France's 3% tax on property held by companies and entities

Who is covered

The tax applies to all legal entities, whatever their form (BOI-PAT-TPC-10-10, § 1 to 50):

• legal persons: companies limited by shares, partnerships, sociétés civiles, foundations;
• bodies and groupings, whether or not they have legal personality;
• fiducies and comparable institutions: trusts, family foundations, investment funds without legal personality.

An entity is also liable when it holds the property through an intermediate entity, however many tiers there are in the chain. The tax is, however, due only by the entity or entities closest to the property that are not exempt (BOI-PAT-TPC-10-20, § 1 and 10). Co-ownership property companies under article 1655 ter of the CGI fall outside its scope.

The fraction of the property corresponding to the rights of an individual who is a shareholder of an exempt entity is not subject to the tax (BOI-PAT-TPC-10-20, § 10). The question arises as soon as a company is interposed, for example an SCI (property-holding company) some of whose shares are held by a foreign company.

The base: 3% of market value

The tax applies to built and unbuilt property located in France and to the droits réels (rights in rem) relating to it, whether let or not, owned on 1 January of the tax year (BOI-PAT-TPC-10-30, § 1 to 40). It is calculated:

• on the market value of the property on that date, at a rate of 3%;
• without deduction of debts, including loans taken out to buy;
• excluding property used for the professional activity, other than property activity, of the entity or of an entity in the same group;
• excluding the stock of marchands de biens (property dealers) and developers;
• for indirect holdings, in proportion to the rights held in the intermediate entity.

Recalculated example: a company with its registered office in a State that has neither an administrative assistance agreement nor a non-discrimination clause with France owns a flat in Paris valued at €2,000,000 on 1 January. Without an exemption, the tax is 2,000,000 × 3% = €60,000 a year, even if the property is financed by borrowing.

Exemptions

Automatic exemptions (BOI-PAT-TPC-20-10):

• sovereign States, international organisations and entities they control by majority;
• entities not predominantly invested in property: French property, excluding professional use, representing less than 50% of their French assets;
• entities whose securities are traded significantly and regularly on a regulated market, and their wholly owned subsidiaries.

Exemptions reserved for entities with their registered office in the EU, in a State bound to France by an administrative assistance agreement, or in a State whose treaty with France contains a non-discrimination clause (BOI-PAT-TPC-20-20, § 40):

• a) holding a property worth less than €100,000 or 5% of its market value, assessed property by property;
• b) pension funds, entities recognised as being of public utility or managed on a non-profit basis, where the activity or its financing justifies the holding;
• c) SPPICAV (property investment companies with variable capital), property investment funds and foreign equivalents;
• d) full exemption for an entity that declares each year, on form 2746-SD, its property and the identity of its shareholders, or that gives an undertaking to provide this information on request;
• e) partial exemption, in proportion to the shares whose holders are disclosed.

Shareholders holding 1% or less do not have to be declared (§ 330). Companies that already file form 2072, such as SCIs not subject to corporation tax that let their property, are deemed to meet this information requirement and are exempt if they comply with it (§ 370 and 380). In 2016, the BOFiP (the tax authority’s official guidance) clarified the supporting documents for shareholders’ identity (ACTU-2016-00205).

The BOFiP example (§ 480): an entity that discloses the shareholders holding 80% of its capital is exempt up to 80%. With a €1,000,000 property, the tax applies to €200,000, i.e. €6,000.

Form 2746-SD and payment

The liable entity files form 2746-SD (CERFA no. 11109) each year, in duplicate, no later than 15 May, stating the location, description and market value of the property on 1 January. The tax is paid on filing (BOI-PAT-TPC-30, § 1 and 30). An entity claiming exemption by disclosing its shareholders files form 2746-SD within the same deadline, no later than 15 May (BOI-PAT-TPC-20-20, § 360). The undertaking to provide information is given on acquisition; the tax authority allows a period of two months (§ 450).

In the event of default:

• assessment by default if the entity does not regularise within 30 days of a formal notice;
• late-payment interest and a surcharge for late filing;
• the first regularisation within the time limit avoids payment for an entity that was entitled to full exemption (BOI-PAT-TPC-30, § 10 to 30).

Each entity interposed between the liable entity and the property is jointly and severally liable for payment. On a sale by an entity established outside the EU, the tax representative appointed for the capital gain is also liable for the 3% tax for the year of the sale, if their undertaking expressly covers it (§ 50 to 70).

Which professional to consult

The notaire (notary) acts on a purchase or sale by a company and, on a sale, checks the appointment of the tax representative, who is also liable for that year’s tax. The agent immobilier (estate agent) can provide a valuation, as the tax is calculated on the market value on 1 January.