The 3% tax is an annual tax applied to both French and foreign legal entities that own, directly or indirectly, real estate or real-estate rights located in France. This tax is governed by Articles 990 D to 990 G of the French Tax Code (Code général des impôts).
Who Is Subject to the 3% Tax?
The tax applies, in particular, to:
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companies (including foreign holding structures and SPVs),
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funds, organisations and associations,
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trusts, fiducies and similar arrangements.
The tax is assessed at the level of the legal entity — not individuals — and becomes applicable if, on 1 January of the relevant year, the entity owns real estate located in France or any related property rights (shared ownership, usufruct, long-term leasehold, etc.).
In practice, the 3% tax is particularly relevant for foreign companies used as vehicles for acquiring French real estate.
Tax Rate and Taxable Base
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Rate — 3%.
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Taxable base — the market value (valeur vénale) of all real-estate assets and rights held in France by the entity as of 1 January of the relevant tax year.
How to benefit from an exemption
In many cases, the tax does not ultimately have to be paid if the entity meets the exemption conditions and completes the required formalities.
Exemption Based on Status (Automatic Exemption)
The following are automatically exempt:
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states and public institutions,
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international organisations,
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listed companies (entities whose shares are predominantly traded on a regulated market),
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certain collective investment vehicles,
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entities that use the property exclusively for their own industrial or commercial activity and record it on their balance sheet.
Exemption Through Disclosure of Beneficial Owners (the most common exemption for foreign investors)
A foreign (or French) entity may avoid the 3% tax if it:
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files the annual declaration No. 2746-SD (TVVI) by 15 May,
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discloses in this declaration the ultimate beneficial owners (individuals or entities) holding more than 1% of its capital, or identifies the next entity in the ownership chain that itself fulfils this disclosure obligation.
This is the most common exemption: with full transparency of the ownership chain and timely filing, the 3% tax is not payable.
Exemption Under Double-Tax Treaties
Entities established in a jurisdiction that has a double tax treaty with France providing for exchange of tax information may benefit from an exemption, provided they disclose their owners and comply with the procedural requirements.
Declaration and Deadlines
To benefit from an exemption, the entity must generally:
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file the annual declaration No. 2746-SD (or, in some cases, another form such as Form 2072 for certain SCIs),
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submit the declaration by 15 May of the year following the year of ownership,
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complete the declaration carefully, without omissions or errors in the beneficial-ownership information.
The declaration must be submitted electronically (télé-déclaration) or, in exceptional cases, on paper.
Risks of Non-Compliance
If the declaration is not filed, is filed late (especially repeatedly), or contains incomplete or incorrect information, the tax authorities may:
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require payment of the 3% tax itself (even if the entity would otherwise be exempt),
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impose interest and penalties,
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reassess the tax for previous years within the general statute of limitations.
Recent case law and Ministry of Finance guidance highlight that, for the 3% tax, the margin for error is extremely limited: an incomplete or incorrect declaration may have consequences almost as severe as not filing at all.
Practical Conclusion
With an appropriate ownership structure and timely annual filings, the 3% tax will generally not apply. The essential requirement is to ensure complete transparency of the ownership chain and to disclose beneficial owners to the French tax authorities each year.
This article is provided for informational purposes only. The agency does not provide personalized tax calculations for individuals, except for clients of Property Service Azur.
