The para-hotel regime is a tax and legal framework that attracts many investors seeking to combine rental profitability with tax optimization. In 2025, this sector continues to evolve, particularly with recent legislative changes governing its operation. In this article, we provide an overview of the current regulations and their implications for operators.
What is a para-hotel?
A para-hotel is a furnished rental that includes services similar to those offered by a hotel. According to Article 261 D, 4°-b of the French General Tax Code (CGI), an establishment is considered a para-hotel when it offers at least three of the following four services:
- Breakfast
- Regular cleaning of the premises
- Linen supply
- Reception (including paperless reception)
As of January 1, 2024, a new rule applies to this sector: stays are now limited to 30 nights, with the possibility of renewal. This measure is intended to distinguish para-hotels more clearly from standard furnished rentals.
Para-hotel tax benefits
One of the main advantages of the para-hotel sector is its favorable tax treatment, particularly in terms of VAT and rental income taxation.
VAT recovery on property purchase
Investors who purchase newly built properties or properties undergoing major renovation can reclaim the 20% VAT included in the purchase price. However, this benefit comes with a 20-year commitment to maintain the property under the para-hotel regime. If the property is sold before this period, a proportional VAT adjustment is required.
Taxation of rental income
Income generated from a para-hotel business is taxed under the Bénéfices Industriels et Commerciaux (BIC) (Industrial and Commercial Profits) regime, which allows the deduction of various expenses, including: loan interest, depreciation, maintenance costs, other expenses directly related to the rental activity.
The applicable tax rate depends on the owner’s tax residency. Non-residents are subject to a minimum tax rate of 20%, plus social contributions (CSG CRDS) of 17.2%.
Exemption from Real Estate Wealth Tax (IFI)
If the para-hotel activity is conducted as a primary business, the property may be exempt from the French Real Estate Wealth Tax (IFI). This exemption serves as a valuable tool for wealth optimization.
Additional tax considerations apply if the activity is carried out through a company
Professional or non-professional status: what are the differences?
The para-hotel business can be run under two different statuses:
- Professional para-hotel operator: active participation in property management is required. This status allows losses to be deducted from overall income and exempts you from capital gains tax after 5 years in business.
- Non-professional para-hotel operator: Losses can only be offset against future business profits, and are limited to six consecutive years.
The choice of status is decisive for income taxation and the management of tax deficits.
Social security charges: what impact for operators?
Affiliation to the regime for non-employed workers (TNS)
If the operator runs their para-hotel business as a self-employed individual or as the majority manager of a commercial company (such as a family SARL), they are subject to the Travailleurs Non-Salariés (TNS) scheme.
Social security contributions amount to approximately 40% of net income. In the event of a negative result, a minimum contribution applies, generally ranging from €1,100 to €1,600 per year.
Impact of capital gains on social security contributions
When a para-hotel property is resold, part of the capital gain may be subject to social security contributions. Specifically, the portion corresponding to the accumulated depreciation up to the sale date is included in the TNS contribution base.
VAT and available options
As the para-hotel business is subject to VAT, it benefits from a reduced rate of 10% on rents received.
VAT recovery
One of the main advantages of the para-hotel business is the possibility for the operator to reclaim VAT on the purchase of the new property or on the work carried out. However, this implies a commitment to maintain the business for 20 years, failing which part of the reclaimed VAT will have to be repaid in the event of early cessation.
VAT exemption option
In some cases—especially if VAT recovery is not applicable (e.g., for an older property with no eligible renovations)—the operator can opt for a VAT exemption. This is possible if annual revenue does not exceed €91,900.
NB: The new Finance Law has lowered the VAT exemption threshold to €25,000. However, this measure has been suspended for the time being, so we will communicate the threshold validated by the Government at a later date.
Managing capital gains on resale
If the property is sold, the capital gain is subject to the professional capital gains regime.
- If the property has been held for less than 2 years: the entire capital gain is taxed as current income, at the progressive income tax rate.
- If the property has been held for more than 2 years: A distinction is made between short-term capital gains (subject to the progressive scale) and long-term capital gains (taxed at 30%).
- Exemption possible after 5 years in business
Article 151 septies of the French General Tax Code stipulates that capital gains from sales made in the context of a commercial activity carried on in a professional capacity for at least 5 years are tax-exempt when annual revenues for the two years preceding the sale are less than €250,000.
Operators who can prove that their business is of a professional nature (see above) can benefit from a tax exemption on the resale of their property.
Conclusion: should you invest in the para-hotel sector in 2025?
Para-hotel remains an attractive strategy for investors wishing to maximize their profitability while benefiting from an advantageous tax framework. However, it is essential to structure your project properly to comply with legal criteria and avoid tax requalification.
To secure your investment and optimize your tax situation, Roche & Cie can help you at every stage of your project.
Need personalized support? Contact us now for a tailor-made consultation!
