The French 3 % Tax: Regularising the Past and Challenging an Assessment

Two situations bring most foreign structures to a French tax lawyer on this subject. Either a letter has arrived and the clock is running. Or nothing has arrived, somebody has realised that no return has ever been filed, and the question is whether to come forward.

The two call for different answers, and the order of events matters more than the arguments.

The numbers that drive every decision

3 % of the gross market value of the French property, each year, with no deduction for debt.

Six years of reach where nothing has been filed.

A thirty-day window, after a formal notice, in which the tax can still be avoided entirely.

On a property worth 2,000,000 euros, six years is 360,000 euros before interest and penalties.

Nothing has arrived yet: coming forward

French administrative guidance contains a mechanism that is not widely known outside France, and that is worth more than most arguments.

An entity that could have claimed the filing-based exemption but has not filed must be given formal notice to put matters right within thirty days. If it does so, the tax is not payable and no penalty is applied. The authorities apply the same treatment to entities that file voluntarily, without having received a formal notice (BOI-PAT-TPC-30).

Four limits define it, and each has to be checked before anything is filed.

It works once

The relief applies only to the first request for regularisation, but it then covers all non-time-barred years. That is both its strength and its danger: a partial filing, covering two or three years when six were open, consumes the relief for the rest.

The practical rule admits no nuance. File everything, in one go, or file nothing yet.

It assumes the substantive conditions can be met

Regularising means filing returns that produce an exemption. That assumes the entity meets the seat condition and can identify and evidence its real holders of more than 1 % at 1 January of each year concerned.

An entity that cannot name a real economic beneficiary gains nothing: it will file returns that do not exempt it (Cass. com., 10 May 2024, no. 21-11.230).

It covers failure to file, not inaccurate filing

The guidance refers to taxpayers who have not filed. An entity that filed every year, but with the wrong holders, does not come within its terms. Its position is a matter for dispute, not for regularisation.

Partial exemption is not free

Where the exemption claimed is the partial one, available in proportion to the holders actually disclosed, the tax remains payable for the undisclosed part. Regularisation is then cheaper, not costless.

A 2026 judgment has made this relief far stronger

Until recently this was treated as a concession, and practitioners hesitated to rely on it. A judgment of July 2026 changed its legal character.

A company had given an undertaking to disclose in 1993. A change in the law rendered it ineffective in 2008, without anyone telling the company, which filed nothing thereafter. In 2015 the authorities gave it formal notice to file the returns for 2009 to 2014 « together with payment of the tax ». The company paid 2,418,062 euros.

The Cour de cassation set the decision aside, on the basis that published administrative guidance is binding on the authorities, and that the lower court should have examined whether they had disregarded their own guidance by demanding payment in the formal notice (Cass. com., 8 July 2026, no. 25-12.737).

Two consequences follow. The relief is no longer a discretionary favour but an enforceable guarantee. And a formal notice that demands payment at the same time as filing is open to challenge, which makes it worth reading word for word in every file.

A letter has arrived: what it is, and what it is not

The first thing to establish is which document you are holding, because the consequences differ entirely.

• A request for information. Not binding, but the answer shapes everything that follows.

• A formal notice to file within thirty days. This is the decisive window, and the one in which the relief above still operates.

• A proposed assessment. The thirty-day period to respond can generally be extended by a further thirty days on request. Ask for it, every time.

• A recovery notice. The assessment stage is over; what remains is a claim, with a request to suspend payment.

Where the authorities proceed by assessment in the absence of a return, the burden of proof shifts. It is then for the entity seeking discharge to prove its case, not for the authorities to disprove it. That alone is a reason to use the thirty-day window rather than to litigate later.

How far back can they go?

The tax is assessed and collected under the rules governing registration duties, which determines the reach.

The short three-year period applies only where the liability was sufficiently disclosed by a registered deed or return, without further enquiry being needed. Where nothing has been filed, that condition is not met and the six-year period applies, running from the operative date.

For this tax, six years is the rule and three the exception. It is the main reason assessments reach amounts out of all proportion to the size of the structures concerned.

Penalties: two different 40 % surcharges

They are routinely confused, including in assessments, and the point is worth checking every time.

• One sanctions failure to file: 10 % where no formal notice has been given or where the return is filed within thirty days of one, and 40 % where it is still not filed within those thirty days. No intention has to be shown.

• The other sanctions an inaccurate return: 40 % for a deliberate failure, 80 % for fraudulent conduct. Here the burden of proving intent rests on the authorities.

Late interest applies in both cases. A 40 % surcharge imposed for a deliberate failure, without intent being made out on the facts of the file, is open to challenge. One imposed for late filing is challenged differently: on the validity of the formal notice and on the thirty-day period.

What no longer works

Recent case law has closed several doors, and a defence built on them will lose both time and credibility.

• Arguing that the tax itself offends the free movement of capital. That argument has been rejected.

• Arguing that the authorities had to request the information before assessing, where the entity had filed returns. The two routes to exemption were mutually exclusive, and the undertaking route has in any event been abolished (Cass. com., 1 April 2026, no. 25-10.605).

• Complaining that procedural documents were not served on interposed entities. Those entities are jointly liable for payment but are not the taxpayers, and the authorities need not serve them with the documents that follow the proposed assessment (Cass. com., 28 May 2026, no. 24-18.404).

• Producing a share register, however certified and apostilled, as self-sufficient proof of ownership (Cass. com., 12 October 2022, no. 20-14.073).

What still works

Service of the formal notice

For a foreign company this is the most productive ground, and the most often overlooked.

A Spanish company owning a château in France had been assessed for 2012 to 2017. The formal notices had been served at its registered office, where the acknowledgement of receipt was signed by the building caretaker, who said he had been unable to identify the addressee. The Cour de cassation set aside the decision upholding the procedure, because the court had not examined whether the caretaker had authority to sign or had sufficient personal or professional connection with the company for it to be expected that he would pass the letter on (Cass. com., 5 November 2025, no. 24-10.577).

In cross-border files, where letters land with a domiciliation agent, a caretaker or a former director, the point is far from theoretical.

The authorities' own guidance

As set out above, published guidance is binding on the authorities. The formal notice should be read against it, word for word.

Market value

Valuation is a question of fact, and usually the ground that yields the largest reduction. Two lines combine: challenging the comparables relied on, their date, their location and their condition; and producing a documented counter-valuation reflecting the constraints specific to the property, whether occupation, easements, co-ownership, condition or planning and heritage restrictions.

Debt is not deductible from the base. Arguing from the acquisition loan is ineffective and weakens the rest of the response.

Whether the entity was within the scope at all

Two questions precede everything else. Was the entity genuinely property-rich at 1 January, once property used for a non-property trading activity is excluded? And did it meet the seat condition, bearing in mind that the list of qualifying States was replaced on 8 October 2025 and is wider than before? See Which Jurisdictions Still Allow Exemption From the French 3 % Tax.

The first thirty days

• Identify exactly what you have received, and the date of actual receipt. Keep the envelope and note who signed for it.

• Request an extension of the response period wherever the procedure allows.

• Reconstruct the ownership chain and the real holders at 1 January of each year concerned, with evidence from outside the structure, above all the financial flows.

• Read the formal notice against the published guidance.

• Do not pay before deciding between regularisation and challenge. Paying to stop the process does not prevent a later claim, but it weakens the negotiating position.

Frequently asked questions

Can we still regularise after a proposed assessment?

The relief operates at the formal notice stage, not after. Later regularisation still matters for penalties and good faith, but it no longer prevents the tax from being due. That is why the thirty-day window is decisive.

Do we have to pay before challenging?

No. A claim may be accompanied by a request to suspend payment, which stays enforcement, the authorities being entitled to require security above a certain amount. A statutory mortgage already registered does not disappear.

Which court hears the dispute?

Because the tax follows the rules governing registration duties, disputes go to the civil courts, the tribunal judiciaire and then the court of appeal, not to the administrative courts. This differs from corporate tax and shapes the procedure.

The foreign company has been dissolved. Who is pursued?

Interposed entities remain jointly liable for payment, and the French Treasury holds a statutory mortgage over the property. The disappearance of the top company does not end the exposure; it moves it down the chain.

How long does a dispute take?

The recent judgments of the Cour de cassation concern assessments issued between 2012 and 2018. That gives the order of magnitude, and explains why dealing with the matter at the formal notice stage is almost always preferable.

How we work

Sassi Société d'Avocats has acted for more than thirty years in French tax audits and litigation and international tax, at every stage: responding to a formal notice, responding to a proposed assessment, hierarchical review, formal claim and litigation before the French civil courts.

We check service, compliance with the authorities' own guidance, the basis of the penalties and the valuation relied on, before turning to the merits.

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