TLDR: The difference between LMNP and LMP concerns the tax regime for capital gains, the possibility of installment payments or exemptions, and the management of deficits. LMPs benefit from tax advantages such as installment payments for capital gains and exemptions under certain conditions, while LMNPs are subject to ordinary taxation without these benefits.
Tax regime for capital gains
LMNPs are subject to the private capital gains regime, with no possibility of exemption or installment payments. LMPs, on the other hand, benefit from the professional capital gains regime, with options for installment payments over 3 or 10 years and, in some cases, exemption if the activity has been carried out for at least 5 years and revenues fall within the prescribed thresholds (€90,000 or €250,000 depending on the type of rental).
Deficit management
Only LMPs can allocate deficits arising from preparatory expenses in a staggered manner over the first 3 years of activity. LMNPs cannot offset such deficits against other income.
Conditions for capital gains exemption
LMPs can benefit from capital gains exemption if the activity has been carried out for at least 5 years and annual revenues do not exceed €90,000 (for direct rentals) or €250,000 (for indirect rentals). LMNPs cannot benefit from this exemption.
Installment payments for capital gains
LMPs can spread the payment of capital gains tax over a period of 3 years (general rule) or 10 years for approved business restructuring operations. LMNPs do not have this option and are subject to ordinary taxation.
Rental commitment
LMNPs must provide a written commitment to rent the furnished property for 9 years from the effective date of the contract. This commitment must include details of the owner, the property, and the operator.
Key differences
A key difference between the two regimes concerns deficit management. LMPs can allocate deficits arising from expenses incurred before the start of the rental activity at a rate of one-third per year over the first three years of activity. This option is reserved for activities carried out on a professional basis (LMP) and does not apply to LMNPs.