{"id":2062618,"date":"2026-07-30T16:39:45","date_gmt":"2026-07-30T14:39:45","guid":{"rendered":"https:\/\/kohenavocats.fr\/2026\/07\/30\/french-3-percent-annual-tax-non-resident-entities-2026-reform\/"},"modified":"2026-07-30T16:40:43","modified_gmt":"2026-07-30T14:40:43","slug":"french-3-percent-annual-tax-non-resident-entities-2026-reform","status":"publish","type":"post","link":"https:\/\/kohenavocats.fr\/en\/2026\/07\/30\/french-3-percent-annual-tax-non-resident-entities-2026-reform\/","title":{"rendered":"The 2026 Reform of the French 3 Percent Annual Tax on Real Estate Held by Non-Resident Entities"},"content":{"rendered":"

If you hold French residential property through a company \u2014 a soci\u00e9t\u00e9 civile immobili\u00e8re<\/em> (SCI<\/a>), a Luxembourg holding vehicle, a UK limited company, a US LLC, or a trust \u2014 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<\/a>. 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.<\/p>\n

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<\/a>. 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 \u2014 from a holiday apartment on the C\u00f4te d’Azur held through a British company to a Paris pied-\u00e0-terre in a US trust \u2014 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.<\/p>\n

I. The Mechanism of the 3% Tax: Scope, Calculation and Exemptions<\/h2>\n

A. Who is Liable and How the Tax is Calculated<\/h3>\n

The tax is established by Article 990 D of the French General Tax Code<\/a> (Code g\u00e9n\u00e9ral des imp\u00f4ts<\/em>, or CGI). It applies to \u00ables entit\u00e9s juridiques : personnes morales, organismes, fiducies ou institutions comparables qui, directement ou par entit\u00e9 interpos\u00e9e, poss\u00e8dent un ou plusieurs immeubles situ\u00e9s en France\u00bb \u2014 essentially any legal entity, trust or comparable institution that owns French real estate, whether directly or through an intermediary.<\/p>\n

The tax is calculated at 3% of the fair market value (valeur v\u00e9nale<\/em>) 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<\/a>, \u00abla taxe est due \u00e0 raison des immeubles ou droits immobiliers poss\u00e9d\u00e9s au 1er janvier de l’ann\u00e9e d’imposition\u00bb \u2014 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.<\/p>\n

The concept of ownership by \u00abentit\u00e9 interpos\u00e9e\u00bb (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<\/a> that \u00abtoute personne morale, organisme, fiducie ou institution comparable, interpos\u00e9 entre le ou les d\u00e9biteurs de la taxe et les immeubles ou droits immobiliers est solidairement responsable du paiement de cette taxe\u00bb \u2014 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.<\/p>\n

Trusts are expressly covered. The Conseil d’\u00c9tat confirmed in a decision of 9 May 2019 (no. 426431)<\/a> that \u00ables immeubles donnent lieu, lorsqu’ils sont plac\u00e9s dans un trust, y compris lorsque ce dernier n’est pas dot\u00e9 de la personnalit\u00e9 morale, \u00e0 assujettissement \u00e0 la taxe annuelle \u00e9gale \u00e0 3 % de leur valeur v\u00e9nale\u00bb \u2014 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.<\/p>\n

Under Article 990 G<\/a>, \u00abla taxe pr\u00e9vue \u00e0 l’article 990 D n’est pas d\u00e9ductible pour l’assiette de l’imp\u00f4t sur le revenu ou de l’imp\u00f4t sur les soci\u00e9t\u00e9s\u00bb \u2014 the 3% tax is not deductible against income tax or corporation tax. It is a net cost with no offset.<\/p>\n

B. The Exemption Framework Before and After the 2026 Reform<\/h3>\n

The tax is not universally due. Article 990 E<\/a> sets out the full catalogue of exemptions. Structural exemptions include international organisations and sovereign states (1\u00b0), entities whose French real estate represents less than 50% of their total French assets when professional-use properties are excluded (2\u00b0 a), publicly traded companies and their wholly-owned subsidiaries (2\u00b0 b), and entities holding property valued below \u20ac100,000 or less than 5% of the property’s total value (3\u00b0 a). Regulated pension funds, charities meeting specific criteria, and French REITs (soci\u00e9t\u00e9s de placement \u00e0 pr\u00e9pond\u00e9rance immobili\u00e8re \u00e0 capital variable<\/em>) are also exempt (3\u00b0 b and c).<\/p>\n

The exemption most commonly relied upon by non-resident entities \u2014 and the one the 2026 reform targets \u2014 is found in paragraphs d and e of Article 990 E, 3\u00b0. 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.<\/p>\n

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<\/em> (commitment) to disclose this information upon request. Second, if the tax authorities served a mise en demeure<\/em> (formal notice) and the entity regularised within thirty days, the tax was not assessed \u2014 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)<\/a>, the doctrine stated that \u00ables contribuables qui peuvent b\u00e9n\u00e9ficier d’une exon\u00e9ration de taxe en application des d et e du 3\u00b0 de l’article 990 E du CGI mais qui n’ont pas, suivant les cas, souscrit les d\u00e9clarations n\u00b0 2746 (\u2026) ou pris l’engagement pr\u00e9vu au d, doivent \u00eatre mis en demeure par l’administration de r\u00e9gulariser leur situation dans les trente jours. Si les contribuables remplissent leurs obligations dans ce d\u00e9lai, le paiement de la taxe n’est pas exig\u00e9\u00bb \u2014 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.<\/p>\n

Article 102 of Law No. 2026-534<\/a> 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<\/strong> for the current year and all non-time-barred years. Failure to do so exposes the entity to taxation d’office<\/em> (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.<\/p>\n

II. Judicial Treatment and Practical Compliance Strategy<\/h2>\n

A. What the Courts Have Decided: Key French Case Law<\/h3>\n

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.<\/p>\n

The obligation to identify real, present beneficiaries.<\/strong> In its leading ruling of 10 May 2024 (no. 21-11.230, published in the Bulletin)<\/a>, the Commercial Chamber of the Cour de cassation held that \u00abtoute entit\u00e9 est redevable de la taxe de 3 % sur la valeur v\u00e9nale des immeubles qu’elle poss\u00e8de en France, sauf \u00e0 justifier relever d’un des cas \u00e9num\u00e9r\u00e9s\u00bb by Article 990 E \u2014 every entity is liable unless it proves it falls within a listed exemption. The Court then established a crucial principle: \u00abSeuls peuvent \u00eatre assimil\u00e9s aux actionnaires, associ\u00e9s ou autres membres qui d\u00e9tiennent, \u00e0 quelque titre que ce soit, plus de 1 % des actions, parts ou autres droits les b\u00e9n\u00e9ficiaires \u00e9conomiques r\u00e9els au 1er janvier de l’ann\u00e9e d’imposition des entit\u00e9s juridiques concern\u00e9es, et non des b\u00e9n\u00e9ficiaires \u00e9ventuels\u00bb \u2014 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<\/em>) that had no shareholders and could not name a current beneficiary \u2014 because under its statutes, the beneficiary was only determined upon dissolution \u2014 was denied exemption. This ruling matters for any structure where ultimate beneficial ownership is contingent, deferred or conditional.<\/p>\n

Incomplete or inaccurate disclosure is treated as non-compliance.<\/strong> The Cour de cassation ruled on 12 October 2022 (no. 20-14.565)<\/a> that the regime is a \u00abr\u00e9gime d\u00e9rogatoire de droit commun subordonn\u00e9, notamment, \u00e0 la r\u00e9v\u00e9lation de l’identit\u00e9 du ou des actionnaires et \u00e0 l’indication des circonstances juridiques et financi\u00e8res ayant conduit la ou les personnes d\u00e9sign\u00e9es \u00e0 poss\u00e9der les titres litigieux\u00bb \u2014 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.<\/p>\n

Annual filing is mandatory; past compliance does not carry forward.<\/strong> The Tribunal judiciaire de Nice ruled on 30 April 2026 (no. 24\/02060)<\/a> that \u00abl’obligation ne dispara\u00eet pas du seul fait que l’administration fiscale a re\u00e7u les informations \u00e0 un autre moment, notamment lors de la transmission des statuts; la d\u00e9claration doit \u00eatre effectu\u00e9e chaque ann\u00e9e, dans les formes et d\u00e9lais prescrits\u00bb \u2014 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.<\/p>\n

Tax residence of the entity matters.<\/strong> The Tribunal judiciaire de Grasse, in a decision of 6 June 2025 (no. 24\/00542)<\/a>, dismissed the claim of a Swiss company that could not \u00abd\u00e9terminer avec pr\u00e9cision la r\u00e9sidence fiscale effective\u00bb \u2014 precisely determine its effective tax residence \u2014 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.<\/p>\n

Fiduciary structures face particular scrutiny.<\/strong> In its 8 July 2026 decision (no. 25-12.737)<\/a>, the Cour de cassation examined the case of a French company that held property through a fiducie<\/em> (a civil-law trust arrangement). The Court held that \u00able fiduciaire, dont le patrimoine, au sens des dispositions fiscales r\u00e9gissant l’ISF, ne comprend pas les actifs transf\u00e9r\u00e9s dans celui de la fiducie, ne peut \u00eatre consid\u00e9r\u00e9 comme un actionnaire au sens de l’article 990, D, 3\u00b0, e) du code g\u00e9n\u00e9ral des imp\u00f4ts\u00bb \u2014 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’\u00c9tat ruling of 9 May 2019<\/a> confirming that trusts are within the scope of the tax, creates a specific compliance burden for trust-held French property.<\/p>\n

Discharge is possible for years where compliance was demonstrated.<\/strong> Not every dispute goes against the taxpayer. The Cour d’appel d’Aix-en-Provence ruled on 28 May 2025 (no. 21\/01177)<\/a> 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.<\/p>\n

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.<\/p>\n

B. Practical Steps for Non-Resident Entities Before the 2027 Filing<\/h3>\n

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 \u2014 15 May 2027 \u2014 will arrive quickly given the preparatory work required. Six steps are urgent.<\/p>\n

First, map the structure.<\/strong> 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 soci\u00e9t\u00e9 par actions simplifi\u00e9e<\/em> (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<\/a>, so a gap anywhere in the mapping creates risk everywhere.<\/p>\n

Second, classify each entity against the exemption catalogue in Article 990 E<\/a>.<\/strong> Is the entity structurally exempt \u2014 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 \u20ac100,000 or 5% threshold? If the answer to all three questions is no, the entity must rely on the transparency exemption \u2014 and that requires an annual form 2746.<\/p>\n

Third, verify the registered office jurisdiction.<\/strong> The transparency exemption under Article 990 E, 3\u00b0 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 \u2014 several Caribbean and Pacific offshore centres among them \u2014 cannot claim any exemption and are liable for the full 3% tax. Legal advice on restructuring options<\/a> may be necessary before the 2027 filing.<\/p>\n

Fourth, gather shareholder information for the 1% threshold.<\/strong> 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 \u2014 a UK company with five shareholders, a Luxembourg SOPARFI with institutional investors \u2014 this exercise can be time-consuming. The earlier it begins, the more likely the filing will be complete.<\/p>\n

Fifth, obtain defensible valuations.<\/strong> The tax is assessed on the valeur v\u00e9nale<\/em> (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)<\/a>, the Cour de cassation affirmed that \u00abla circonstance qu’un litige soit n\u00e9 sur la propri\u00e9t\u00e9 d’un bien est sans incidence sur la valeur v\u00e9nale r\u00e9elle du bien en cause\u00bb \u2014 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 \u2014 prepared by a French expert immobilier<\/em> or notaire<\/em> \u2014 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.<\/p>\n

Sixth, register on the French tax portal.<\/strong> Form 2746 is filed electronically through the impots.gouv.fr<\/em> 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.<\/p>\n

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<\/em> after 27 June 2026 must file and pay within thirty days \u2014 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 C\u00f4te d’Azur villa valued at \u20ac2 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 \u20ac360,000 \u2014 3% of \u20ac2 million multiplied by six, before interest and penalties. Even a partial assessment covering three years reaches \u20ac180,000. These figures explain why the reform was included in a law titled \u00ablutte contre les fraudes sociales et fiscales\u00bb \u2014 the French legislator views undisclosed entity-held property as a significant gap in tax transparency.<\/p>\n

And for non-resident entities selling their French property, Article 990 F<\/a> 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.<\/p>\n

Conclusion<\/h2>\n

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 \u2014 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 \u2014 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<\/a> can prevent costly compliance failures later.<\/p>\n","protected":false},"excerpt":{"rendered":"

If you hold French residential property through a company \u2014 a soci\u00e9t\u00e9 civile immobili\u00e8re (SCI), a Luxembourg holding vehicle, a UK limited company, a US LLC, or a trust \u2014 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 […]<\/p>\n","protected":false},"author":251031309,"featured_media":16512,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_kj_source_type":"","_kj_official_id":"","_kj_official_url":"","_kj_judilibre_id":"","_kj_jur":"","_kj_lieu":"","_kj_chambre":"","_kj_rg":"","_kj_date":"","activitypub_content_warning":"","activitypub_content_visibility":"","activitypub_max_image_attachments":4,"activitypub_interaction_policy_quote":"anyone","activitypub_status":"deleted","footnotes":""},"categories":[79307],"tags":[],"class_list":["post-2062618","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-en-real-estate"],"yoast_head":"\nThe 2026 Reform of the French 3 Percent Annual Tax on Real Estate Held by Non-Resident Entities - Ma\u00eetre Reda Kohen, Real Estate and Business Law Attorney in Paris<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/kohenavocats.fr\/en\/2026\/07\/30\/french-3-percent-annual-tax-non-resident-entities-2026-reform\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The 2026 Reform of the French 3 Percent Annual Tax on Real Estate Held by Non-Resident Entities\" \/>\n<meta property=\"og:description\" content=\"If you hold French residential property through a company \u2014 a soci\u00e9t\u00e9 civile immobili\u00e8re (SCI), a Luxembourg holding vehicle, a UK limited company, a US LLC, or a trust \u2014 an often-overlooked annual tax applies. 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