The 3% tax on market value

The tax on the market value of property owned directly or indirectly in France by any French or foreign legal entity, whether incorporated or unincorporated, is provided for by Articles 990 D, 990 E, 990 F and 990 G of the French General Tax Code.

The tax is payable on real properties and real property rights owned in France. Certain exemptions are possible. The tax rate is 3%.

 

Scope

The tax applies to all French and foreign corporate bodies, organisations, trusts and comparable institutions (legal entities), regardless of their legal form, whether incorporated or unincorporated, that own real properties or real property rights in France on 1 January of the tax year, either directly or through intermediaries.

 

Exemptions
 

Exemptions that do not require filing form no. 2746

The tax does not apply to:

  • International organisations, sovereign States and their political and territorial subdivisions, and legal entities in which they have a majority stake

  • Legal entities that are not deemed companies investing predominantly in real property, whose property assets located in France account for less than 50% of French assets they hold, either directly or indirectly

  • Legal entities whose shares, units and other rights are the subject of significant and regular transactions on a regulated market, as well as corporate bodies in which these entities hold the entire share capital, either directly or indirectly

  • Legal entities that have their registered office in France or another EU Member State

  • Legal entities that have their registered office in a country or territory bound to France by an administrative assistance agreement with a view to combating tax evasion and avoidance

  • Legal entities that have their registered office in a country bound to France by a treaty under the terms of which they enjoy the same treatment as legal entities having their registered office in France, and that:

    • Directly or indirectly hold a share in real properties situated in France or hold real property rights relating to such properties, whose market value is less than €100,000 or 5% of the market value of the aforementioned properties or rights

    • Are established for the purpose of managing retirement schemes, are public interest organisations, or organisations managed without personal gain, and whose business activity or financing justifies ownership of real properties or real property rights

    • Take the form of a real-estate investment trust (FPI) or a limited liability real estate company with variable capital (SPPICAV) and legal entities that must comply with equivalent regulations, subject to the provisions of Article 990 E 3 c) of the French General Tax Code

    • Under the provisions of Article 990 E 3 d) of the French General Tax Code, agree to provide the tax authorities, at their request, with the location, form and market value of properties owned as of 1 January, as well as the identities and addresses of all shareholders, partners and other members
       

Exemptions that require filing form no. 2746

Legal entities liable for VAT and whose registered office is located in France, in another EU Member State or in a country or territory bound to France by an administrative assistance agreement with a view to combating tax evasion and avoidance or in a country bound to France by a treaty under the terms of which they enjoy the same treatment as legal entities having their registered office in France may also be eligible for:

  • Total exemption from VAT under the provisions of Article 990 E 3 d) of the French General Tax Code provided that they freely file declaration no. 2746 each year by 15 May at the latest. Nevertheless, legal entities that also file a declaration containing the information set out in d) of Article 990 E of the French General Tax Code shall be exempt from this formality. This is the case for legal entities that file declaration no. 2038 or 2072 each year.

  • Partial exemption from VAT under the provisions of Article 990 E 3 e) of the French General Tax Code provided that they freely file declaration no. 2746 each year by 15 May at the latest. The exemption is granted on a pro rata basis, depending on the number of shares, units or other rights held as at 1 January by the shareholders, partners or other members, whose identities and addresses are included in form no. 2746.

Jointly with the two provisions cited above, the legal entity that is liable for VAT and that files form 2746 for partial or total exemption:

  • is exempt from declaring shareholders, partners or other members that hold less than 1% of shares, units or other rights

  • is exempt from declaring real properties and real property rights whose market value is lower than the thresholds determined in Article 990 E 3° a) of the French General Tax Code, in cases of direct or indirect ownership of more than one real property.