Barnes' para-hotelry contracts
The French ‘para-hôtellerie’ system (which in effect means ‘hotel lite’) involves owners renting their properties to guests with a number of hotel-like services included in the rental package (which go beyond what a guest would expect from a normal furnished rental). The French legal and fiscal systems treat properties rented under ‘para-hôtellerie’ conditions as if the owner was running the property as a business activity.
In order for your property rental to be considered as ‘para-hôtellerie’, rather than a simple furnished rental, at least 3 out of the 4 following services must be included with the property rental:
- Regular cleaning of the premises
- Supply of house linen
- Greeting of guests upon arrival
The ‘para-hôtellerie’ system has a number of attractions for the owner :
- Many expenses, including the depreciation of the property, can be offset against the gross rental income as deductibles. This can result in significantly reduced net taxable income.
- In certain circumstances, if the ‘para-hôtellerie’ property incurs a net financial loss, this loss can be offset against the individual’s (or household’s) other income, again resulting in reduced total taxable income.
- Services offered under the ‘para-hôtellerie’ system generally attract VAT. However, this also means that any purchases associated with the property/services are generally VAT-free. Significantly, this could mean a 20% reduction in the cost of acquiring the property*.
- If the owner has run the property under the ‘para-hôtellerie’ system for at least 5 years, any capital gain may be sheltered from capital gains tax.
The taxable value of properties under the ‘para-hôtellerie’ system is generally not counted for the purposes of French wealth tax.
In order to benefit from the many attractions of the ‘para-hôtellerie’ system it is important to plan carefully, taking into account the exact nature of the property and the owner’s personal circumstances. We would be very pleased to arrange an obligation-free consultation with a specialist in this area.
*VAT exemption applies to new-build properties.
Disclaimer: Please note that the information above is indicative in nature - clients are advised to seek professional advice concerning their fiscal situation.