France finally fixes the LMNP/LMP rules for non-resident owners (with important details to consider)

If you’re a non-resident owner or a foreign investor with furnished rental property in France, we have some good news for you. But there are also some important details and trade-offs you need to understand: tax attorney Vincent Berthier de Bortoli, a specialist in tax and customs law, gives us his best advice to navigate these new regulations.

Looking to optimise your rental revenue?

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LMNP and LMP: understanding the different classifications when renting out furnished properties in France

What do LMP and LMNP classifications mean? 

In France, if you rent out furnished property, you’re classified as either an LMNP (Loueur en Meublé Non Professionnel – non-professional furnished landlord) or an LMP (Loueur en Meublé Professionnel – professional furnished landlord).

These classifications are very important.

To be considered an LMNP, you need to meet one of these criteria:

• Your annual rental income is less than €23,000; OR
• Your rental income is less than your professional income.

This may seem straightforward, but if you live outside France, things can get complicated.

What this meant for owners living outside France

The French tax authorities only counted income taxable in France when comparing your rental income to your professional income.

For example, if you’re a software engineer living in Singapore earning €120,000 a year, or a consultant in Dubai making €150,000, or really anyone living outside France with a decent salary, if that income isn’t taxable in France (which it usually isn’t), the French tax authorities didn’t take it into account.

As a result, if your rental income exceeded €23,000, you were automatically classified as an LMP, even though you clearly weren’t a professional landlord. You were just living and working outside France.

The problem with being classified as an LMP

Being classified as an LMP had two disadvantages.

1. French social charges (URSSAF) – for most non-residents

As an LMP, you were subject to French social security contributions via URSSAF on your rental profits. This added up to about 20-30% in additional charges on top of your income tax.

Important exception: If you were affiliated with a health insurance system in an EU country, Switzerland or the UK, you were exempt from these charges thanks to EU healthcare coordination regulations. So for this group, the social charges weren’t an issue as an LMP.

But for everyone else – non-residents from the US, Canada, Australia, Singapore, UAE, etc. – these charges were a major cost.

2. Less favourable capital gains treatment

When you eventually sell your property:

• LMNP: You get the standard capital gains regime for individuals, with time-based allowances (22% reduction after six years, full exemption after 30 years);
• LMP: You are subject to the professional capital gains regime – no time-based allowances, more complex rules, generally less favourable.

So the automatic LMP classification was costly for foreign owners and investors.LMP était donc coûteuse pour les propriétaires et les investisseurs étrangers.

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The 2026 solution: what changes for non-residents

Foreign income is now taken into account

The good news is that the 2026 Finance Bill (Article 12 Quindecies) finally addresses this issue.

Under the new rules, non-residents can now include their foreign professional income when determining their LMNP/LMP status, as long as that income is subject to income tax in their country of residence.

So the Singapore software engineer’s earnings of €120,000 and the Dubai consultant’s €150,000 are both taken into consideration.

What this means for non-residents

For many owners and investors living abroad, this means:

• Qualifying as an LMNP instead of an LMP;
• No French social charges via URSSAF (except for EU/Swiss/UK residents who were already exempt as LMPs);
• Better capital gains treatment when you sell (for most);
• Less complicated admin to deal with.

Note for EU/Swiss/UK residents: You’ll now face the 7.5% “prélèvement de solidarité” on capital gains, which wasn’t applicable as an LMP. You’ll still probably be better off overall, but it’s worth factoring in.

A reform correcting a tax anomaly

It’s worth noting that this change didn’t come out of nowhere. The European Commission had flagged France’s old rule as potentially discriminatory against non-residents and possibly contrary to EU principles on free movement of capital.

So this reform isn’t just about fixing an administrative headache – it’s also about bringing French tax law into line with European principles. 

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The catch: the LMP to LMNP conversion tax trap

Why this change can be considered a cessation of professional activity

However, not all the news is good. 

If you were classified as an LMP in 2025 and will become an LMNP in 2026 under the new rules, this status change is treated as a cessation of professional activity.

The French tax authorities consider this as a taxable event. Specifically, it triggers capital gains tax on your property, based on its current value.

This means you could owe capital gains tax without actually selling your property.

The theoretical risk of capital gains tax

Here’s a simplified example:

• You bought your chalet in the Alps for €600,000;
• It’s now worth €1,000,000;
• You convert from LMP to LMNP in 2026;
• In theory, the tax authorities could assess capital gains on the €400,000 appreciation;
• That would mean tax of roughly €150,000, without actually selling anything.

Why this tax is not being applied in practice

However – and this is crucial – in practice, this capital gains tax on conversion is NOT being applied. 

The French tax authorities recognise that triggering such a significant tax liability on a mere status change would be both unfair and potentially unconstitutional. So while the legal framework technically allows for this taxation, it’s not actually being applied.

That said, the situation remains somewhat unclear and could theoretically change, so it’s worth monitoring it and discussing with your tax advisor.

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Other important tax changes for non-residents

The “prélèvement de solidarité” issue for EU/Swiss/UK residents

This is a problem that affects non-residents covered by EU, Swiss, or UK health insurance.

The former LMP Advantage

If you were classified as an LMP and had health coverage from an EU country, Switzerland, or the UK, you were exempt from French social charges on your rental income. The EU regulation on healthcare coordination protected you from double social contributions.

This meant:

• No CSG (Contribution sociale généralisée);
• No CRDS (Contribution pour le Remboursement de la Dette Sociale);
• No other French social charges;
• Just the income tax.

The new LMNP disadvantage 

If you are classified as an LMNP under the new rules, you’ll be subject to the 7.5% prélèvement de solidarité on the capital gain when you eventually sell your property.

This 7.5% contribution is not covered by EU healthcare coordination regulations. It’s technically not considered a “social charge” under EU law – it’s a “solidarity levy” that France claims isn’t subject to the same exemptions.

So the reform that’s supposed to help non-residents actually creates a new cost for EU/Swiss/UK residents who were previously LMPs:

• As an LMP: No social charges at all on rental income or capital gains;
• As an LMNP: 7.5% prélèvement de solidarité on capital gains when you sell.

This is still better than the alternative of paying URSSAF charges on your ongoing rental income as an LMP. And the LMNP capital gains regime with time-based allowances is still more favourable overall. But it’s worth knowing that this 7.5% will apply when you eventually sell.

Looking to optimise your rental revenue?

The 2026 CSG increase (for some non-residents)

There’s another issue that non-resident property owners need to know about – and this one seems to be a legislative oversight.

What happened

France’s 2026 Social Security Financing Law increased the CSG (Contribution Sociale Généralisée – a social security contribution) from 9.2% to 10.6%. That’s a 1.4 percentage point jump.

For French residents selling property, the law specifically neutralised this increase for capital gains tax purposes. They are still taxed at the old rates. But the law forgot to include the same neutralisation for non-residents.

Who is affected

If you’re a non-resident but you’re affiliated with a health insurance system in:

• An EEA country (European Economic Area),
• Switzerland,
• The United Kingdom,

…and you’re not covered by the French social security system, you’re already exempt from CSG and CRDS (another social contribution) so this increase doesn’t affect you at all.

For non-residents from outside the EEA, Switzerland, and UK – think US, Canada, Australia, Singapore, Dubai, etc., capital gains on French property sales (before time-based allowances) are now taxed at:

• 19% income tax
• 18.6% social charges (including the new 10.6% CSG rate)
• Total: 37.6% (up from 36.2%)

That’s a 1.4 percentage point increase that French residents don’t have to pay.

A possible drafting oversight

Looking at the legislative history and the spirit of previous versions of the law, this appears to be a drafting oversight. The legislators meant to neutralise the CSG increase for capital gains across the board, but somehow the articles covering non-resident property sales were left out.

There are two likely scenarios:

1. It’s a simple error that will be corrected in a future amendment (hopefully soon).
2. If it’s not corrected, there’s a strong argument that this violates the principle of equal treatment under tax law.

What this means in practice

For now, the law is the law. If you’re a non-resident from outside the EEA/Switzerland/UK selling French property:

• The 37.6% rate applies to sales completed from January 1, 2026 onwards;
• The tax must be withheld from the sale price and paid to the French Treasury;
• If/when this gets corrected, you should be able to request a refund from the tax authorities.

If you’re in this situation, document everything carefully and keep records of the tax withheld. If this anomaly is fixed retrospectively (which seems likely given the equal treatment argument), you will then be ready to file for a refund.le probable selon le principe d’égalité devant la loi fiscale), vous serez prêt à demander un remboursement.

The silver lining

The time-based allowances still apply. After 22 years of ownership, you will be fully exempt from the 19% income tax portion. And after 30 years, you will be exempt from social charges too. So if you’re a long-term holder, this increase matters less and less over time.

But still, an extra 1.4% on a €200,000 gain is €2,800 – not to be disregarded.

The unofficial workaround

Here’s an interesting fact: some French tax offices (Centres des Finances Publiques) were already quietly applying the more favourable LMNP capital gains regime to non-resident LMPs when they actually sold their properties.

Why? Because the tax officers themselves knew the rule didn’t make sense. They recognised that these weren’t really professional landlords, they were just non-residents who got caught in a bureaucratic trap.

However, you can’t count on that informal flexibility applying to the actual conversion event. The shift from LMP to LMNP is an explicit change of status, and the tax code is pretty clear about what happens when you cease a professional activity.

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What non-resident investors need to do in 2026

This will depend on your current situation and where you live:

If you’re currently an LMNP (or not yet a landlord)

This reform just makes your life easier and confirms your favourable status.

Just be aware: if you’re from outside the EEA/Switzerland/UK and are planning to sell eventually, you’re currently subject to that 37.6% rate (before allowances), due to the CSG oversight. It’s worth checking to see if that is eventually corrected.

If you’re currently an LMP with EU/Swiss/UK health coverage

You have a specific situation to consider. The good news is that you’ll avoid URSSAF charges going forward as an LMNP. The trade-off is that you’ll pay the 7.5% “prélèvement de solidarité” when you eventually sell your property.

For most people, this is still a net gain (ongoing savings on rental income compared to a one-time charge on exit), but it’s worth checking the figures for your particular situation.

If you’re currently an LMP (other cases)

Talk to your tax advisor as soon as possible. While the capital gains tax on conversion doesn’t appear to be applied in practice, you still need to:

1. Understand the potential risks and legal uncertainty around conversion.
2. Calculate the long-term benefits of LMNP status (no social charges, better eventual sale treatment).
3. Consider your timeline and overall tax situation.
4. Look into any potential mitigation strategies.

The figures will be different for everyone, depending on:

• How much your property has risen in value (but remember, conversion tax isn’t being applied in practice);
• How long you plan to keep it;
• Your rental income levels;
• Your overall tax situation;
• Where you’re tax resident (for the CSG and prélèvement de solidarité issues).

If you’re considering buying French rental property

This reform is great news for you. But make sure you structure things properly from the start, make sure your foreign income is documented and subject to income tax in your country of residence, and you should be able to maintain LMNP status without issues.

If you’re from outside the EEA/Switzerland/UK, factor in that extra 1.4% in social charges when calculating your eventual exit strategy (unless it gets fixed, which it probably will). 

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Investing in a furnished rental chalet: the bigger picture

A clearer tax environment for non-resident investors

Overall, the LMNP/LMP reform is a positive development. France has finally acknowledged that a non-resident earning €100k in London isn’t suddenly a “professional landlord” just because they rent out a chalet in the Alps for €50k a year.

A few elements to keep in mind:

• The theoretical conversion tax trap isn’t being applied in practice (good news);
• The CSG oversight creates an unfair disparity that will likely get corrected;
• The 7.5% prélèvement de solidarité for EU/Swiss/UK residents is a trade-off to consider.

Why the Alps are a good choice for seasonal rentals

The Alps are a world-famous destination with renowned ski resorts and traditional villages. The mountains attract guests from all over the world in all seasons: from skiing in winter to hiking, cycling or just sunbathing by the pool or a lake in summer. 

By investing in a rental property in the Alps, you are sure to attract seasonal rentals thanks to the high volume of tourism in the region, allowing you to optimise your rental revenue.

Thinking about renting out a property in France?

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FAQ – LMNP and tax rules on furnished rental properties for non-resident

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The 2026 tax reform is positive overall for non-residents and corrects a long-standing tax issue. Investing in a furnished rental property in France remains an attractive strategy, particularly in the Alps, provided you fully understand the tax rules applicable to non-residents. As with any tax reform, the devil is in the details. And in this case, there are multiple details that matter:

• Were you already classified as an LMP? (Conversion questions, even if not applied in practice)
• Do you have EU/Swiss/UK health coverage? (Prélèvement de solidarité applies)
• Where are you tax resident? (CSG increase issue)
• How long have you owned the property? (Time-based allowances)
• What’s your long-term strategy? (Hold vs. sell timeline)

If any of these apply to you, check the figures before these reforms fully take effect.

Disclaimer: This article is for informational purposes only and shouldn’t be considered tax advice. French tax law is complex, and every situation is unique. If you’re affected by these changes, consult a qualified tax advisor who specialises in French property taxation and international tax issues.