professional Lessor of Furnished Accommodation has been carried on for 5 years and annual income is less than 152,449 Euros (including VAT), appreciations released during transfer (sale, taken back for personal use, etc) are exempt of tax.

The tax situation on transfer: The Professional Lessor of Furnished Accommodation's heirs enjoy a preferential tax situation provided for within the framework of company transfers. A deferral period of 5 years is provided for the repayment of state duties, followed by payment in instalments over the next 10 years. In both cases, a highly advantageous interest rate is applied (1.1%)

In case of a donation, Professional Lessor of Furnished Accommodation can take advantage of rules applied to unquoted family enterprises; these also offer a deferral period of 5 years and repayment in instalments over the next 10 years; In addition, transfer duty is deductible from the revenues of the transferred activity.

Wealth tax: Furnished properties are considered to be professional assets and therefore not subject to wealth tax when they generate annual income higher that other professional income generated in the household tax. if this is not the case, there are other estate solutions that may be applied to take your purchase out of the wealth tax system throughout the duration of the loan.