The owner of a gîte in France has failed in their attempt to obtain improved tax advantages by offering a breakfast service to their guests.

The basis on which rental income from the letting of furnished accommodation in France is taxed can be something of a conundrum to landlords.

Not only is it subject to frequent legal and fiscal changes, but different rules apply depending on the amount of the income, the business status of the owner, the nature of the accommodation and its location. It is further complicated by the fact that unfurnished accommodation is taxed on a different basis.

So it is perhaps not surprising that the issue is a source of frequent litigation, with owners and the tax authority alike testing the boundaries of the law.

In a recent case in the French courts, the owner of a furnished gîte sought to claim that the business should be taxed on the same basis as that of a hotel, as he was offering services that granted him ‘hôtelière’ tax status.

The distinction is an important one, for a hotel owner can charge VAT (and thereby recover VAT on purchases) and they are also able to charge losses against their total income.

By contrast, a gîte owner cannot charge VAT and, unless they are a registered professional landlord, they can only charge losses against furnished rental income, provided they are taxed on the basis of the régime réel. That is to say, that they are not running the business as a micro-entreprise.

Hotel and related accommodation owners obtain the tax advantages because they offer a range of complementary services that under European law grants them separate tax status from that of a landlord of other types of furnished accommodation.

The law states that only where a range of complementary services are offered, in addition to the accommodation itself, can an owner charge VAT. At least three of the following services must be offered in order to qualify:

• Provision of breakfast;
• Regular cleaning of the property;
• Provision of linen;
• Welcoming of guests.

In this case the owner stated that he offered his guests breakfast but produced unconvincing evidence to support his argument. Although he had contracted with a local company to supply the breakfasts, there were no accounting records which showed any of the guests had used the service.

The court also considered that changing of the linen and cleaning of the room at the beginning and the end of the stay was insufficient, and welcoming of guests by a member of his family was incidental.

In addition, the provision of a telephone, a television, parking spaces, as well as a garden and a swimming pool did not exceed the simple occupation of a rental property.

Accordingly, the court considered that the owner did not prove they provided the service, stating they 'n'établissait pas fournir effectivement les services accessoires qui permettaient de regarder la location proposée comme comportant des prestations excédant la simple jouissance du bien.'

As a result, 'les contrats conclus par M. A... avec ses locataires ne peuvent être qualifiés de contrats de louage de services et doivent être regardés comme des contrats de location de locaux d'habitation meublés.'