This is an operation which, in economic terms, is akin to a real estate purchase financed by a credit institution; what distinguishes it from traditional financing is that the lender retains ownership of the asset throughout the term of the financing deployed. 

In legal terms, the operation can be analysed as:

  • a lease entered into between the financial institution (the lessor) and the company or investor (the lessee) providing the latter with enjoyment of the assets over the term of the lease agreement;

  • accompanied by an undertaking to sell, enabling the tenant ultimately to purchase the asset for a price that takes account of the payments paid under the lease;

  • these lease payments are calculated not as a traditional rent but as a financial rent intended to writedown the cost of the real estate asset and its financing;

  • depending on the case, the cost payable by the lessee for taking up the option is not significant or may represent a value that is often similar to that of the land. 


 In the case of a  sui generis operation, tax law has an approach that combines the legal and accounting aspects.

The tax arrangements applicable to a lease agreement can be analysed:

  • at the time the agreement is entered into,
  • during the term of said agreement, and
  • at the time the option is taken up 

Agreement entered into 


TPF (Registration fees)

No special tax arrangement unless:

  • the leasing company purchases the real estate asset from the future lessee (sale and leaseback operation) :
    • ðTPF payable on the purchase of the real estate asset is calculated at the rate of 0.715% and not 5.09 / 5.81%
  • if the term of the lease is longer than 12 years:
    •  ðcompulsory registration in the mortgage registry (Conservation des Hypothèques) resulting in TPF being applied at the rate of 0.715% on the amount of cumulative rents (maximum 20 years under Article 742 of the FTC).

If this obligation is not complied with, the favourable regime applicable to taking up the option in terms of TPF cannot be applied.


The rents payable under the lease agreement may be liable to VAT under the rules of ordinary law, and in particular at the lessor’s option in the case of a bare real estate asset used for business purposes. 

Lifespan of the agreement 

At an accounting level, the lessee’s situation is comparable to that of a tenant, in that it deducts the payments made under the lease agreement from its accounting result. Nevertheless, in tax terms, account is taken of the fact that such payments are not normal rents, but to some extent a specific form of loan repayment. 

On this basis, the tax arrangements applicable to the lease aim to put the lessee in a position that is as close as possible to the one it would be in if it had purchased the real estate asset directly, using traditional financing techniques. Nevertheless, the lease usually provides the lessee with a cash benefit, except in the case of office real estate assets in the Ile-de-France region.


The payments made by the lessee over the term of the lease are tax-deductible, provided that they do not correspond to the purchase price of the land, which by nature is a non-depreciable item. 

The monies paid by the lessee should therefore be applied according to the various financial headings of the agreement, namely:

  • handling charges;
  • financial costs;
  • construction costs; and
  • the cost of the land. 

These charges are applied on the basis of the information provided by the lessor regarding the breakdown of lease payments among the various financial components of the operation. 

ðAs long as the lease payments can be applied to items other than the cost of land, they are fully deductible. Any remaining balance (presumably the final lease payments) will not be tax-deductible and these payments will therefore have to be absorbed back into the lessee’s profit for tax purposes.


If the lease relates to an office real estate asset located in the Ile-de-France region, the only deductions that may be made are those that would have applied if the real estate asset had been purchased directly.

ðLease payments relating to real estate asset work may only be deducted to the extent of any depreciation costs that the company leasing the real estate asset would have been able to apply if it had owned the real estate asset (based on a theoretical depreciation schedule for the real estate asset). 

End of the agreement

Lease payment
At the time the option is taken up, and to put the lessee back in a position identical to that in which it would have been if it had purchased the real estate asset (Articles 39.10 and 239 sexies C of the FTC ), it must write back the tax on the share of the lease payments previously deducted, corresponding to the difference between: 

  • the total amount of the monies that it would have been entitled to deduct if it had purchased the real estate asset directly (handling charges, financial costs and depreciation costs of real estate asset work over the period in question); and
  • the amount of any lease payments previously paid and deducted for tax purposes. 

In principle, no writeback will be applied in respect of office real estate assets in the Ile-de-France region (writeback is progressive on an annual basis in tandem with payments made under the lease). 

ðThe tax benefit of a lease agreement for the lessee (excluding office real estate assets in the Ile-de-France region) will therefore be limited to early tax deduction of lease payments equivalent to any surplus in relation to the costs and depreciation that it would have been entitled to deduct in the case of a standard acquisition, but not a final deduction.


The take-up price of the option is normally subject to TPF at the rate applicable under ordinary law, namely 5.09% or 5.81%. 

As a mitigation measure, the rule whereby TPF is based on the asset’s market value if this is higher than the price (see hyperlink: Registration fees (TPF) / Base for assessment) will not apply (in practice, the market value is always higher than the take-up price of the option) unless the term of the lease is longer than 12 years and the lease has not been registered. 

Assignment of the agreement during its lifetime

 The lessee may assign its rights under the lease agreement to a third party to the agreement before the option is taken up. 

While this assignment relates to the real estate asset in the economic sense, legally it relates to the rights held by the lessee (who at this point is not the owner of the real estate asset) under the lease agreement vis-à-vis the lessor, namely:

  • the right to be the tenant of the real estate asset, and
  • the option, once the agreement expires, to purchase the real estate asset at an agreed price, taking into account the payments already made under the lease.
The price of an assignment is usually determined by taking into account the market value of the underlying real estate asset, less any amounts still owed to the lessor as repayment of the principal of the debt associated with the real estate asset, taking account to a greater or lesser degree of the financial terms of the agreement in relation to market conditions on the date the real estate asset is assigned, plus any costs linked to an early exit from the lease agreement (penalty charges).

Registration fees / VAT

The price must be split between:

  • the share of the price that relates to the "lease right", subject to this type of assignment:
    • - below €23,000: 0%;
    • - between €23,000 and €200,000: 3%;
    • - above €200,000: 5%; and
  • the share relating to the undertaking to sell that is not subject to registration fees but is automatically subject to VAT if it concerns a plot of real estate asset land or a real estate asset completed within the past 5 years or optionally in other cases (unless Article 257 bis of the FTC applies).

 This price breakdown is usually an economic fiction that does not correspond to the way in which the price is determined by the parties. It must however be produced in order to determine the basis of application of the "lease right" and of VAT if applicable, according to a ruling handed down by the Court of Cassation.

Profit tax

For the vendor, the operation generates a capital gain, the amount of which corresponds to the assignment price of the agreement, less any non-deductible lease payments previously made (in practice, the non-deducted share of payments in the case of an office real estate asset located in the Ile-de-France region). 

For the purchaser, the purchase price specified in the agreement constitutes a fixed asset. Furthermore, at the time the option is taken up, it will only have to execute the writebacks provided for pro rata to the period of time for which it was the lessee in relation to the full term of the contract.


This document and the information it contains are intended to provide as complete and accurate information as possible. It is however theoretical in nature and must undergo all necessary checking prior to its application. FiscalImmo and its authors cannot in any circumstances be held liable on the basis of this document.