AirBnB rentals and taxes: Beware of tax rules!
Are you renting out a room, apartment or house on AirBnb? Are you required to declare this income to the tax authorities? How to declare it? What are the risks if I don’t declare my AirBnb income? Does AirBnb report my earnings to the tax authorities?
Everything you need to know about the French tax system for your AirBnb rental!
Do I have to declare my AirBnb rental income to the tax authorities?
I have to declare my earnings for furnished rental income tax purposes
The accommodation you rent via AirBnb will most often be considered a furnished rental, the aim being to enable the user to enjoy a fully-equipped home for a short stay.
Profits from furnished rentals made on a regular basis, regardless of whether you are renting as an owner or subletting as a tenant, must be declared in the industrial and commercial profits (BIC) category.
For the authorities, a furnished rental qualifies as BIC if the furniture rented with the premises is sufficient to give the property a minimum level of habitability (bedding, hotplates, oven or microwave, fridge, crockery, kitchen utensils, etc.).
So if you earn income from an AirBnb rental, you must declare this income for income tax purposes, unless you benefit from a very specific exemption…
The two possible exemptions for AirBnb income
You can benefit from an exemption for your AirBnb income, which frees you from all declarations in two cases:
- If you rent out or sublet a room in your main home, and this is also your tenant’s main home.
You can benefit from an exemption if you meet the following three conditions:
- the rooms rented or sublet must be part of your principal residence;
- the rooms must also be the tenant’s or sub-tenant’s principal residence (bearing in mind that students are considered by the authorities to have their principal residence in the place where they usually stay during the academic year, even if they remain legally domiciled with their parents);
- the annual rental price must not exceed €184 per square meter in Ile-de-France and €135 in other regions (so if you rent a 15m2 room in your residence, you don’t have to declare anything if your annual income from this rental is less than €2,760 = 15m2 x €184).
- If you rent or sublet a room in your main home, but the tenant does not use it as his or her main home
If you rent out one or more rooms in your principal residence on a regular basis, you are exempt from income tax on the proceeds of these rentals, up to a maximum of €760 (incl. VAT) per year.
So if you rent out a room in your main residence for less than €760, you don’t have to declare this income.
Above €760 a year, you must declare all your income, and you will be taxed on all net income from the rental.
Am I liable for tourist tax?
Travelers booking Airbnb accommodations located in Ajaccio, Annecy, Antibes, Avignon, Biarritz, Bordeaux, Cannes, Chamonix, La Rochelle, Lille, Lyon, Marseille, Montpellier, Nantes, Nice, Paris, Saint-Malo, Strasbourg or Toulouse will be required to pay tourist tax.
The tax will be collected directly by the AirBnb website (included in the website’s service charges), so you don’t have to fulfil any obligations to declare or collect the tax. The amount of the tax varies between 20 eurocents and four euros, depending on the municipality.
How do I declare my AirBnb rental income?
If you’re looking for detailed information on the transactions you’ve made, you can view your income at any time on your Airbnb account.
Once you’ve checked the amount of income you’ve generated, it’s time to think about how to declare it.
If you’re renting out furnished accommodation, you’ll always declare your income as business income.
However, you need to determine whether you are a professional or non-professional furnished rental operator.
If you are a professional furnished-rental operator: BIC professional
You are a professional furnished-rental operator if you meet the following conditions:
- A member of your tax household must be registered as a professional lessor with the RCS (registre du commerce et des sociétés);
- Your total income from rentals exceeds 23,000 euros;
- Your rental income must exceed your other income, such as your salary (you must earn more from property rental than from your salary or share dividends, for example).
Advantages of a professional furnished rental: As a professional furnished rental operator, you will declare your income in the BIC category, but you will also deduct your expenses (e.g. costs of repairs and improvements to the property).
If you have a deficit at the end of the year (more expenses than income), it can be deducted from your overall income without limit, i.e. these deficits will be deducted from your salaries, dividends or non-commercial profits, for example.
Where to declare this income? Use form n°2031 to declare your income as a professional lessor.
You are a non-professional furnished rental operator: BIC non-professional
You are a non-professional furnished-renter if you do not meet the 3 conditions set out above for professional furnished-renters.
You have two options for declaring your income:
- 1st solution: You are covered by the micro-business regime
You can opt for the micro-business regime if your annual rental income is less than 32,900 euros.
Under the micro-enterprise scheme, you declare only your income and not your expenses.
You don’t declare any expenses, but the authorities will automatically apply a tax allowance of 50%, with a minimum of 305 euros representing expenses.
So if you have annual rental income of 5,000 euros, you will only be taxed on 2,500 euros.
Where to declare this income? Use form n°2042 C and declare the total amount of your income in box 5ND, to which the tax authorities will automatically apply the 50% allowance.
The specific case of bed & breakfast! If you have declared a ” meublé de tourisme ” (furnished tourist accommodation) or ” chambres d’hôtes ” (bed and breakfast) rental to the town hall ( bed and breakfast is located in an inhabitant’s home, and the rental must be accompanied by services such as the provision of meals), the rental activity is treated in the same way as the sale of goods, and you benefit from a deduction of 71% rather than 50%.
As of the 2016 tax year, renters of holiday cottages with the “Gîtes de France” label benefit from this system only if the cottage is classified as a ” furnished tourist accommodation “.
Where to declare this income? Use form n°2042 C and declare the total amount of your income in box 5NG, to which the tax authorities will automatically apply the 71% allowance.
- 2nd solution: You are subject to the actual profit system
You can opt to declare your income as actual profit, regardless of the amount of your income. Actual profit is mandatory if your income exceeds €32,900.
If you opt for actual profit, you must declare not only your income, but also your expenses (e.g. repairs).
Advantage of real benefit: If you’ve done a lot of work on your property, and the amount exceeds the 50% deduction available under the micro-company scheme, it may be worthwhile opting for the real benefit scheme, so that you can deduct the full cost of the work as an expense from your rental income.
Disadvantage of real non-professional income: any losses arising from rental income can only be charged against profits of the same kind made in the same year and the following ten years. You won’t be able to reduce the amount of your wages by the existence of a deficit on your rental income, whereas this is possible if you are a professional furnished rental operator.
Where to declare this income? Use form n°2042 C and enter the total amount of your income in box 5NA, or the amount of any deficits in boxes 5NY and 5GA.
What are the risks if I don’t declare my AirBnb rental income?
Does AirBnb communicate your income to the tax authorities?
While the French Senate’s Finance Committee had adopted an amendment to the Digital Republic bill aimed at obliging AirBnb to automatically declare your income to the tax authorities, this amendment was withdrawn.
So, for the moment, AirBnb does not spontaneously communicate the amount of your earnings to the tax authorities.
However, for income earned from 2019 onwards, the rules are changing!
From 2019 onwards, online platforms will have to transmit a secure automatic declaration (DAS) of their users’ income to the tax authorities (Article 1649 quater A bis of the Code Général des Impôts).
The declaration must include the following information for each user:
- the identity of the individual or legal entity registered on the platform and its status on the platform (private individual or professional) ;
- the user’s e-mail address;
- the total amount of gross revenue received by the user during the year
- the category of gross revenue received.
The effectiveness of this declaration is doubtful, as there are currently no penalties for failure to declare.
Until 2019, for the time being the only obligation AirBnb has is to inform you of the tax and social security obligations incumbent on you concerning transactions carried out from July 1, 2016.
In January of each year, AirBn must also send you a document summarizing the gross amount of transactions known to them and received by you during the previous year.
What can the tax authorities do if I don’t declare my AirBnb rental income?
The tax authorities have the right to obtain information about your income from AirBnb by making a request to AirBnb.
However, your tax return still needs to be checked, as failure to declare income always entails the risk of a tax reassessment. In particular, if you significantly understate your tax return when renting out an apartment in a high-income area, the tax authorities are bound to be attracted by the ostensibly understated amount.
There are a number of tax optimization techniques that can be used, rather than minimizing your rental income. Don’t hesitate to contact an AGN lawyer in your area, who will assess your tax situation.
For income tax, the administration’s right of recovery can be exercised until the end of the third year following the year in respect of which the tax is due. So until December 2016, the tax authorities can adjust your income for 2013, 2014 and 2015.
Are you using the AirBnb platform to rent out accommodation? But you don’t know how to declare your income? Are you facing a tax