The 3% tax
The 3% tax is set out in Articles 990 D and seq. of the FTC.
The aim of the tax is not to collect tax, but rather to allow the tax authorities to establish the identity of persons owning immovable property situated in France by means of one or more interposed companies: this tax was thus introduced in 1982 just after the wealth tax (ISF).
The tax is due by all companies that mainly own, directly or indirectly, real estate assets in France.
There are however a number of exemptions, either in general or subject to the provision of information regarding their shareholders.
The following are thus exemption from the 3% tax:
- listed companies and their subsidiaries;
- state-owned companies;
- pension funds and other non-for-profit organisations whose purpose requires the holding of real estate;
- legal entities established in EU member states or in a state that has concluded an ad hoc agreement with France (administrative assistance agreement aimed at combating tax fraud and evasion, or one containing a clause of equal treatment with France) whose holdings, direct or indirect, of a share of buildings in France or of rights in rem relating to such assets have a sale value of less than €100,000 or 5% of said property (analysed per asset);
- in the absence of one of the above automatic exemptions, any company dealing mainly in real estate located in a state that has concluded an ad hoc agreement with France will be exempt:
- - if it provides the French tax authorities with a list of the identity of its shareholders each year (only the identity of shareholders > 1% is required) and a list of the real estate assets they hold (directly or indirectly); or
- - if it undertakes to provide such information at the first request of the tax authorities (such undertaking must be made within two months of the acquisition of the real estate asset or the shareholding leading to the tax becoming applicable).
If tax is due, the tax base will consist of the sale value of the real estate asset held directly or indirectly by the company concerned in proportion to its holding.
The tax is due on 15 May of each year.
Where exemption is obtained on the basis of a declaration or an undertaking, all companies interposed between the company that owns the real estate assets and the company owing the tax are jointly and severally liable – as regards the French tax authorities – to make payment of the 3% tax should it become due. This joint and several liability allows the tax authorities to demand payment of the tax from the company directly owning the real estate assets, against which it may enter a legal right of lien on behalf of the French Treasury.
The statutory limitation is the same as that for registration fees, namely, in the absence of a declaration, it will be at the end of the sixth year following that giving rise to the tax charge (e.g. for the 2014 tax the limitation will have passed and the risk thus extinguished as of 1 January 2021).
This joint and several liability makes the 3% tax an issue not just for those liable, but also for: