Para-hotel services:
LMNP, LMP and income tax

It is taxed as industrial and commercial profits (French Tax Code, art. 34). The provision of para-hotel services (reception, cleaning, linen, breakfast) gives the activity a commercial character. This classification applies regardless of the amount of receipts: there is no threshold below which the income would be treated as property income or as passive furnished letting income.

The furnished lettor is deemed professional (LMP) where, cumulatively, the annual receipts of the activity exceed 23,000 euros and exceed the other earned income of the tax household (French Tax Code, art. 155, IV). Failing this, the lettor is non-professional (LMNP). The status determines the offsetting of losses, liability for social security contributions and the capital gains regime on sale.

Under the actual profit regime, the operator deducts each year a fraction of the value of the building (excluding land, by components) and of the furniture, as depreciation (French Tax Code, art. 39 C). This mechanism reduces taxable profit. The deduction of building depreciation is nevertheless capped: it may neither create nor increase a tax loss. The fraction of depreciation not deducted is carried forward to subsequent financial years.

It depends on the status. The LMP falls under the business capital gains regime, with a possible exemption based on the level of receipts after five years of activity (French Tax Code, art. 151 septies). The LMNP falls under the private individuals capital gains regime, with holding-period allowances and exemption at the end of the standard holding period. The regime should be anticipated from acquisition, as it strongly influences the net return of a transaction.

Article 84 of the 2025 Finance Act amended the calculation of the capital gain on the sale of properties held under LMNP status: depreciation deducted during the letting period now reduces the acquisition price used to calculate the gain, which increases the taxable base. Previously, this depreciation had no impact on the private individuals capital gain. Exceptions are provided, notably for certain serviced residences.

The law provides exceptions to the add-back, mainly covering certain serviced residences: student residences and residences for elderly or disabled persons. For these properties, the depreciation deducted does not increase the capital gains base. Applying these exceptions requires a precise verification of the nature of the residence and of the conditions laid down by the legislation.

No. LMP status allows losses to be offset against overall income and gives access to the business capital gains exemptions (French Tax Code, art. 151 septies), but it entails liability for social security contributions and heavier administration. LMNP status may remain preferable in many situations, particularly since the 2025 reform, which does not affect serviced residences eligible for the exceptions. The choice is made case by case, based on receipts, the household's other income and the intended holding period.

Yes. Professional status results from the mere fulfilment of the conditions of article 155, IV of the French Tax Code: as soon as receipts exceed 23,000 euros and exceed the other earned income of the household, LMP status applies automatically, without any formality. This switch may occur unintentionally, for example following a fall in the household's other income, and change the capital gains regime applicable to a later sale. Annual monitoring is necessary.