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LMP: Conditions for exemption from IFI for furnished rentals

The exemption from IFI constitutes one of the tax advantages of the LMP status

The real estate wealth tax (IFI) is the French wealth tax paid, since January 1, 2018, by individuals or couples holding real estate assets not allocated to professional activity, with net taxable assets strictly above the threshold of €1.3 million (as of January 1 of the tax reference year).

By exception, when the owner rents out furnished residential premises, they are exempt from the IFI, provided they benefit from the status of LMP (Professional Furnished Lessor).

Professional Furnished Lessor (LMP) is a favorable tax status granted to individuals with significant income from renting furnished accommodation.

To qualify as furnished, the rental must be for furnished accommodation and generate more than €23,000 in annual income. In addition, the owner must derive more than half of their income from rental activities.

If these conditions, which are assessed within the tax household, are not met, the status of non-professional furnished rental (LMNP) applies.

It should be noted that, to qualify as furnished, a dwelling must be equipped with sufficient quantity and quality of furniture to allow the tenant to sleep, eat, and live there adequately, given the requirements of everyday life (Article 25-4 of Law No. 89-462 of July 6, 1989). The list of items that this furniture must contain is set out in Article 2 of Decree 2015-981 of July 31, 2015.

Thus, there are three cumulative conditions to qualify for LMP status:

– Rental income exceeding €23,000/year
– Net rental income (after deduction of actual expenses) represents more than 50% of the tax household’s income, i.e., greater than salaries, BIC (commercial interest on business), BNC (commercial profit on business), and BA (business income)
– Furnished accommodation within the meaning of the law of July 6, 1989.

If these conditions are met, rented accommodation is considered professional assets and is eligible for the IFI exemption scheme, pursuant to the provisions of Article 975, V of the General Tax Code.