Disclaimer: This article is for general information only and does not constitute legal, tax, or financial advice. The interaction between LMP/LMNP qualification, the location of the taxpayer, and the residence-state tax regime is technical, and a single misclassification can have material consequences on capital-gains treatment and deficit imputation. Before acting, consult a qualified French tax advisor with cross-border experience. The English Investor accepts no liability for decisions taken on the basis of this article.
An American banker living in New York owns a small Paris flat that he lets furnished, generating €30,000 of rental receipts per year. He has, separately, a US salary of $250,000. He has been treated as a loueur en meublé professionnel (LMP) by the French tax authority since 2018. Why? Because the LMP / LMNP threshold under article 155 IV of the Code général des impôts compares furnished-rental receipts to “the other income of the foyer fiscal” — and for a non-resident, “other income of the foyer fiscal” historically meant only the foreign owner’s French-source other income, on the theory that French tax cares only about French-source income. The US salary did not count. So €30,000 of French rental beat €0 of French-source other income, and the banker landed in LMP status — whether he wanted to or not.
That quirk has now been fixed. The Loi de Finances pour 2026 added a paragraph to article 155 IV of the CGI providing that, for non-resident taxpayers, the income to be compared to furnished-rental receipts now includes foreign income subject to an equivalent income tax in the taxpayer’s country of residence. The change took effect on 1 January 2026. The American banker’s US salary now counts. €250,000 dwarfs €30,000. He drops out of LMP and back into loueur en meublé non professionnel (LMNP) status. The consequences cascade.
For foreign owners of French property — British, American, Irish, Canadian, or any other nationality with a furnished let in France — the reform matters in three concrete ways. Here is what changed, why it changed, and how it lands in 2026.
The €23,000 threshold and the predominance test
LMP qualification under article 155 IV of the Code général des impôts requires two cumulative conditions. First, the gross annual receipts from furnished-rental activity, at the level of the entire foyer fiscal, must exceed €23,000. Second, those receipts must exceed the other income of the foyer fiscal taken into account for the threshold assessment. Both conditions must be satisfied. If either fails, the taxpayer is in LMNP. The receipts figure is the gross amount including charges (TTC); the predominance test compares that gross figure to the “other income” of the foyer.
For a French resident, “other income” means salary, pension, dividends, and any other taxable income of the foyer fiscal in France. The classification is usually intuitive — a furnished-rental activity that generates more income than the rest of the household’s combined earnings places the owner in LMP. For non-residents, the picture was distorted. French tax doctrine treated “other income” as restricted to French-source other income, because that is what France taxes for a non-resident. A non-resident with very modest French-source other income — typically zero — automatically failed the predominance condition the wrong way, with €30,000 of French rental beating €0 of other French-source income, and landed in LMP regardless of any foreign salary, dividend, or pension stream that the taxpayer was earning in his country of residence.
The European Commission objection
The European Commission flagged the issue. The pre-2026 calculation rule was, in the Commission’s view, a discrimination against non-resident taxpayers contrary to the freedom of movement of capital under EU law. The logic is direct. Two taxpayers with otherwise-identical economic positions — €30,000 of French furnished rental and €250,000 of salary — were treated differently for LMP qualification depending solely on whether the salary was taxed in France or abroad. The French-resident landlord landed cleanly in LMNP because his €250,000 of French salary exceeded his €30,000 of rental. The non-resident landlord landed in LMP because his €250,000 of foreign salary was disregarded. Same activity, same scale, different outcome — and the difference turned on the cross-border element. That is the textbook fingerprint of an EU freedom-of-movement discrimination.
The French legislator accepted the analysis. The Loi de Finances pour 2026 amends article 155 IV CGI to provide, in a new paragraph, that for non-resident taxpayers the income compared to furnished-rental receipts must include income of the same nature subject to a tax equivalent to French income tax in the taxpayer’s country of residence. The amendment applies from 1 January 2026.
What changes for a foreign owner — three concrete consequences
Falling out of LMP status and back into LMNP is not a neutral reclassification. It triggers a cascade of regime changes that affect, in particular, the capital-gains treatment on a future sale and the treatment of any operating deficits in the furnished-rental activity. The comparison below captures the principal differences.
| Question | LMP regime | LMNP regime |
|---|---|---|
| Threshold to qualify | Receipts > €23,000 AND receipts > other foyer income | Default if either condition fails |
| Capital-gains regime on sale | Plus-values professionnelles (business CGT) | Plus-values des particuliers (private CGT) — with holding-period abatements |
| Deficit imputation | Imputable on global income (no cap), 6-year carry-forward | Imputable only on BIC of the same nature (LMNP), 10-year carry-forward |
| Amortissement reintegration on CGT calculation | Yes — amortissements reduce the asset basis (net book value = cost − cumulative amortissements) | Reintegrated since the LF 2025 reform (BIC réel filers only) |
| Result for a typical foreign owner with a small French rental and a foreign salary | (Was the previous default under the pre-2026 rule) | The new default from 1 January 2026 |
For most foreign owners, the swap from LMP to LMNP is on net favourable. The capital-gains regime is the largest single line. Under LMNP, the sale of the property falls into the standard plus-values immobilières des particuliers regime, with holding-period abatements that reduce the taxable gain over time and the standard 19% income-tax rate plus 17.2% social charges (or the 7.5% solidarity levy if the EU/UK A1/S1 carve-out applies — see our CSG-hike article). Under LMP, the sale would have fallen into the business CGT regime, which is procedurally different and generally less favourable for a long-held furnished rental. For the broader CGT mechanics applicable to non-residents, see our CGT pillar.
The deficit-treatment swap cuts the other way. Under LMP, an operating deficit in the furnished-rental activity could be imputed against the taxpayer’s global income, without a cap, with the unused balance carried forward six years. Under LMNP, that deficit can only be offset against future BIC income of the same nature (i.e., other LMNP rental profits), with a 10-year carry-forward. For a foreign owner whose furnished-rental activity is structurally profitable, this matters less. For one with significant early-year deficits — typically the case during a heavy amortissement phase or after a renovation — losing the global-income offset is a real cost.
A subtlety on the amortissement front: the Loi de Finances 2025 reformed the LMNP CGT calculation to reintegrate amortissements practised during the rental period into the taxable gain on sale (for taxpayers under the BIC réel regime). That reform applies to LMNP and not to LMP. So a foreign owner moving from LMP to LMNP in 2026 picks up the LMNP amortissement-reintegration rule on a future sale — which slightly dampens the CGT-regime improvement just described. For the underlying LMNP mechanics, see our LMNP guide.
Practical implications for foreign owners
Review your status for 2026. If you were previously classified as LMP under the old rule — likely the case for any non-resident with French furnished-rental receipts above €23,000 and no significant French-source other income — recompute your position under the new rule. Include your foreign salary, pension, business income, and any other foreign income subject to a tax equivalent to French income tax in your residence country. If the foreign income exceeds the rental receipts (the typical case for most foreign owners), you are now LMNP from 1 January 2026.
Document the residence-state tax. The new rule requires that the foreign income be subject to “a tax equivalent to French income tax” in the residence state. For a UK-resident owner, that is HMRC income tax. For a US person, that is US federal income tax. For an Irish or German resident, the local revenue. Keep the home-country tax returns and salary slips in your file — if the French tax authority queries the LMP/LMNP classification, you will need to demonstrate that the foreign income was subject to an equivalent tax.
Re-plan your exit strategy if a sale was on the horizon. The CGT regime swap from business CGT to private CGT is generally favourable. If you were contemplating a sale during your former LMP period and had been deterred by the business-CGT exit cost, the 2026 reform may have changed the economics. Run the numbers with your advisor before committing to a timeline. If you are a US person whose American tax considerations are also in play, the cross-border picture is even more layered — see our US-person reporting stack for the parallel IRS side.
Frequently asked questions
I’m a UK-resident landlord with a Paris flat let furnished for €25,000/year. Will I still be LMP in 2026?
Almost certainly not, unless your UK income subject to HMRC income tax is below €25,000 — uncommon for a typical UK professional. Under the new rule, your UK salary, pension, or other income subject to UK income tax is counted in the predominance test. €25,000 of French rental will not exceed your UK earnings in most cases, so you fall into LMNP from 1 January 2026.
I’m a US person and I was previously LMP. What changes for me?
Your US-taxable income — federal income tax on your global earnings — now counts in the predominance test. Most US persons fall out of LMP and into LMNP from 1 January 2026. The CGT regime improves; the deficit-imputation rule tightens. Coordinate with a cross-border tax advisor: the US-side implications (Schedule E, Form 1116, the IRS Joint Directive on CSG/CRDS) interact with the French-side classification in ways your French tax preparer alone may not capture. See our US-person reporting stack for the parallel IRS framework.
What if my country of residence does not have an income tax “equivalent” to French income tax?
The amended article 155 IV CGI requires that the foreign income be subject to a tax equivalent to French income tax in the residence state. If the residence state does not levy an equivalent tax — for example, certain Gulf states with no personal income tax — the foreign income may not count, and the pre-2026 calculation effectively still applies. The position is fact-specific and turns on the precise nature of the residence-state tax; check with a cross-border advisor.
Is the reform retroactive?
No. The Loi de Finances 2026 amendment to article 155 IV CGI applies from 1 January 2026. Pre-2026 classifications stand for prior years. The most immediate practical question is what happens at the boundary year — if you were LMP in 2025 and become LMNP in 2026, the 2025 deficits previously imputable on global income will be subject to the LMNP carry-forward rules going forward.
Does my CGT regime change retroactively for the property’s full holding period?
No. The CGT regime applicable on a future sale will follow your classification at the date of sale, not your classification at acquisition. If you are LMNP at the time of sale in 2027 or later, the plus-values immobilières des particuliers regime applies — with holding-period abatements counted from the acquisition date. The historical LMP classification does not retroactively recolour the gain.
