The exemption from IFI (real-estate wealth tax) for business assets (French Tax Code art. 975) can apply to furnished-letting activities under strict conditions. For individuals: revenue thresholds (over EUR 23,000) and a preponderance test (over 50% of household income). For family-owned SARL companies: proof of active management by the manager is required, and delegating management to a third party destroys the exemption (TGI Versailles, 30 April 2024, RG 22/01600). An audit is essential before each IFI return.
Article 975 of the French Tax Code exempts from IFI the real-estate assets used for a commercial activity, subject to specific conditions. The management of private wealth is expressly excluded, save for narrowly defined exceptions.
For individuals carrying on a furnished-letting activity, the exemption requires annual revenue above EUR 23,000 AND income from that activity representing more than 50% of the household's taxable income (LMP status). These conditions are strict: failing either one means losing the exemption.
For family-owned SARL companies carrying on furnished lettings, those thresholds do not apply, but the exemption remains subject to active and genuine management by the manager. Delegating management to third-party management companies destroys the exemption, as confirmed by the TGI Versailles (30 April 2024, RG 22/01600).
Exemption for real-estate assets used for a commercial activity.
Two very strict cumulative conditions to qualify for the exemption.
Different conditions apply: the central test is genuine active management by the manager.
Three essential requirements identified by the courts.
A landmark decision: delegating management to a third party destroys the IFI exemption, even where the manager remains nominally responsible.
The ruling of the TGI Versailles (30 April 2024, RG 22/01600) settles a frequently disputed point: can operational management be delegated to a third party (property management company, concierge service, etc.) while retaining the IFI business-assets exemption? The court's answer is clear: no. Management must remain actually exercised by the manager, not merely nominally attributed.
For each property for which the IFI exemption is claimed, identify who actually takes the operational decisions: tenant selection, rent setting, handling of claims, supervision of works. If those decisions are taken by a third party (management company, estate agent, concierge service), the exemption is fragile and at risk of being challenged in an audit.
Build an evidence file: correspondence with tenants (letters, emails), upkeep and maintenance files, works invoices, a schedule of property visits, management reports. This documentation must be contemporaneous with the operations, not reconstructed after the fact when an audit arises.
Where certain tasks must be delegated (for example, recovery of unpaid rent or major works), they must be occasional and clearly identified, not systematic. The manager must retain decision-making power and effective control. Complete delegation to a management company (a monthly fee for full-scope management) is incompatible with the exemption.
For SCI companies subject to corporate income tax that carry on furnished lettings, the exemption requires the SCI to have a genuine commercial activity (active management) and the shares to qualify as assets necessary to the taxpayer's activity. The risk is heightened for a family wealth-holding SCI whose management is delegated to an agent, which drifts towards a characterisation of private wealth management (not exempt).
Jonathan Bensaid, founding lawyer of the firm, admitted to the Paris & Geneva Bars, advises taxpayers subject to IFI and family-owned SARL companies on auditing the business-assets exemption, documenting active management, defending IFI reassessments, and wealth structuring (moving to LMP status, interaction with split of ownership (usufruct/bare ownership) and fiducie arrangements).
The analysis runs as follows: (1) if you are an individual, check the thresholds, namely revenue above EUR 23,000 AND more than 50% of the household's taxable income (LMP status); (2) if you hold the properties through a family-owned SARL, demonstrate genuine active management by the manager. In both cases, the burden of proof lies with the taxpayer in an IFI audit. An audit is recommended every year before filing the return.
Practical test: ask yourself who would take the operational decisions if the manager disappeared for 3 months. If the answer is the management company or the agent, then management is in practice delegated and the IFI exemption is fragile (TGI Versailles, 30 April 2024). If the manager can be replaced with no impact, the activity is not actively managed. An audit is essential at least once a year.
The value of the properties is added back to the IFI base for the years still open to reassessment (generally 6 years, LPF L.181). Standard IFI rates apply (0.5% to 1.5% per bracket). A surcharge of 10% to 80% may be added depending on the characterisation (deliberate breach, abuse of law). For a EUR 5 million property portfolio claimed as exempt over 6 years, the exposure can amount to several hundred thousand euros.
The risk is very high. A concierge service handling check-in, cleaning and operational management substitutes itself for the manager in the day-to-day running of the business. The Versailles ruling 22/01600 sanctions precisely that configuration. To preserve the exemption, the manager must retain the strategic decisions (pricing policy, platform selection, quality monitoring) and the administrative management (invoicing, accounting, controls), even where certain operational tasks are outsourced.
LMP (professional furnished-property lessor) means revenue above EUR 23,000 AND more than 50% of the household's taxable income. It potentially opens the IFI business-assets exemption (subject to conditions). LMNP (non-professional furnished-property lessor) means one of the two tests is not met. No IFI exemption is available: the furnished properties are then fully included in the IFI base where it exceeds the EUR 1.3 million threshold. A taxpayer can switch between the two statuses from one year to the next as revenue evolves, which is why annual monitoring matters.
Related resources on IFI, furnished lettings and the taxation of real-estate wealth.
LMNP/LMP, para-hotel services, Dutreil, IFI, Airbnb: a full analysis.
Voir la page Related articleA tightening of the para-hotel regime and its operational implications.
Voir la page Area of expertiseGifts, split of ownership (usufruct/bare ownership), Dutreil, wealth-holding companies.
Voir la page Lead counselPartner in charge of IFI matters and wealth structuring.
Voir la pageA confidential initial conversation. Audit of active management, documentation of the manager's involvement, pre-filing IFI security review, litigation defence if the exemption is challenged.
© BENSAID Avocats — The information published on this site does not constitute legal advice. Sources: French Tax Code art. 975 (business assets exempt from IFI); French Tax Code art. 155 IV (LMP / LMNP status); LPF art. L.181 (IFI reassessment period); TGI Versailles, 30 April 2024 (RG 22/01600); case law on the active management of companies. Editorial update: 27 May 2024.
