The French 3 % Tax on Property-Owning Entities: What Changed on 25 June 2026

If a company, trust, foundation or fund you are connected with owns property in France, and nothing has been filed with the French tax authorities for years because an undertaking was signed at the time of purchase, this article concerns you directly.

That undertaking no longer exists. Article 102 of Law no. 2026-534 of 25 June 2026 on combating social security and tax fraud abolished it. From now on, exemption from the 3 % tax requires an actual filing, every year, by 15 May. An entity that does not file becomes liable to a tax of 3 % of the market value of its French property, for each year concerned.

On a property worth 5,000,000 euros, that is 150,000 euros a year, before late interest and penalties, and the authorities can go back six years where nothing has been filed.

In short

Exemption by way of an undertaking to disclose on request ended on 27 June 2026.

Only an annual return, filed by 15 May, now preserves the exemption.

Entities with no permanent establishment in France must appoint a French representative.

The first filing under the new regime is due by 15 May 2027, on the position at 1 January 2027.

What is the 3 % tax?

The tax under article 990 D of the French Tax Code was introduced in 1983. It was never designed to raise revenue. It was designed to force disclosure: the French State forgoes the tax entirely, provided it is told who stands behind the structure that owns the property.

It applies to legal entities, which the statute defines broadly as companies, organisations, fiducies and comparable institutions, French or foreign, whether or not they have separate legal personality. Trusts, foundations, partnerships, investment funds and ordinary holding companies all fall within it. What matters is ownership, direct or through one or more interposed entities, of French real estate or of rights in rem over such property on 1 January.

How is it calculated?

The base is the market value of the French property on 1 January of the tax year, and the rate is 3 %.

Two points surprise foreign investors. Debt is not deductible: the mortgage that financed the acquisition does not reduce the base, unlike the position under the French wealth tax on real estate. And where the property is held through an interposed entity, the base is reduced in proportion to the rights held in that entity (BOI-PAT-TPC-10-30).

Who actually pays in a multi-tier structure?

This is the point most international holding chains underestimate.

Under article 990 F, the taxpayer is the entity, or entities, closest to the property in the chain that is not exempt under paragraph 3° (d) or (e) of article 990 E. A filing failure higher up the chain therefore pushes the liability downwards.

More importantly, every entity interposed between the taxpayer and the property is jointly and severally liable for payment. The French authorities do not need to work their way up a foreign structure in order to collect. They can address themselves to the French link in the chain, even a modest property company, and leave the shareholders to sort out contribution among themselves.

Disclosure also operates at every level. Each non-exempt interposed entity must itself disclose its own holders of more than 1 %, so the ownership has in practice to be reconstructed tier by tier, up to the real beneficial owners.

Which exemptions survive the reform?

The reform touched only the filing side. Exemptions based on the nature of the entity or the composition of its assets are unchanged.

Exemptions requiring no filing at all

• International organisations, sovereign States, their political and territorial subdivisions, and entities they control.

• Entities whose French real estate represents less than 50 % of their French assets. Property used for the entity's own trading or professional activity, other than a property activity, is not counted as a real estate asset, so an operating building can bring an entity below the threshold.

• Entities whose shares are significantly and regularly traded on a regulated market, and their wholly owned subsidiaries.

• Entities whose share of French property is worth less than 100,000 euros or less than 5 % of the value of the property. The two thresholds are alternative and assessed property by property.

• Pension organisations, bodies of recognised public utility or with non-profit management, and French real estate investment vehicles and their foreign equivalents.

The disclosure exemption, which the reform has reshaped

This is the route taken by most private wealth structures, and it starts with a condition that has nothing to do with filing: the entity must have its place of effective management in France, in an EU Member State, in a country that has concluded with France a treaty on administrative assistance against tax fraud and evasion, or in a State bound to France by a treaty containing a non-discrimination clause (BOI-PAT-TPC-20-20).

This condition is decisive and it is checked first. An entity whose registered office sits in a jurisdiction with no such agreement cannot claim any of these exemptions, and the French authorities may rely on the place of effective management where it differs from the registered office. A structure chosen for confidentiality may fail here, before any question of filing arises.

Where the condition is met, article 990 E offers full exemption to an entity that discloses the identity and address of every holder of more than 1 % of its shares or rights, and partial exemption, in proportion to the holders actually disclosed, to an entity that cannot identify them all.

What article 102 of the June 2026 law removed

Until 26 June 2026, full exemption could be obtained in either of two ways: by filing return no. 2746-SD every year, or by signing, once and for all at the time of acquisition, an undertaking to disclose the same information if the tax authorities asked for it.

The second route is gone. Since 27 June 2026, paragraph 3° (d) of article 990 E refers only to entities that file each year by 15 May, and article 990 F extends that obligation expressly, beyond taxable entities, to those exempt under paragraph 3° (d) and (e).

Three consequences deserve attention.

Undertakings signed before the reform have lost their legal basis. The statute contains no transitional provision and the tax authorities have not yet published their commentary. The prudent position is to stop relying on an old undertaking and to move to annual filing.

The procedural protection attached to the undertaking has gone with it. Article R. 23 B-1 of the Book of Tax Procedures required the authorities, before any assessment, to request the information by registered letter, and then to serve a formal notice where the reply was incomplete. That sequence, which gave two opportunities to put matters right, no longer has a basis.

The mechanism allowing a defaulting entity to recover the exemption for the future by signing a fresh undertaking has also been repealed.

The new French representative requirement

The same article 102 created article 990 FA. An entity subject to the filing obligation that has no permanent establishment in France must appoint, in its return, an individual tax resident in France or a company with its registered office in France, authorised to receive on its behalf all communications, procedural documents and notifications relating to the control of the tax.

The requirement applies even where the entity is exempt, provided it has to file.

The default rule is the one to watch. Where no appointment is made, the entity closest to the property in the chain of participations and known to the authorities, whether exempt or not, is deemed authorised to receive those documents. In practice, an assessment aimed at a Luxembourg or British structure may be validly served on a French property company at the bottom of the chain, whose manager has no idea what is at stake or that time limits have started to run.

The appointed representative is a recipient of documents, not a guarantor: the statute does not make them liable for payment of the tax.

What to do before 15 May 2027

The measures took effect on 27 June 2026. Because the filing deadline falls on 15 May, their first practical effect will be the return due by 15 May 2027, covering the position at 1 January 2027.

• If the entity already filed return no. 2746-SD every year, nothing changes, except that it must now appoint a representative if it has no permanent establishment in France.

• If the entity relied on an undertaking, it must move to annual filing. This is the most exposed group, and often the least aware of its own position: the undertaking was signed fifteen or twenty years ago by an adviser who is no longer involved.

• If nothing was ever filed or signed, the entity is in principle liable to the tax. That is a matter for a regularisation exercise, not for a simple compliance step.

A practical point that governs everything else

Return no. 2746-SD must be filed electronically, and payment must be made electronically too. The entity therefore needs a professional account on impots.gouv.fr, which requires obtaining an identification number, activating the account with a code sent by post, subscribing to the secure messaging service and then to the filing service.

For a foreign entity with no French establishment, dealt with by the tax office for foreign businesses within the Directorate for Non-Resident Taxation, these formalities take weeks. They are started well ahead of the deadline, not in May (official guidance, form no. 2746-SD).

What is at risk if nothing is filed

Losing the exemption is not an incidental consequence. It is the penalty: the entity becomes liable to 3 % of the market value for each year concerned.

Late interest applies, and then surcharges, on two distinct bases that are easily confused. A failure to file carries 10 %, rising to 40 % where the return is still not filed within thirty days of a formal notice. An inaccurate return carries 40 % where the inaccuracy is found to be deliberate, and 80 % in cases of fraudulent conduct. The distinction matters, because the burden of proving that a failure was deliberate rests on the authorities.

As to the limitation period: because the tax is assessed and collected under the rules governing registration duties, 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 was filed, that condition is not met and the six-year period applies. In practice, for this tax, six years is the rule and three years the exception.

A failure to file also opens the way to an assessment made unilaterally by the authorities, after a formal notice that remains unanswered for thirty days. For collection, the Treasury has a general preferential claim over movables and a statutory mortgage that can be registered against the French property itself.

French administrative guidance does provide relief for first-time defaulters: an entity served with a formal notice that puts matters right within thirty days pays no tax and incurs no penalty. The relief applies only to the first request for regularisation, covering all non-time-barred years (BOI-PAT-TPC-30).

One limit deserves emphasis, because it is the source of most assessments: the relief covers a failure to file, not a return that was filed but incomplete or inaccurate. An entity that filed, badly, does not benefit from it.

It should also be noted that the official guidance has not yet been updated. As at 2 October 2026, the BOFiP commentary on this tax still predates the reform and mentions neither the law of 25 June 2026 nor article 990 FA. Several points of articulation therefore await a formal position from the authorities.

Defending an assessment

Recent case law is strict, and it is better to say so plainly: arguments of principle rarely succeed.

The Cour de cassation has held that an entity with no shareholders, in that case a Liechtenstein foundation, cannot claim the disclosure exemption, since only real beneficial owners at 1 January can be treated as members, to the exclusion of contingent beneficiaries (Cass. com., 10 May 2024, no. 21-11.230). The same judgment rejected an argument based on the free movement of capital.

In a judgment of 1 April 2026 reported in its Bulletin, the Court held that the two routes to exemption are mutually exclusive (Cass. com., 1 April 2026, no. 25-10.605). A British company had given an undertaking in September 2004 and then, out of caution, filed annual returns from 2006 to 2012. Those returns named four individuals, whereas the company had in fact been wholly owned by another company since 2006. The Court held that the voluntary filings had moved the company into the filing regime, so that the authorities could issue an assessment without following the procedure under article R. 23 B-1.

The lesson goes beyond the facts. Excess caution cost the company its procedural protection, and the error about its own ownership was enough to found the assessment. Since the reform that protection no longer exists for anyone, but the requirement that the return be accurate remains in full.

A defence is therefore built elsewhere, and it is built early:

• Scope: was the entity genuinely property-rich at 1 January, once property used for a non-property trading activity is excluded?

• Place of effective management: was it in a jurisdiction that permits the exemption, and can that be evidenced?

• Valuation: is the market value relied on by the authorities supported by relevant comparables? This is often the most productive ground, valuation being a question of fact.

• Procedure: validity of the formal notice, compliance with the thirty-day period, competence of the office, reasons given in the assessment, and the limitation period actually applicable.

• Penalties: is the right basis being relied on? A 40 % surcharge for a deliberate inaccuracy requires the authorities to establish intent, which they do not always do with the rigour required.

The first written reply shapes everything that follows. It is drafted with the whole chain of ownership in view, not property by property.

Frequently asked questions

Does this affect a French property company?

Yes. The tax applies to French and foreign entities alike. In practice, French property companies that are not subject to corporation tax and that file their own annual return are treated as having met the disclosure objective and do not file return no. 2746-SD. The new statute does not expressly restate that relief, so its continuation will need to be confirmed. See French property companies.

Is a trust liable to the 3 % tax?

Yes. A trust is liable in respect of the French property it holds and may claim the exemptions under article 990 E. The return must identify the real holders of rights over the property, assessed case by case: generally the settlor where the trust is revocable, and the beneficiaries where it is irrevocable (BOI-PAT-TPC-10-10).

Does the 3 % tax overlap with the French wealth tax?

They are separate taxes. The 3 % tax is borne by the entity on the gross market value of the property, with no deduction for debt. The wealth tax on real estate is borne by the individual on the net value of their French property holdings. The 3 % tax is not deductible for income tax or corporation tax purposes (article 990 G).

Is an undertaking signed in 2010 still valid?

The provision on which it rested has been repealed and no transitional rule preserves it. As matters stand it should not be relied on, and the return due by 15 May 2027 should be prepared.

Who should be appointed as the French representative?

An individual tax resident in France, or a company with its registered office in France. The appointment is made in the return itself. Failing that, the entity closest to the property in the chain and known to the authorities is deemed authorised to receive procedural documents, which exposes the structure to a notification received by a company in no position to respond to it.

Can past years still be regularised?

Yes, and doing so is better than waiting. It requires a prior review of the non-time-barred years, of the place of effective management in each of them, of the market value of the properties, and of the position to be taken on the first-time-defaulter relief. It is not something to improvise at the point of filing.

How we work

Sassi Société d'Avocats has acted for more than thirty years in French tax audits and litigation and international tax for foreign investors, groups and families holding property in France.

On the 3 % tax, our work covers mapping the ownership chain and identifying who is actually liable, assessing the place of effective management and the available exemptions, preparing the annual returns and the appointment of the representative, regularising past years, and defending assessments through to the French courts.

We do not set up offshore structures. Our work is to build positions that are documented and defensible, and then to defend them.

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