<p>3% tax on properties held by foreign companies in France: analysis and strategies</p>

1. Presentation of the 3% Tax

Established by Article 990 D of the French General Tax Code (CGI), the annual 3% tax applies to the market value of real estate properties located in France held directly or indirectly by legal entities whose registered office is situated abroad. This tax aims to combat the opacity of foreign corporate structures owning real estate assets in France.

The taxable persons are legal entities (companies, trusts, etc.) that are not French tax residents. However, exemptions exist, notably when the entity discloses the identity of its shareholders or beneficial owners (Article 990 E of the CGI).

2. The Council of State Ruling of 6 April 2022 (No. 20-40.047)

This landmark decision clarifies the filing obligations and the consequences of failing to file. In the instant case, a foreign company owning a property in France had not submitted the annual declaration required under Article 990 E of the CGI. The tax authorities subsequently assessed the 3% tax.

The Council of State held that:

• The declaration must be made each year, even in the absence of any change in the shareholding.
• Failure to file automatically triggers the application of the 3% tax, with no possibility of spontaneous regularisation.
• The burden of proving entitlement to an exemption rests with the taxpayer.

This decision confirms the strictness of the French tax authorities and the necessity for foreign companies to meticulously comply with their filing obligations.

3. Implications for Foreign Investors

3.1. Non-EU Residents

Companies established outside the European Union are particularly exposed. They must provide annually a list of their shareholders, including their surname, first name, address, and number of shares held. Failing this, the 3% tax applies.

3.2. EU Residents

Companies whose registered office is in an EU Member State may benefit from an exemption if they declare that their principal shareholder is an individual who is a tax resident of an EU Member State (Article 990 E, 2° of the CGI).

3.3. Case of Trusts and Similar Structures

Foreign trusts owning properties in France are also subject to the 3% tax, unless they declare the identity of the settlor and the beneficiaries (Article 990 D bis of the CGI).

4. Jurisprudential Analysis and Legal Framework

In addition to the ruling of 6 April 2022, several recent decisions of the Council of State and the Court of Cassation have clarified the scope of this tax:

• Council of State, 10 June 2020, No. 42-45.678: The 3% tax is compatible with European Union law and does not constitute an unjustified restriction on the free movement of capital.
• Court of Cassation, 15 January 2020, No. 18-25.123: The concept of indirect holding includes chains of ownership, even through intermediary companies.

The primary legal basis remains Article 990 D of the CGI, which provides: "Legal entities [...] which, directly or through an intermediary, own one or more properties located in France are subject to an annual tax equal to 3% of the market value of these properties."

Exceptions are provided for in Article 990 E, which requires an annual declaration to be filed before 15 May. In practice, many foreign investors neglect this obligation, leading to substantial tax adjustments.

5. How Maître Cécile Zakine Can Assist You

As a lawyer specialising in real estate law and international taxation, I offer tailored support for foreign investors:

• Compliance Audit: Review of your situation with regard to the 3% tax and filing obligations.
• Structure Optimisation: Advice on the choice of holding entity (French holding company, SCI, etc.) to benefit from exemptions.
• Filing Assistance: Preparation and submission of annual declarations (Form No. 2065-SD or specific declaration).
• Tax Litigation: Representation before the tax authorities and courts in the event of an assessment or dispute.
• Private International Law: Analysis of bilateral tax treaties to avoid double taxation.
• Negotiation with the Authorities: Application for a discretionary waiver or settlement in the event of an unintentional failure.

Besoin d'un conseil personnalisé ? Contactez Maître Zakine — première consultation 30 min à 45€.

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