Land tax (Taxe de Publicité Foncière, TPF)
Under ordinary law, land tax is applied at a rate of 5.09 / 5.81%, plus a fee for property transaction formalities of 0.10%.
(See hyperlink: Acquisition/Disposal > Real estate asset > Registration fees TPF).
Since 1 January 2016, an additional tax has been added to the benefit of the Ile-de-France (IDF) region of 0.60% for the transfer of offices, commercial premises and storage premises located in Ile-de-France (except in certain cases, in particular: new buildings and buildings acquired with a resale commitment).
However, there is a particular regime applicable to operations involving land not previously built on that is intended for construction or for a new building.
Land for building / bare plots / buildings "for reconstruction" undertaking to build
Pursuant to Article 1594-0 G, A of the FTC, acquisitions of building land or similar are exempt from land tax (only a fixed fee of €125 applies) subject to the purchaser undertaking to construct a new building on the land within a period of 4 years (which may in certain circumstances be extended). The purchaser must be a taxable person for VAT purposes, i.e. acquiring the land for business rather than private purposes.
This exemption applies irrespective of the applicable VAT regime and whether or not construction is permitted on the land.
The undertaking to build must appear in the deed of purchase.
Extension of tax period
If the building is not realised within the 4-year period, this may be extended annually by means of an express request to the tax authorities by the taxpayer.
Such request shall be deemed accepted if no response is forthcoming within a period of 2 months.
If the request is refused, there must be grounds for such refusal.
Transfer of the undertaking to build
Where a real estate asset is disposed of before construction is completed, the purchaser’s undertaking to build may as necessary be transferred to the sub-purchaser, who will in this scenario be bound by the 4-year period running from the time of acquisition by the original purchaser. A request for an extension of this period may be made under the provisions of ordinary law.
The original purchaser is then discharged from its undertaking.
The transfer of the undertaking to build depends on the will of the parties: it is not an obligation.
New real estate assets
Transfers of new buildings, i.e. buildings completed within the five years prior to transfer, are subject to land tax at a reduced rate of 0.715% (Article 1594 F quinquies A of the FTC). In addition, the additional tax of 0.60% for offices, commercial premises and storage premises in Ile-de-France is not applicable.
This rate applies to all transfers made in the above-mentioned 5-year period.
Starting point for the 5-year period: completion of the building
ð Difficulties may arise if it can be factually demonstrated that the building was completed prior to the date of declaration of completion (e.g. tenant occupies premises prior to declared completion date).
focus // acceptance in lieu of payment
As part of the development operations the parties may decide upon acceptance in lieu of payment:
ð The developer pays the price of the land, not by paying for it directly but rather by giving the assignor lots of equal value in the building that is to be built
ðThe vendor thus receives a real estate asset (often in the form of apartments)
ðThe developer does not have to finance the acquisition of the land
ðIn tax terms (profits tax, VAT, land tax), the operation is similar to a double sale:
The tax administration keeps a close eye on the price, which must correspond to the sale value of the lots assigned to the person selling the land.
A more complex alternative option is sometimes envisaged, as follows:
ð This option, while complicated, reduces the tax consequences of the operation, as the assignor remains the owner of part of its land and the value of the constructions carried out on its behalf are less than the value of the lots themselves.
ð The tax effects are thus limited.