In the real estate business, profits derived from a furnished rental property are considered to be “industrial and commercial profits”. Also known as “BIC” (short for bénéfices industriels et commerciaux), these profits are liable for income tax (known in France as IR, short for impôt sur le revenu). What are the different types of BIC? How are these profits calculated? Our MGM experts can help you understand more about industrial and commercial profits.
What are industrial and commercial profits (BIC)?
BIC (industrial and commercial profits) means profits made by individuals or partnerships conducting a commercial, industrial or craft activity. They are included in taxable income and must be declared under the simplified real tax regime, the normal real regime or the micro-BIC regime.
What profits are treated as BIC?
The following are considered as BIC:
- Profits from commercial, industrial and craft professions;
- Profits from commercial activities by assimilation: rental of real estate or sale of a business, buildings, stocks or a share in a real estate company;
- Profits made by co-owners of ships, municipal concessionaires or farmers and mining concessionaires.
As a property owner, BIC may therefore apply to you. In the rented property sector, BIC concerns profits received in the context of:
- rental of a furnished apartment;
- rental of a furnished commercial or industrial property;
- leasing-management of a business.
When you invest in an MGM tourist residence, the profits from your rental may be considered as industrial and commercial profits (BICs) liable for income tax.
According to the regulations, the people who fall into the BIC category are:
- A self-employed individual operator or entrepreneur;
- The sole partner in an EURL (limited liability single-person company);
- A partner in a partnership.
What is the difference between professional BIC and non-professional BIC?
Industrial and commercial profits are divided into two taxable income categories:
- professional BIC: this refers to profits made from a professional activity. Your activity is deemed to be professional if the personal, direct and continuous participation of a member of the taxable household is necessary for its functioning;
- non-professional BIC: this refers to profits made on a non-professional basis. The activity is non-professional if it does not meet the conditions listed above.
How are industrial and commercial profits calculated?
As the owner of a rental property, it is important to know the various tax regimes in order to calculate the industrial and commercial profits.
The “micro-BIC” tax regime is intended for self-employed individuals and private entrepreneurs who are not liable for VAT. This system applies automatically when your annual turnover before tax:
- is less than €82,000 (for businesses selling goods to take away or eat on the premises, and provision of housing);
- is less than €32,900 (for services and furnished rentals).
If you are subject to the micro-enterprise regime, your taxable profit is calculated based on the turnover achieved during the tax year. You must therefore declare all the receipts of the year, including exceptional receipts.The simplified real regime
If you are subject to the simplified real regime, profits are calculated in real terms: turnover - deductible expenses.
To be classed under this tax regime, your turnover must be between:
- 170,000 euros before tax and 789,000 euros before tax for two consecutive calendar years, for the sale of goods and provision of housing;
- 70,000 euros and 238,000 euros before tax for two consecutive calendar years, for BIC services.
The normal real regime
The normal real regime also enables you to calculate profit in real terms. To be classed under this tax regime, your turnover must exceed:
- 789,000 euros before tax for sale of goods and provision of housing;
- 238,000 euros before tax for services.
What is the difference between property income and BIC?
When you invest in rental property, your operation may fall under two different tax regimes:
- If you are letting a furnished property, you are taxed under the industrial and commercial profits (BIC) regime;
- If you are letting an unfurnished property, your income is classed as property income.
These two tax regimes apply to housing as well as business premises.
Did you know? It is the nature of your property that determines your tax regime. When you receive rent from your MGM second home, you must declare it:
- as BIC if the rental is in a tourist residence;
- as property income if the property is in a classic condominium.
MGM’s experts can assist you at every stage of your property project. You can also find detailed articles about commercial leases or condominium charges, as well as advice on calculating your borrowing requirements and investing in a mountain tourist residence successfully.