it is the net income that counts for the estate tax

A couple, which took as a criterion the amount of gross rent earned and not the amount of their net rental income, all deductions taken, suffered a tax adjustment that was validated by the courts.

It is difficult to avoid wealth tax on immovable property provided as rental furniture, according to a ruling by the Court of Cassation. It is particularly difficult to reach the income threshold that allows these buildings to qualify as exempt “professional property”. A couple, which took as a criterion the amount of gross rent earned and not the amount of their net rental income, all deductions taken, suffered a tax adjustment that was validated by the courts.

If this taxable couple received a gross rent of ten thousand euros, the various deductions made once left almost zero income related to maintenance, operating expenses or credits. However, in order to have a professional income, this taxable income must be predominant in the income of the tax houses, the Court of Cassation recalled, and therefore it must be more than 50% of the income made up of wages and rents, industrial and commercial profits. agricultural, non-commercial, etc.

Tax-free criteria

In order to accept that the activity of furniture rental justifies the non-taxation of the buildings affected, as “exempt professional property”, the law requires that the owner be registered in the commercial register as a professional renter, realizing more than 23,000 euros. annual income and that it gets more than 50% of the income of the tax houses.

According to the sites of managers of furnished residences, these accumulated requirements mean that the notion of exempt professional property is very difficult for individuals to achieve, unless they are retired, because the retirement pension is not counted in the household income. This case concerned a couple who were subject to estate tax before 2017, but the same rules have been applied to estate tax since the 2017 reform.

(Cass. Com, 20.12.2023, Y 22-17.612).

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