2026 Finance Bill: Key Clarification for Expatriate Furnished Rental Owners
Two amendments adopted in the Senate as part of the 2026 Finance Bill propose to harmonize the rules of the General Tax Code and put an end to an asymmetry considered discriminatory by the European Commission.
A Contested Doctrine
The core issue lies in Article 155 of the General Tax Code, which determines whether a landlord falls under the LMNP (non-professional) or LMP (professional) status. Two criteria apply: generating less than 23,000 euros in furnished rental income annually or, if the income exceeds this threshold, having professional income higher than that rental income. If not, the landlord is deemed professional.
The tax doctrine, repeatedly confirmed by the administration, including a ministerial response in January 2024, interprets these « professional incomes » restrictively: only incomes taxable in France are considered. However, furnished rental income includes all properties, whether located in France or abroad. Consequently, an expatriate earning professional income in their country of residence but no taxable income in France is, by default, classified as LMP if their rental income exceeds 23,000 euros. Under the same economic conditions, a French resident would be LMNP.
This imbalance has prompted numerous parliamentary inquiries. On June 1, 2023, Senator Évelyne Renaud-Garabedian requested clarification from the administration. The government's response on January 4, 2024, reaffirmed the existing doctrine, temporarily closing the debate. Meanwhile, the European Commission notified French authorities that these rules might be discriminatory against non-residents and could violate the free movement of capital guaranteed by European law.
In this context, two amendments to the 2026 Finance Bill (I-2652 rect. bis and I-2553 rect.) propose directly modifying Article 155 of the General Tax Code to explicitly state that the considered professional incomes include all similar income, whether taxed in France or subject to an equivalent tax abroad. The stated goal: to end the « asymmetry of treatment » and secure the situation for thousands of expatriate taxpayers.
A Potentially Massive Shift
If these amendments are confirmed in the final text, the consequences would be profound for expatriate furnished rental landlords. Baptiste Bochart, a legal expert for Jedéclaremonmeublé.com (JD2M), explains, « The first consequence would be securing the tax status, ending the persistent hesitation between following the administration's restrictive position or adopting a broader interpretation. » The decisive criterion—comparing income from professional activities and furnished rental income—would regain its economic rationale, regardless of the taxpayer's country of residence.
The possible shift from LMP (Professional Furnished Rental) to LMNP (Non-Professional Furnished Rental) would significantly alter applicable tax policies, particularly in terms of capital gains. Under LMP, capital gains fall under the professional regime, which is generally more burdensome, and are taxed not only upon sale but also upon cessation of the activity, regardless of the cause. This mechanism can create complex, even penalizing situations for expatriates looking to temporarily cease their activity or reorganize their assets.
Conversely, the LMNP status applies the capital gains regime for individuals, with reductions based on the duration of ownership and taxation only upon the sale of the property. Bochart also highlights two lesser-known but crucial exemptions: the ability to sell a previously rented property after having occupied it as a primary residence, and the possibility of selling a property to finance the purchase of a primary residence upon returning to France. These are particularly useful levers for expatriates considering relocation.
The status change would also affect social contributions, the treatment of deficits, and potentially the IFI (French wealth tax). An LMP landlord can be liable for social contributions, while the LMNP status falls under either the micro-social regime or the real regime without equivalent mandatory contributions. Regarding IFI, assets used for a principal professional activity can be exempt: requalifying to LMNP could, paradoxically, reintroduce some assets into the taxable base. Everything would depend on individual situations.
For expatriates, the issue is not just fiscal. The clarification would reduce the risks of requalification during an audit, provide better legal security for rental investments made from abroad, and facilitate asset management decisions. In a real estate market where international investors play an increasing role, the stability of the tax framework becomes a decisive factor.
This content has been automatically translated using artificial intelligence. While we strive for accuracy, some nuances may differ from the original French version.
