Against a backdrop of tension in the housing market and a decline in private rental investment, several measures are being considered to revitalise the residential property market, while rebalancing the tax system applicable to property owners. These include the creation of a private landlord status, the inclusion of inflation in the calculation of property capital gains, and an adjustment to the property wealth tax (IFI). Here we analyse these major developments under consideration.

Creation of a private landlord status

The creation of a private landlord status responds to the observation that unfurnished rentals, although essential to the housing supply, are now less attractive from a tax perspective than furnished rentals. The aim of this new status would be to encourage investment in traditional rental housing and to offer a more consistent and incentive-based tax system. The main change is the possibility of depreciating property acquired for unfurnished rental, similar to what already exists for furnished rentals. In practice and subject to certain conditions:

• The owner could deduct a portion of the property's value (80%) from their rental income each year (3 to 5.5% depending on the situation).
• This would significantly reduce or even eliminate taxation on rents and could even create a property deficit (up to a limit of €10,700).

Capital gains on property

Currently, when a property is sold, the capital gain is calculated by comparing the purchase price and the sale price, without taking into account monetary erosion linked to inflation. A Senate bill proposed abolishing the allowance for length of ownership for income tax and social security contributions. These would be replaced by a flat-rate tax of 15%, 9% for income tax and 6% for social security contributions. In addition, a monetary erosion coefficient would be applied to offset inflation.

IFI reform

The Senate has proposed a reform of the real estate wealth tax (IFI) with the aim of broadening the tax base. It would be renamed the Contribution on High Wealth (CHP). It would add the following to the IFI tax base:

• Cash and similar financial investments (current accounts, savings accounts, money market funds, etc.);
• Tangible movable property (valuables, cars, yachts, aeroplanes, furniture, etc.);
• Literary, artistic and industrial property rights where the taxpayer is neither the author nor the inventor;
• Digital assets referred to in Article L. 54-10-1 of the Monetary and Financial Code.

The threshold for liability would rise from €1.3 million to €2.57 million.

In its final  version, the Government has retained only the status of private lessor. In a constantly changing regulatory environment, the support of a wealth management professional remains essential to take full advantage of these new opportunities. Finankap's wealth management advisers are here to implement strategies that take all these aspects and your needs into account to support you in creating and developing your wealth. Contact us!

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