Property tax: new filing requirement for translucent real estate companies

In order to determine the property tax basis (“Taxe Foncière”), industrial real estate held by companies that are not subject to CIT under the standard regime (e.g. tax transparent SCIs) were evaluated according to methods provided for commercial premises and not according to accounting methods consisting basically in considering the actual costs of construction. The Finance Law for 2016 brought back in the scope of application assets mentioned above as from 1st January 2017 for companies having mainly a real estate rental activity. French Tax authorities have now published clarifications to comment this new mechanism on 6 September 2017.

In their guidelines, the French Tax Authorities invite companies abovementioned to declare, before 31st December 2017, the actual cost of their buildings so that the tax services can calculate the new tax basis according to accounting methods.

Questions remain about the possible consequences of a lack or delay of declaration to the extent that the filing requirement in the administration’s guidelines is not provided by the above mentioned Finance Law. Although this is doubtful, one can also wonder if, during a future tax audit, the Tax Administration could apply sanctions related to the lack of filing requirements and particularly apply the procedure allowing it to multiply by four the amount of the tax adjustment. However, it cannot be excluded for a decree to be published to formalize this obligation and attach it sanctions.

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Sarvi Keyhani

Sarvi Keyhani, Partner, specializes in real estate tax. She advises international investors on major real estate operations. She particularly advises a large number of international real estate funds on the […]