Companies, regardless of where their registered office is located (in France or outside France), which, either directly or through intermediary companies or organisations, own property (or French assets consisting predominantly of property) in France as on 1 January each year, are liable for an annual tax of 3% [1] calculated on the market value of these properties, without any deduction being allowed for any loan taken out in connection with the purchase of the property.

Various exemptions have existed to date, but the 3% tax regime is set to undergo a major overhaul, as Parliament voted on 7 April, by a very large majority, to introduce a two-fold amendment to this tax within the broader framework of the law against social security and tax fraud, following a Senate amendment adopted on 12 November 2025. It is therefore highly likely that this bill will be definitively adopted [2] in the coming days.

On the one hand, the obligation to disclose information (the identities of partners holding more than 1% of the capital and the valuation of the property) in response to a request from the tax authorities has been abolished. From now on, the company must submit an annual declaration by 15 May at the latest, via online filing [3], form no. 2746-SD. This reporting requirement makes the 3% tax exemption conditional upon the information provided being consistent – a requirement that must be verified annually – and upon the information being fully and accurately completed.

Furthermore, foreign companies that do not have a permanent establishment in France must appoint a tax representative in France on form 2746-SD and pay the relevant fees [4].

The authorities considered that the company’s submission of annual declaration No. 2072 in France exempted it from completing form 2746-SD or from undertaking to provide information (a requirement that has recently been abolished) [5]. There is every reason to believe that this rule will continue to apply, since declaration No. 2072 contains the required information.

In all other cases, online filing will therefore become mandatory and, as a reminder, the authorities take a very strict approach when assessing the information provided. They may challenge this information and deem it insufficient to grant the exemption. This is the situation that the Grasse Judicial Court had to rule on on 19 December 2025 [6]. A Danish company, which owned a villa in Cannes, diligently submitted its Form 2746 every year. The tax authorities requested further information, which they deemed unsatisfactory. Consequently, they refused the 3% tax exemption and issued a proposed adjustment for an amount of €409,536. The company challenged this adjustment before the Court, which ruled in its favour. However, this was solely on the basis of a procedural error: the registered letter containing the proposed adjustment had been sent not to the Danish company, but to its partners residing in Switzerland. The Court therefore did not rule on the merits of the case, that is to say, on the question of whether the responses provided were sufficient to qualify for the exemption.

It should therefore be noted that the submission of Form 2746 does not guarantee entitlement to the 3% tax exemption. The Court also points out that such submission is merely ‘likely’ to result in the exemption. In practice, it is essential to check the consistency and completeness of the information declared each year, in order to ensure that the exemption is upheld in the event of an audit.

In fact, incorrect or incomplete declarations are no longer eligible for the rectification period following a ministerial response dated 13 December 2023 [7]. Whereas the Court of Cassation ruled in a landmark judgment of 31 January 2006 (Bull. IV, No. 20) that the leniency measure provided for in the Ministerial Reply of 13 March 2000 is intended solely to regularise the situation of taxpayers who failed to submit Form No. 2746 due to a good-faith misunderstanding of the reporting obligation set out in subparagraphs (d) and (e) of paragraph 3 of Article 990 E of the General Tax Code. This leniency may be applied only once.

It may come as a surprise, but failing to file a return is therefore sometimes more advantageous than filing an incorrect one. This results in a paradoxical situation where companies whose good faith is not in question but which have submitted incomplete or incorrect returns must pay the 3% tax, whilst companies that have never filed a return can regularise their position once, free of tax.

This is a little-known tax that should not be overlooked, as the tax authorities all too often take an overly strict approach to reporting errors, demanding payment of the 3% tax on the entire value of a taxpayer’s property portfolio as soon as an omission, or inaccuracy is detected in the submitted declarations, leaving the taxpayer exposed to a degree of subjectivity regarding the concept of inaccuracy.

Given the significant amount involved (3% per annum of the property’s gross value), it is essential for companies that own one or more properties in France to have a tax audit carried out and to ensure that form no. 2746-SD is submitted correctly by 15 May each year.

*Me Philippe Laurens is a member of the Luxembourg and Montpellier Bar; Nexus Conseils and Nexus Luxembourg

[1] Section 990 D of the General Tax Code.

[2] In order to be definitively adopted, the bill must now go before the Joint Committee and then the Constitutional Council.

[3] This requires prior registration with the French authorities in order to obtain a SIREN number.

[4] New Article 990 F of the General Tax Code.

[5] BOI-PAT-TPC, no. 370.

[6] Grasse Regional Court, 19 December 2025, Case No. 25/00176.

[7] Ministerial reply of 13 December 2022, Ms Alexandra Masson.