A furnished rental hardly escapes wealth tax

It is difficult to escape wealth tax for real estate given as furnished rental, according to a ruling from the Court of Cassation. It is particularly difficult to reach the income threshold which allows these buildings to be qualified as exempt “professional property”.

A couple, who took as a criterion the amount of gross rents obtained and not the amount of their net rental income, all deductions taken, underwent a tax adjustment which the courts validated.

Because if this couple of taxpayers received tens of thousands of euros in gross rent, there remained, once the various deductions made, linked to maintenance, operating costs or credits, only an almost zero income. .

However, to be professional income, this taxable income must be preponderant in the income of the tax household, recalled the Court of Cassation, and it must therefore represent more than 50% of the income constituted by salaries and wages, profits industrial and commercial, agricultural, non-commercial, etc.

To accept that the activity of furnished rental justifies the non-taxation of the buildings concerned, as "exempt professional property", the law requires that the owner be registered in the commercial register as a professional rental, that he realizes more than 23.000 euros in revenue per year and that he derives more than 50% of the tax household's income.

According to sites of managers of furnished furnished residences, these cumulative conditions mean that the notion of exempt professional property is very difficult to achieve for individuals, unless they are retired since the retirement pension is not counted in total household income.

This case concerned a couple subject to wealth tax prior to 2017 but the same rules have been applied to wealth tax since its reform in 2017.

(Cass. Com, 20.12.2023, Y 22-17.612).