Changes in French Real Estate Tax Legislation
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In this tax-related article for owners of property in France, we outline the main changes in French tax legislation regarding real estate since the passing of the new Finance Law in February 2025.
Crackdown on Short-Term Rentals Benefits
In France, landlords may be taxed according to the régime reel, whereby actual expenses are considered when assessing the net taxable figure. This is broadly similar to the UK position, where regular expenditures are deducted from the total income to determine the taxable income.
Alternatively, when specific criteria are met, landlords can decide to be taxed according to the ‘Micro’ regime. Instead of actual expenses, a notional expense deduction is applied to the business’s turnover. This has the advantage that no detailed accounting is required, and the landlord automatically has a deduction for expenses, even where his actual expenses are lower than the notional expense.
The French government wishes to reduce the impact of short-term rentals on local communities. The anti-Airbnb law has been adopted in November 2024, and from 2025, the income threshold eligibility criteria for short-term furnished rentals have been restricted.
Changes to the Micro Regime for Short-Term Rentals
For non-classified short-term rentals, the notional deduction will drop from 50% to 30%, and the income threshold to qualify for the micro regime will decrease from €77,700 to €15,000. For classified short-term rentals (such as those with a tourist classification), the deduction will be reduced from 71% to 50%, and the qualifying income threshold will fall from €188,700 to €77,700.
Additionally, all short-term rentals must be registered with a dedicated national online service by May 2026. Certain municipalities, like Chamonix and popular villages of the French Riviera, have implemented specific measures regulating the proliferation of short-term rentals.
Non-Professional Furnished Landlords and Capital Gains Tax
Under the régime réel, property depreciation is deducted against rental profits. For example, residential properties are generally depreciated on a straight-line basis over 40 to 100 years, so a percentage (1% to 2.5%) of their value is typically deductible each year.
On the other hand, depreciation generally increases the tax on the sale of a property. This is because, on disposal, the capital gain will be assessed on the sale price less the written-down property value in the accounts. This did not apply to non-professional furnished landlords until 2025.
From 2025, professional and non-professional furnished landlord who deducted depreciation on their rental income must also deduct depreciation when calculating their capital gains.
Practical Examples
Gaston is a non-professional furnished landlord who acquired a flat for €200,000 in 2010. Today, Gaston sells the flat for €300,000. Gaston’s accounts show a € 50,000 depreciation on the flat.
Before the tax reform, Gaston would have made a capital gain of €100,000 when selling the flat. Now, if Gaston sells the flat, his capital gain will be €150,000 because he must include the depreciation when calculating the capital gain.
In France, capital gains are taxable at 36.2%. After the fifth year of ownership, a taper relief reduces capital gains for each year, with a full capital gains tax exemption after 30 years.
Increase in Notaire / Legal Fees
On a French property acquisition, the purchaser pays notary’s fees (‘Frais de notaire’), which include stamp duty. Until 2025, these fees were around 7% of the net purchase price. From April 2025, local communes and authorities may increase the stamp duty rate by 0.5 points. Contact your local Mairie or Notaire to learn more.
For Expert Tax Advice
Our legal expert, François Mouniélou, specialises in taxation, wealth tax, succession, etc.… for property owners and investors in France. François has extensive knowledge of the French tax system. Do not hesitate to contact him directly for more information or to book a consultation.
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