If you hold French residential property through a company — a société civile immobilière (SCI), a Luxembourg holding vehicle, a UK limited company, a US LLC, or a trust — an often-overlooked annual tax applies. The French tax code imposes a 3% levy on the fair market value of real estate owned in France by legal entities, regardless of where that entity is incorporated. Until June 2026, a non-resident entity could avoid the tax by promising to disclose its shareholders upon request. That escape route has now been closed.
Law No. 2026-534 of 25 June 2026, enacted as part of France’s broader anti-fraud legislative package, abolished both the commitment-to-disclose exemption and the thirty-day grace period after a formal notice. The reform took effect on 27 June 2026 and will apply to filings due from 15 May 2027 onwards. For the tens of thousands of non-resident entities holding French property — from a holiday apartment on the Côte d’Azur held through a British company to a Paris pied-à-terre in a US trust — the compliance landscape has shifted materially. This article explains what the tax is, who it affects, what the reform changes, and what steps must be taken before the next filing deadline.
I. The Mechanism of the 3% Tax: Scope, Calculation and Exemptions
A. Who is Liable and How the Tax is Calculated
The tax is established by Article 990 D of the French General Tax Code (Code général des impôts, or CGI). It applies to «les entités juridiques : personnes morales, organismes, fiducies ou institutions comparables qui, directement ou par entité interposée, possèdent un ou plusieurs immeubles situés en France» — essentially any legal entity, trust or comparable institution that owns French real estate, whether directly or through an intermediary.
The tax is calculated at 3% of the fair market value (valeur vénale) of the property as of 1 January of the tax year. Debt is not deductible: the 3% applies to the gross value, not the net equity. Under Article 990 F, «la taxe est due à raison des immeubles ou droits immobiliers possédés au 1er janvier de l’année d’imposition» — the tax is assessed on property held on 1 January. A property sold on 2 January therefore does not escape the tax for the year of sale.
The concept of ownership by «entité interposée» (intermediary entity) is deliberately broad. If a foreign parent company holds shares in a French SCI that owns the property, both entities may fall within the scope. Article 990 F further provides that «toute personne morale, organisme, fiducie ou institution comparable, interposé entre le ou les débiteurs de la taxe et les immeubles ou droits immobiliers est solidairement responsable du paiement de cette taxe» — every entity interposed between the taxpayer and the property is jointly liable for payment. The French tax authorities can pursue any entity in the chain.
Trusts are expressly covered. The Conseil d’État confirmed in a decision of 9 May 2019 (no. 426431) that «les immeubles donnent lieu, lorsqu’ils sont placés dans un trust, y compris lorsque ce dernier n’est pas doté de la personnalité morale, à assujettissement à la taxe annuelle égale à 3 % de leur valeur vénale» — real estate held in a trust triggers the 3% tax even when the trust lacks legal personality. This is particularly relevant for Anglo-American trust structures routinely used by UK and US investors.
Under Article 990 G, «la taxe prévue à l’article 990 D n’est pas déductible pour l’assiette de l’impôt sur le revenu ou de l’impôt sur les sociétés» — the 3% tax is not deductible against income tax or corporation tax. It is a net cost with no offset.
B. The Exemption Framework Before and After the 2026 Reform
The tax is not universally due. Article 990 E sets out the full catalogue of exemptions. Structural exemptions include international organisations and sovereign states (1°), entities whose French real estate represents less than 50% of their total French assets when professional-use properties are excluded (2° a), publicly traded companies and their wholly-owned subsidiaries (2° b), and entities holding property valued below €100,000 or less than 5% of the property’s total value (3° a). Regulated pension funds, charities meeting specific criteria, and French REITs (sociétés de placement à prépondérance immobilière à capital variable) are also exempt (3° b and c).
The exemption most commonly relied upon by non-resident entities — and the one the 2026 reform targets — is found in paragraphs d and e of Article 990 E, 3°. These provisions allow an entity established in an EU Member State, or in a country that has concluded an administrative assistance treaty with France, to avoid the tax by filing an annual declaration (form 2746-SD) disclosing the identity and address of every shareholder holding more than 1% of its shares, together with the number of shares held.
Until the 2026 reform, an entity that had not filed could still escape the tax through a two-step process. First, it could make an engagement (commitment) to disclose this information upon request. Second, if the tax authorities served a mise en demeure (formal notice) and the entity regularised within thirty days, the tax was not assessed — even for prior years. This tolerance, codified in the administrative doctrine BOI-PAT-TPC-30, effectively granted a second chance. As the Cour de cassation recently recalled in its decision of 8 July 2026 (no. 25-12.737, published in the Bulletin), the doctrine stated that «les contribuables qui peuvent bénéficier d’une exonération de taxe en application des d et e du 3° de l’article 990 E du CGI mais qui n’ont pas, suivant les cas, souscrit les déclarations n° 2746 (…) ou pris l’engagement prévu au d, doivent être mis en demeure par l’administration de régulariser leur situation dans les trente jours. Si les contribuables remplissent leurs obligations dans ce délai, le paiement de la taxe n’est pas exigé» — taxpayers who could claim exemption but who had not filed form 2746 or made the commitment were to receive a formal notice and, if they regularised within thirty days, no tax was payable. This measure applied only to the first notice and covered all non-time-barred years.
Article 102 of Law No. 2026-534 repealed both the commitment-to-disclose mechanism and the thirty-day grace period. From the 2027 filing year, an entity that has not filed form 2746 and paid the tax by 15 May cannot escape liability through a post-hoc disclosure. If the tax authorities identify a breach, the entity now has thirty days to file the form and pay the tax for the current year and all non-time-barred years. Failure to do so exposes the entity to taxation d’office (ex officio assessment), with late-payment interest and penalties applied under the rules governing registration duties. The reform also created a new Article 990 FA CGI, reinforcing the enforcement framework.
II. Judicial Treatment and Practical Compliance Strategy
A. What the Courts Have Decided: Key French Case Law
The 3% tax has generated extensive litigation, and French courts have consistently interpreted the exemption conditions strictly. Several decisions provide essential guidance for non-resident entities.
The obligation to identify real, present beneficiaries. In its leading ruling of 10 May 2024 (no. 21-11.230, published in the Bulletin), the Commercial Chamber of the Cour de cassation held that «toute entité est redevable de la taxe de 3 % sur la valeur vénale des immeubles qu’elle possède en France, sauf à justifier relever d’un des cas énumérés» by Article 990 E — every entity is liable unless it proves it falls within a listed exemption. The Court then established a crucial principle: «Seuls peuvent être assimilés aux actionnaires, associés ou autres membres qui détiennent, à quelque titre que ce soit, plus de 1 % des actions, parts ou autres droits les bénéficiaires économiques réels au 1er janvier de l’année d’imposition des entités juridiques concernées, et non des bénéficiaires éventuels» — only the real beneficial owners as of 1 January of the tax year qualify as shareholders for disclosure purposes, not hypothetical future beneficiaries. A Liechtenstein foundation (Stiftung) that had no shareholders and could not name a current beneficiary — because under its statutes, the beneficiary was only determined upon dissolution — was denied exemption. This ruling matters for any structure where ultimate beneficial ownership is contingent, deferred or conditional.
Incomplete or inaccurate disclosure is treated as non-compliance. The Cour de cassation ruled on 12 October 2022 (no. 20-14.565) that the regime is a «régime dérogatoire de droit commun subordonné, notamment, à la révélation de l’identité du ou des actionnaires et à l’indication des circonstances juridiques et financières ayant conduit la ou les personnes désignées à posséder les titres litigieux» — an exceptional regime requiring not merely the identity of shareholders but also the legal and financial circumstances through which they came to hold the shares. A Luxembourg company that disclosed its shareholders but failed to explain the chain of beneficial ownership was denied the exemption.
Annual filing is mandatory; past compliance does not carry forward. The Tribunal judiciaire de Nice ruled on 30 April 2026 (no. 24/02060) that «l’obligation ne disparaît pas du seul fait que l’administration fiscale a reçu les informations à un autre moment, notamment lors de la transmission des statuts; la déclaration doit être effectuée chaque année, dans les formes et délais prescrits» — the obligation does not disappear merely because the tax authorities received information at another time, for instance when transmitting the company statutes; the declaration must be filed every year, in the prescribed form and within the prescribed deadlines. A Monegasque SCI that argued its statutes already disclosed its shareholders was rejected.
Tax residence of the entity matters. The Tribunal judiciaire de Grasse, in a decision of 6 June 2025 (no. 24/00542), dismissed the claim of a Swiss company that could not «déterminer avec précision la résidence fiscale effective» — precisely determine its effective tax residence — for the audited years. The court applied domestic French law by default, holding that the burden of proving eligibility for exemption rests on the entity claiming it.
Fiduciary structures face particular scrutiny. In its 8 July 2026 decision (no. 25-12.737), the Cour de cassation examined the case of a French company that held property through a fiducie (a civil-law trust arrangement). The Court held that «le fiduciaire, dont le patrimoine, au sens des dispositions fiscales régissant l’ISF, ne comprend pas les actifs transférés dans celui de la fiducie, ne peut être considéré comme un actionnaire au sens de l’article 990, D, 3°, e) du code général des impôts» — the trustee, whose personal assets under French wealth tax rules do not include assets transferred to the trust, cannot be treated as the shareholder for purposes of the 3% tax disclosure. The true beneficial owner must be identified. This decision, coupled with the Conseil d’État ruling of 9 May 2019 confirming that trusts are within the scope of the tax, creates a specific compliance burden for trust-held French property.
Discharge is possible for years where compliance was demonstrated. Not every dispute goes against the taxpayer. The Cour d’appel d’Aix-en-Provence ruled on 28 May 2025 (no. 21/01177) that where a Luxembourg company had properly disclosed its sole shareholder for certain years, the tax assessment for those years was invalid. Partial discharge was granted for the years 2013 to 2015, confirming that a well-documented disclosure does protect the entity.
The common thread across these decisions is that French courts treat the 3% tax as a transparency obligation backed by a financial sanction. The entity that can produce, for each year, a complete and accurate form 2746 identifying all shareholders above the 1% threshold is protected. The entity that relies on informal communication, outdated corporate records, or contingent beneficial interests is exposed.
B. Practical Steps for Non-Resident Entities Before the 2027 Filing
The reform leaves non-resident entities with three months between now and the end of 2026 to prepare for the new regime. The deadline for the first post-reform filing — 15 May 2027 — will arrive quickly given the preparatory work required. Six steps are urgent.
First, map the structure. Identify every entity in the ownership chain that directly or indirectly holds French real estate. This includes foreign parent companies, intermediate holding vehicles, and the French SCI or société par actions simplifiée (SAS) that appears on the title deed. The tax authorities can pursue any entity in the chain under the joint liability provisions of Article 990 F, so a gap anywhere in the mapping creates risk everywhere.
Second, classify each entity against the exemption catalogue in Article 990 E. Is the entity structurally exempt — a listed company, a regulated fund, a pension vehicle? Do its French real estate assets represent less than 50% of its total French assets when professional-use property is excluded? Is the value of its holding below the €100,000 or 5% threshold? If the answer to all three questions is no, the entity must rely on the transparency exemption — and that requires an annual form 2746.
Third, verify the registered office jurisdiction. The transparency exemption under Article 990 E, 3° is available only to entities established in France, another EU Member State, or a country that has concluded with France both an administrative assistance treaty and a treaty containing a non-discrimination clause. Entities registered in jurisdictions that lack such treaties — several Caribbean and Pacific offshore centres among them — cannot claim any exemption and are liable for the full 3% tax. Legal advice on restructuring options may be necessary before the 2027 filing.
Fourth, gather shareholder information for the 1% threshold. The 2746 form requires the identity and address of every shareholder holding more than 1% of the entity’s shares as of 1 January. For entities with multiple investors — a UK company with five shareholders, a Luxembourg SOPARFI with institutional investors — this exercise can be time-consuming. The earlier it begins, the more likely the filing will be complete.
Fifth, obtain defensible valuations. The tax is assessed on the valeur vénale (fair market value) of the property as of 1 January. French tax audits frequently challenge self-assessed values, and an undervaluation can be treated as a breach of the exemption conditions, exposing the full tax for multiple years. The importance of accurate valuation has been underscored by the courts: in the 10 May 2024 decision (no. 21-11.230), the Cour de cassation affirmed that «la circonstance qu’un litige soit né sur la propriété d’un bien est sans incidence sur la valeur vénale réelle du bien en cause» — even a dispute over who owns the property does not affect its real fair market value for tax purposes. The valuation must reflect the market, not the owner’s circumstances. A professional valuation report — prepared by a French expert immobilier or notaire — is now a prudent component of the filing package, particularly for atypical properties or those in illiquid markets such as rural estates, ski apartments in low-turnover resorts, or properties with unusual easements. The cost of the valuation is modest compared with an assessment of 3% of gross value across three or more non-time-barred years.
Sixth, register on the French tax portal. Form 2746 is filed electronically through the impots.gouv.fr portal. Each entity must have an active professional account. Non-resident entities that have never interacted with the French tax system online should begin the registration process now, as it requires identity verification and may involve delays.
Two additional points deserve emphasis. The reform removed the tolerance that allowed an entity to regularise after a formal notice without paying the tax. An entity that receives a mise en demeure after 27 June 2026 must file and pay within thirty days — the tax for all non-time-barred years is immediately due. There is no longer a free pass. The sums at stake are substantial. For a Côte d’Azur villa valued at €2 million and held through a UK limited company that has never filed form 2746, the potential assessment across the six-year limitation period applicable to registration duties is theoretically €360,000 — 3% of €2 million multiplied by six, before interest and penalties. Even a partial assessment covering three years reaches €180,000. These figures explain why the reform was included in a law titled «lutte contre les fraudes sociales et fiscales» — the French legislator views undisclosed entity-held property as a significant gap in tax transparency.
And for non-resident entities selling their French property, Article 990 F provides that the French tax representative appointed for capital gains purposes under Article 244 bis A CGI is responsible for any 3% tax remaining unpaid at the date of sale. A sale does not extinguish the liability; it may transfer enforcement risk to the tax representative, who will seek indemnification from the seller.
Conclusion
The 2026 reform transforms the 3% tax from a largely avoidable levy into an annual compliance obligation for most non-resident entities holding French property. The abolition of the commitment-to-disclose mechanism and the thirty-day grace period means that the only reliable path to exemption is a complete, accurate and timely form 2746, supported by verifiable shareholder information and defensible property valuations. Entities that have never filed, or that have relied on informal disclosures, face exposure across multiple non-time-barred years — potentially six years under the extended limitation period for registration duties. The three months remaining in 2026 should be used to map the ownership structure, verify eligibility for structural exemptions, assemble the shareholder data, and obtain valuations. For entities that cannot claim any exemption, the 3% tax becomes an annual cost to budget for — and a factor to weigh in decisions about whether to hold French property through a corporate vehicle at all. French property law and tax practice are closely intertwined, and the choice of acquisition structure has consequences that extend well beyond the purchase itself. Professional guidance at the structuring stage can prevent costly compliance failures later.