Proposed 2027 Fiscal Reforms Target Real Estate Assets
The French Court of Audit (Cour des comptes) has proposed tax reforms to curb public deficits by 2027, affecting property owners and investors.
The recommendations target long-standing tax advantages in real estate, business succession, and renovation incentives.
The government aims to generate approximately €200 million in annual savings by narrowing the fiscal gap between furnished and unfurnished rentals. While these measures are currently proposals, they show changing legislative priorities ahead of the 2027 finance bill. This adjustment arrives alongside external financial pressures, as current OAT rates at 4.25% threaten to push mortgage credit rates toward 4% by 2026, further complicating investments.
Stricter Rules for Furnished Rentals
The most significant change concerns the status of non-professional furnished rental (LMNP). The Court of Audit recommends aligning the taxation of furnished rentals with that of unfurnished properties to eliminate current fiscal disparities.
This initiative is a response to the rapid expansion of the sector; since 2011, nearly 1.27 million new landlords have opted for the LMNP status. In certain major cities, the share of furnished housing has reportedly doubled over the last fifteen years.
Current regulations allow investors to deduct property depreciation, which significantly lowers taxable income. The proposed reforms would cap these annual depreciation deductions at 3% of the property’s value, up to a limit of €12,000.
A more restrictive scenario under consideration for the 2027 finance bill would further limit this deduction to 2.5% of the property’s value, capped at €7,000 per year.
This move is intended to rebalance the rental market, which has seen a proliferation of short-term furnished offerings in major cities over the last 15 years. Limiting the fiscal benefit for furnished landlords is also seen as a way to address the broader structural balance of the housing market.
Court Suggests Returning to 50% Succession Tax Abatement
The Court suggests returning to a 50% abatement, the level that existed prior to its 2003 reform, arguing that the current cost is high relative to its economic impact.
Property renovation incentives face similar scrutiny. The current 10% reduced VAT rate for home improvements in dwellings older than two years may be modified or eliminated, according to the Court.
The Court views the effectiveness of this intermediate rate as insufficiently demonstrated, placing a potential financial burden on homeowners planning future maintenance. It is currently weighing two scenarios: either removing the reduced rate for sectors deemed ineffective or raising the 10% VAT rate across the board.
Uncertain Future for Real Estate Tax Perks
The Court of Audit has also recommended removing the corporate tax exemption currently enjoyed by social housing organizations. While this primary impact targets social landlords, it reflects a broader strategy to review tax arrangements related to the housing sector.
Investors now face a period of uncertainty as they await the final version of the 2027 finance bill. Lawmakers have not yet decided which of these recommendations to adopt, as the debate regarding the balance between housing accessibility and fiscal recovery continues.
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