Internet rentals of French property.

One of the issues alongside the GAFA Tax on such as Google Amazon and Facebook was the simultaneous introduction of reporting requirements for Internet Platform Operators enabling sales or services to be provided in France. However, AirBNB's activity in France is also being brought into the fiscal limelight, as from 1st January, 2019.

Amongst other types of services, article 242 bis of the Code Général des Impôts now requires operators of letting platforms over French property to provide the party using the service, the owner, with a notice of certain information at the latest by 31st January of the year following the provision of the services:

« a) Les éléments d'identification de l'opérateur de la plateforme concerné ; 
« b) Les éléments d'identification de l'utilisateur ; 
« c) Le statut de particulier ou de professionnel indiqué par l'utilisateur de la plateforme ; 
« d) Le nombre et le montant total brut des transactions réalisées par l'utilisateur au cours de l'année civile précédente ; 
« e) Si elles sont connues de l'opérateur, les coordonnées du compte bancaire sur lequel les revenus sont versés

a)     The identification items of the Platform Operator;

b)     The identification items of the user, here the person or entity renting the property out using the platform;

c)     The status of he individual or the professional indicated by Platform Operator;

d)     The number and the gross amount or the transaction carried out by the user during the previous civil (i.e. Calendar) year;

e)     If known to the operator, the bank account details to which the revenue is paid.

It is not only AirBNB rentals which are affected. The territorial scope of the requirement is defined by reference to the same principles as the VAT legislation and in particular Article 259 A 2° Code Général des Impôts. Furnished rentals of French property have always been liable to income tax and TVA irrespective of the state of residence of the lessor. However it has been too simple for certain non-residents to abstain from declaring.

In effect, the Operator is now required to send this information for tax year 2019 to the French tax administration. That is why the law requires the Operator to communicate the same information to the taxpayer.  In effect, the new rule simply notifies the Owner as to what is being disclosed.

The Platform Operator is required to do this to account for the amount of rental contracted, then effectively "nudge", not notify, the property owner as to their obligation to account for their rental income and to notify what information has been disclosed.  In this case the "utilisateur" is  the Property owner marketing the French property through the platform and then receiving the rental through it. The Owner's obligation to declare exists already.  What the law does is to formalise the identification and reporting requiements of the Platform Operator.

There will  be many cases in which the gross rental notified by the Platform Operator will not correspond to the actual rental received, for example, in any case where a reimbursmemnt is made directly by the Owner to the person renting the property without going through the Platform.  Hence the need to keep complete financial accounts corresponding to the French tax régime adopted.  If unaware of these and the necessary registration and declaration requirements, seek advice.

Whilst this may appear to be circular,  the aim is to require the Platform Operator to obtain the information from the user and in effect to render it evidential.

In any event, the Platform Operator is required to send the information on to the Tax administration, again by the same date, 31st January. If it does not or does so incorrectly a fine of €50.000 per omission can be imposed. The issue of its proportionality will doubtless be taken to the Conseil Constitutionnel at some point, however given their upholding of the constitutionality of the trust penalty of €20.000 per omission, the penalty is likely to be upheld at least in principle, if not relation to its amount.

If the reader does let out a French property using an internet platform they will normally have been contacted by the Operator to confirm the information the latter holds.

Given that the aim of the law is to capture information concerning undeclared rentals, the effect of the law is likely to give rise to a series of tax investigations and potentially to further social security assessments eiter by the end of 2020 or in 2021.

United Kingdom and any foreign Platform Operators are affected by the legislation. It is not limited to French or EU operators.

Anyone concerned as to whether they are "en règle" should therefore take advice as to their position.

 

Peter Harris

www.overseaschambers.com