Real estate tax France: 3% annual tax on the market value of real estate properties

French and foreign legal entities owning real estate in France could be subject to file a tax return every year. Failure to comply may lead to an automatic tax of three percent based on the market value of the property. The Ecovis experts explain the details.

Scope of the tax

The 3% tax applies to any entity, French or foreign, with or without legal personality (such as limited companies, partnerships, economic interest groupings, syndicates, groups, pool joint ventures, trusts and comparable institutions, etc.) owning real estate properties or rights in rem in France on 1 January of the tax year, either directly or through an intermediary (Articles 990 D to 990 G of the French Tax Code (FTC)).

It is computed on the value of the French assets subject to the declaration obligation.

Exemptions

Some exemptions apply:

• Either linked to the nature of the entity (Article 990 E 1° and 2° of the FTC), such as (i) international organisations and sovereign States, (ii) listed entities and subsidiaries, or (iii) entities not considered to have a preponderance of real estate assets (i.e., French real estate making up less than 50% of the French assets, although it should be noted that this excludes real estate assets assigned to the professional activity).
• Or linked to the location of the entity’s registered office, which must be located either in France, within the European Union, in a country that has signed an administrative assistance agreement with France to combat tax evasion and avoidance, or with a country that has signed a treaty containing a non-discrimination clause (Article 990 E 3° of the FTC).
  This last case concerns only the following entities: (i) those with a low preponderance of real estate, (ii) pension funds or entities recognised as being of public interest, (iii) some specific real estate investments (French SICAV, FPI), and (iv) entities which have undertaken to provide certain information:
  • Either to provide the tax authorities with information relating to the location, consistency and value of properties, identity and address of those who hold more than 1%, and the number of shares or other rights held by each of them by filing a yearly declaration (form 2476 SD) no later than 15 May,
  • Or undertake, upon request, to provide the tax authorities with such information on the date of acquisition of the property or within 60 days.

The exemption may be partial if the entity concerned only partially discloses the identity of the holders on 1st January.

We support you in submitting the tax return for your real estate assets correctly and on time.

Vanessa Raindre, Tax partner, MD Legal, Paris, France

Penalties

Failure to file a declaration can trigger the procedure for automatic taxation (Article L 66 4° of the tax procedural code) coupled with late payment interest (Article 1727 of the FTC) and the penalty provided for by Article 1728 of the FTC (minimum 10%).

Those benefiting from an exemption who have not complied with their filing obligations can still claim the exemption if they correct the situation within 30 days of the request by the tax administration. However, this correction is only available once.

For further information please contact:

Vanessa Raindre, Tax partner, MD Legal, Paris, France
Email: vanessa.raindre@mdlegal.fr