General introduction to the taxation of real estate investments in France

All questions


i Investment funds in real estate

Vehicles commonly used in France for real estate investment include both unregulated and regulated vehicles.

Unregulated vehicles usually take a corporate form, such as Simplified Joint Stock Companies (SAS). Entities that are transparent for tax purposes are also often used, such as private property companies (SCIs) or, in certain specific circumstances, collecting societies (SNCs). SCI is a corporate form that is very suitable for the operation of one or more buildings, but is generally not the most suitable for use as an investment company open to a large number of shareholders.

Regulated vehicles can be registered vehicles, such as registered real estate investment companies (SIICs), or unlisted vehicles, such as collective investment funds (OPCIs) or real estate investment trusts (SCPIs). The OPCIs themselves take one of two forms: either SPPICAV (an open-ended investment company with predominantly real estate assets) or FPI (real estate investment fund).

Which vehicle is most appropriate will depend on a number of factors and circumstances related to the investor’s status, the nature of the transaction, the expected return horizon and certain tax issues (eg transfer taxes and value added tax (VAT)).

ii Property taxes

Real estate investments in France can be subject to various taxes.

Taxes on income and capital gains

Income received by French corporate investors from real estate located in France (rental income and capital gains) is subject to a corporate income tax (CIT) in France of 25 percent (or 25.83 percent when applies the additional fee). However, income derived from certain regulated vehicles, such as SIIC or SPPICAV, may be exempted from DPT, in particular subject to distribution requirements.

Income received by natural persons resident in French tax from immovable property situated in France is subject to the following taxation:

  1. rental income: progressive income tax rates up to 45 per cent and social security contributions with a fixed rate of 17.2 per cent (ie total tax rate up to 62.2 per cent); and
  2. capital gains: income tax at a fixed rate of 19 per cent and social security contributions at a fixed rate of 17.2 per cent (ie a total tax rate of 36.2 per cent, although discounts apply after a certain period of ownership ).

Additional taxes can be applied if the capital gain exceeds 50,000 euros (2 to 6 percent) or if the taxpayer is subject to a high-income contribution (3 to 4 percent).

For non-residents, rental income derived from immovable property situated in France is subject to personal income tax or personal income tax in France, and capital gains arising from the disposal of real estate or shares in rich land enterprises are subject to a specific source tax.

Taxes on the transfer of real estate

The direct acquisition of real estate is usually subject to a transfer tax of 5.81 per cent or 6.4 per cent, depending on the type and location of the property, a land registry fee of 0.1 per cent and a notary fee of 0.799 percent. (without VAT). However, under certain conditions, transfer taxes may be reduced to (1) 0.715 per cent if the real estate asset qualifies as a new building for VAT purposes or if the buyer undertakes to resell the building within five years, or up to (2) 125 euros if the buyer undertakes to build (or restore) within four years.

The acquisition of shares in a company (whether French or foreign) whose assets consist mainly (directly or indirectly) of French real estate is generally subject to a 5% transfer tax. However, subject to certain conditions and restrictions, the acquisition of shares in OPCI may be exempt from transfer taxes.


As a general rule, sales of buildings completed in more than five years are exempt from VAT (but in certain cases the seller may have to choose VAT in order to deduct input VAT). Sales of new buildings or plots are generally subject to VAT at a standard rate of 20 percent.

Sales of shares in companies are exempt from VAT.

Annual 3% tax on French real estate

All entities (regardless of their nationality) that directly or indirectly own real estate located in France are, in principle, subject to an annual tax equal to 3 percent of the fair market value of those assets, as determined on 1 January each year.

In practice, however, the 3 percent tax is limited in scope due to the large number of exceptions applicable.

Local taxes

French real estate tax (property tax) applies to both built-up and unbuilt-up properties located in France. This is a direct local tax that is paid annually by the legal owner of the property as of January 1 of the year in question.

Real estate tax

Real estate tax applies to individuals (whether French or foreign) who own real estate assets, directly or indirectly through real estate companies or real estate investment funds, with a total net value of over € 1.3 million as of 1 January of the year in question.

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