The forgotten brother and one of the many taxes in France, is the 3% tax on real estate. The motive behind this 3% tax is the desire to prevent shareholders of non-French companies from escaping French wealth tax and other taxes. Consequently, "all" legal entities that - directly or indirectly - own real estate in France are subject to an annual tax of 3%. However, there are several exemptions to this tax liability, but the procedure for invoking it will be slightly modified from 2021.
3% tax on French real estate
In France, a tax of 3% applies in principle to (i) all French and foreign legal entities, regardless of their form, (ii) which directly or indirectly hold property rights in (iii) built and/or unbuilt real estate located in France and (iv) of which 50% of the French assets, in the legal entity, consists directly or indirectly of French real estate.
Companies that have invested in French real estate without owning any other assets in France are by definition subject to this tax. In addition, companies that indirectly hold French real estate are also subject to this tax (e.g., all upper holding companies of a company with French real estate). The 3% tax amounts to 3% of the real value of the property.
In many cases, however, French law provides for an exemption from this tax and the corresponding obligation to declare. In certain situations, however, registration is required in order to benefit from the exemption.
Exemption without registration requirement
The tax and declaration requirement does not apply when, among other things:
- The actual value of the ownership share in the property in France is less than 100,000 euros;
- The actual value of the ownership share in the property in France is less than 5% of the market value of the property.
Exemption with registration requirement
An exemption also applies to legal entities whose registered office is located:
- Within the European Union or;
- A third country/territory that has entered into an administrative agreement with France to combat tax fraud and evasion
However, in order to benefit from the exemption, each company must spontaneously file a petition for exemption each year and do so no later than May 15 of the following calendar year.
However, as of January 1, 2021, this annual declaration must be submitted online via the French tax portal. And this brings with it some additional obligations:
- Application, registration and activation of a SIREN number;
- Keeping (digital) accounts in accordance with French accounting standards;
- Preparation of financial statements and corporate tax returns in France.
Check in good time whether or not you fall within the scope and if so, whether an exemption can be obtained. If you want more information, please contact one of our specialists. You can reach us at any time on 051 26 82 68 or by e-mail to email@example.com. .