French or foreign legal entities that directly or indirectly hold, on 1 January of the year of taxation, property or rights in rem in real-estate assets in France are required to pay the annual 3% tax on property, subject to exemption.

Which entities are concerned?

The annual 3% tax, established by Article 990 D of the French Tax Code, applies to all French or foreign legal entities, whether legal persons, organisations or similar institutions such as trusts and investment funds.

In the case of indirect holding, the liable entity is the one which, in the chain of ownership, forms the closest link to the property. If this entity would be exempt, the chain of ownership will be examined to determine the liable entity that is not exempt.

Which entities are exempt?

The following are exempt:

• International organisations, sovereign States, their political and territorial subdivisions and certain entities controlled by them,
• Legal entities whose properties in France account for less than 50% of the French assets directly or indirectly held,
• Listed legal entities and the legal persons whose entire capital is held by these entities, either directly or indirectly,
• Provided they have their registered office in France, in a European Union Member State or in a country or territory that has signed a fiscal administrative assistance agreement:
  • Legal entities whose share of properties or rights in rem in real-estate assets is below €100,000 or 5% of the market value of said properties or rights.
  • Entities managing pension schemes and public interest groupings whose activity or financing justifies the ownership of the properties or rights.
  • SPPICAV and real-estate investment funds (FPI) not incorporated in the form of professional collective real-estate investment organisations and equivalent foreign organisations.
  • Legal entities undertaking to disclose certain information to the tax administration concerning the properties and the holders of more than 1% of securities.
  • Legal entities which file a 2746-SD return each year indicating, in particular, the location of the assets, their surface area, their market value and the identity of holders of more than 1% of securities. In this case, the exemption is proportional to the number of securities for which the holder’s identity and address have been disclosed.

What is the basis of the tax?

The annual 3% tax is based on the market value of the properties or rights in rem held on 1 January of the year of taxation.

Assets duly entered in the stocks of legal persons engaging in the profession of trader in land or property developer are not taken into account.

How is payment made?

Taxpayers must now file tax return no. 2746-SD electronically via their professional account, together with payment of the tax, by 16 May of each year.

What penalties apply?

For entities that have not filed the return on time, the administration will tolerate a regularisation of the situation by the entities, thereby exempting them from payment of the tax. However, this tolerance only applies once according to the decision of the Cour de Cassation of 4 November 2020, no. 18-11.771.

In the event of a subsequent failure, payment of the tax will be due (3% of the market value on 1 January) plus overcharges and interest on arrears.

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