The law stated in this chapter is accurate as at the time of publication and does not reflect any changes introduced by the French 2025 Finance Bill published on October 10, 2024.  This chapter will be updated once this Bill is enacted. 

1. Is stamp duty, transfer tax or a similar tax payable on the sale, purchase or leasing of real estate? If so, what are the rates and who is required to pay the duty or tax?

Under a standard asset deal, transfer duties will be due by the purchaser on the acquisition price of properties in France. The applicable rate is 5.80665%. In addition, a 0.1% real estate security contribution applies as well as a special surtax of 0.6% for the acquisition of commercial properties in the Ile-de-France area (Paris and its suburbs). Notary fees should be added to this amount; on average, this is approximately 1% of the acquisition price (including VAT).

2. Is stamp duty, transfer tax or a similar tax payable on the indirect sale or purchase of real estate, e.g. by means of the sale of an SPV which holds real estate in the jurisdiction? If so, what are the rates and who is required to pay the duty or tax?

The purchase of shares in a French real estate company (i.e., whose assets consist of more than 50% French real estate assets) gives rise to a 5% transfer duty, assessed on the purchase price of such shares.

3. Is value added tax, goods and service tax or a similar tax payable on the sale or purchase of real estate, and the letting of real estate? If so, what are the rates and who is required to pay the tax?

The sale of French properties may be subject to VAT at 20%, depending on the VAT regime of the seller and whether or not the property is considered new (less than five years since construction or reconstruction). No VAT is due where the sale of the relevant property qualifies as a transfer of going concern. The rental of non-furnished property will be subject to VAT in very specific cases. The rental of non-furnished professional premises is not, in principle, subject to French VAT, but the lessor has the option of subjecting rents to VAT at the rate of 20%.

VAT is then paid by the lessor (charged to the tenant) and can be deducted if the tenant is itself liable for VAT.

4. Are there any annual taxes that may be payable on the ownership of real estate, e.g., annual land tax, municipal taxes, surtaxes, etc.?

Yes, the following annual taxes may be payable:

i. 3% tax on the market value

French and foreign legal entities (corporate bodies, organizations, trusts and comparable institutions) that directly or indirectly own French real estate properties, or that hold real property rights relating to such properties, are liable to a 3% annual tax on the market value of such properties or rights, unless they disclose (or commit to disclose in the event of an audit) the full ownership structure up to the end beneficial owner(s). Certain limits and restrictions apply to this tax, and it should be noted that this tax rarely applies in practice. Its purpose is to identify end-owners of French-based real estate in order to subject them to IFI (property wealth tax). The structure to be set up will be subject to certain compliance obligations in order to avoid paying this tax.

ii. Local property tax (taxe foncière)

Local property tax is a local tax due annually on all properties owned on January 1 of the relevant year. The tax is due by the owner and applies to both developed and undeveloped property located in France. The tax is computed by factoring a specific coefficient to half the notional rental value of the property as determined by the local land registry. This tax is levied on an annual basis and issued under the name of the owner of the property.

iii. Tax on the creation of office premises

The construction of office space or commercial premises in the Île-de-France area (i.e., Paris and its suburbs) is subject to a tax on the creation of office space that is attached to the building permit. It is due when building works result in the creation of new office premises or in the conversion of pre-existing premises into office, commercial or storage space. The owner of the property is liable to the French Treasury, but please note that failing to pay may result in subsequent owners of the premises being jointly liable. Typically, French tax authorities collect this tax within two years following the issuance of the building permit.

The tax is assessed on the constructed surface. The applicable rates (per sqm) as at the date of publication are as follows:

1. 1st district: Paris (75) and Hauts-de-Seine (92).
2nd district: cities of the Greater Paris metropolitan area, excluding Paris and Hauts-de-Seine.
3rd district: cities forming part of the Paris urban unit, excluding Greater Paris (IMMO-V-60450).
4th district: other cities in the Île-de-France region.

The total amount of the tax may however not exceed 30% of the portion of the transaction cost attributable to the acquisition and development of the building area.

iv. Annual tax on office space

Owners of office or business storage premises in the Île-de-France area (as well as since 2023, in the departments of Bouches du Rhône, Var and Alpes-Maritimes departments) on January 1 of a given year are liable to an annual tax, calculated on the basis of the relevant floor space (i.e., office buildings and their immediate and necessary dependencies/outbuildings). It also applies to parking spaces of at least 500 square meters, in relation to the taxable premises. The tax rate varies according to the district in which the premises are located. Taxpayers must file an annual tax return and pay the corresponding tax upon filing. The applicable statute of limitations is three years following the year in which the tax is due.

The applicable rates (per sqm) in the Île-de-France area as at the date of publication are as follows:

• the 1st district comprises the 1st, 2nd, 7th, 8th, 9th, 10th, 15th, 16th and 17th arrondissements of Paris and the cities of Boulogne-Billancourt, Courbevoie, Issy-les-Moulineaux, Levallois-Perret, Neuilly-sur-Seine and Puteaux;
• the 2nd district comprises the arrondissements of Paris and the cities of Hauts-de-Seine other than those of the 1st district;
• the 3rd district comprises the cities of the urban unit of Paris, delimited by decree, other than Paris and the cities of the Hauts-de-Seine department;
• the 4th district comprises the other cities of the Île-de-France region

v. Annual additional tax on parking space

Owners of parking space located in the Île-de-France area (as well as since 2023, in the departments of Bouches du Rhône, Var and Alpes-Maritimes departments) on January 1 of a given year must file an annual return and pay the corresponding tax upon filing. The tax is calculated on the basis of the surface area of the parking lots, and its rate varies depending on the districts in which the latter parking lots are located.

The applicable rates (per sqm) in the Île-de-France area as at the date of publication are as follows:

vi. CFE (cotisation fonciére des entreprises)

The CFE applies to properties subject to local property tax and is due by companies who let and/or sublet real estate property.  The CFE is an annual tax assessed on the rental value of the real estate property subject to land tax, for the fiscal year of two years prior (e.g., the assessments for the purposes of the 2025 CFE would take into account the property used during fiscal year 2023).  The applicable rate of the CFE may vary depending on the location of the property.

5. What is the tax rate imposed on rental income?

As regards companies subject to corporate income tax (CIT), rental income is considered a profit submitted to the standard rate of 25%. French or foreign companies (partnerships or corporations) owning property in France are typically taxed in France at 25% on their rental income, regardless of the ownership structure above the property and on the basis of the double tax treaty dispositions signed by France.

6. Is interest on borrowings used to acquire real estate deductible for tax purposes against rental income? If so, (i) are there any restrictions (e.g. thin capitalization, transfer pricing etc.)? and (ii) is there any withholding tax on interest?

Interest on borrowings used to finance the acquisition of French real estate property is generally deductible from the taxable profits of the borrower, albeit with certain limitations.

The main limitations to the deduction of interest are as follows:

• Prohibition of interest deduction on loans and advances from direct shareholders unless the borrowing company's share capital has been fully paid up (Article 39-1-3°al. 2 of the FTC);

• Limitation set out under Article 39-1-3° of the FTC (the "Maximum Tax Rate Limitation") applicable to interest paid or accrued to a direct shareholder that does not qualify as a "related party" to the borrower;

• Limitation pursuant to Article 212. I-a of the FTC (the "Market Rate Test") providing for an adjusted application of the Maximum Tax Rate to interest paid or accrued in respect of loans granted by a "related party";

• Limitation in respect of hybrid instruments (the "Anti-Hybrid Limitation") applicable to interest paid or accrued to certain related parties;

• General capping mechanism: a French company which does not belong to a tax group may deduct its net financial expenses up to a maximum amount equal to the higher of:

  • three million euros per fiscal year, reduced to 12 months if necessary; or

  • 30% of the company's result before interest, taxes, depreciation, and amortization ("Tax EBITDA").

The applicable thresholds may be reduced to respectively one million euros and 10% where the company is considered as thin-capitalized.

Please note that French tax authorities consider that French real estate held by non-resident companies hold source income to be determined in accordance with French standard corporate income tax rules. Therefore, the above rules may apply.

There is no withholding tax on interest, unless it is paid in a non-cooperative jurisdiction.¹

7. Are deductions for capital expenditure available against rental income for tax purposes, for example capital allowances or deductions for depreciation? If so, are deductions available for expenditure on both land and buildings, or on buildings only?

Depreciation on certain property-related expenditures is deductible if the entity declaring the income in France is subject to corporate taxation in France (or to an equivalent tax if established outside of France). Real estate construction expenditure can be amortized at set rates on its different parts on a duration-of-use basis. The depreciation of land is not possible according to French tax rules. Annual depreciation of expenditure is deductible from the taxable profits (including rental income) of the owner company.

8. Are there any other material restrictions on the costs and expenses which may be deducted in calculating a person's taxable rental income, e.g. transfer pricing or anti-hybrid rules?

The arm’s length principle applies to transactions between associated companies. Failure to apply this principle results in readjustment of profits under specific transfer pricing legislation and/or the “irregular management act” principle (acte anormal de gestion), unless the company making or deemed to be making the transfer is able to prove that it did so for sound commercial reasons, such as protecting its market position.

9. Are there any restrictions on the use and/or the carry-forward of losses?

As a general rule, tax losses incurred during a given fiscal year may be carried forward and offset against available profits of subsequent fiscal years for up to €1 million per year, increased by 50% of the taxable profits exceeding the €1 million threshold. Please note that the remaining tax losses can be carried forward indefinitely and used within the same limits. Losses may also be carried back and generate a tax receivable, which may be reimbursed under certain conditions and limits.

10. Are capital gains arising on the sale of real estate taxable? If so, what are the rates and are there any exemptions?

Capital gains resulting from the sale of properties would be taxed at the rate of 25% when the seller is a corporation, or is a see-through entity with an ultimate shareholder subject to corporate taxation. Most double tax treaties signed by France enable the French government to tax such capital gains when the underlying property is located in France (see question 11).

11. Are capital gains arising on the indirect sale of real estate taxable, e.g. by means of the sale of an SPV which holds real estate in the jurisdiction? If so, what are the rates and are there any exemptions?

Capital gains resulting from the sale of shares in a French real estate company (i.e., whose assets consist, directly or indirectly, of more than 50% French real estate assets) are taxed at the rate of 25% when the seller is a corporation, or is a see-through entity with an ultimate shareholder subject to corporate taxation. Most double tax treaties signed by France enable the French government to also tax such capital gains when the underlying property is located in France.

As an exception, a company owning French real estate will not be considered as a “French real estate company” if the relevant property is allocated to a commercial or industrial use. In this case, and subject to any double tax treaty, any capital gain is taxed as ordinary income (ie, at 25%), unless the relevant shares are qualifying participation shares that have been held for at least 2 years at the time of their disposal, in which case the capital gain is exempt from CIT except for a 12% recapture of the gross gain deemed to represent non-deductible expenses.

12. Is there a withholding tax on rental income?

French real-estate-sourced income of non-resident companies is subject to corporate income tax in France and taxed at a rate of 25%, since as mentioned above, most double tax treaties signed by France enable the government to tax such income when the underlying property is located in France. However, rents are not subject to withholding tax.

13. Is there a withholding tax on capital gains derived from real estate? If so, does the withholding tax apply to both direct and indirect sales, or to direct sales only?

Capital gains arising from the sale of real estate property or shares held in a real-estate-predominant company (see questions 11 and 12 above) are subject to a withholding tax set at the standard corporate income tax rate of 25%. Please note, however, that a reduced rate applies to the transfer of shares held by certain real estate investment vehicles (more information at question 4).

14. Does the jurisdiction have a REIT regime? If so, please outline the tax treatment of the REIT and the main conditions that must be satisfied to enter and remain within the regime.

France introduced a REIT regime in 2003 (the “SIIC regime”), which provides for a full exemption from French corporation tax on real estate revenues and capital gains, subject to satisfying certain distribution obligations. The main conditions to elect for the SIIC regime are as follows:

• being mainly, though not exclusively, involved (directly or indirectly) in property business (purchase and/or construction of buildings with a view to renting them out);
• being listed on a regulated stock market;
• having a share capital of at least €15 million;
• the holding of any majority shareholder, whether acting alone or in unison, must be less than 60% of the company's share capital; and
• at the time of the election for the SIIC regime, 15% of the company's share capital must be held by shareholders who each own less than 2%.

Under the SIIC regime, corporations (i.e., companies subject to French CIT) may also opt for the SIIC regime if they are owned, directly or indirectly, at 95% or more by one or more SIICs or SPPICAVs.

15. Apart from REITs, are there any tax-efficient real estate investment vehicles to acquire, hold and exploit real estate in the jurisdiction?

We usually recommend implementing for each property acquired a simplified purchase structure via a French special purpose vehicle (SPV). One such example is a socièté civile immobilière (SCI), a French real estate partnership. If any commercial activity were to actually be developed, a more sophisticated tax structure may be envisaged, such as having the SPV held through a holding company, French or foreign.

Certain French real estate investment vehicles such as OPCIs provide for tax relief on capital gains and real estate income; they can also be set up as companies (SPPICAV) or funds (FPI). Please note, however, that their tax exemption status is subject to certain compliance obligations, including but not limited to distributional quotas. Please also note OPCIs are regulated vehicles with the AMF, the French financial markets regulator, and are subject to investment ratios.

16. Are there any structures commonly used to mitigate real estate tax liabilities on the acquiring and/or disposing of real estate?

The most commonly used structures are SCIs and SPPICAVs.

The acquisition of shares in a real-estate-predominant company, defined as a company with real estate assets that exceed 50% of its total assets, are subject to transfer duties in France at the flat rate of 5% of the purchase price (presumed to be the fair market value of the shares). No notary fees should be added to this price, as the transaction is mainly handled by lawyers.

Real estate lease registration is subject to a €25 registration fee.

17. Are there any material differences in the way individuals and companies are taxed on acquiring, letting and/or disposing of real estate?

The main differences concern the sale of properties.

Individuals are subject to social contributions on their property income at a rate of 17.2%, in addition to income tax. As a result, when the seller is an individual or a see-through entity (with an ultimate shareholder being an individual), capital gains resulting from the sale of properties or of the intermediate holding vehicle (whose assets consist for more than 50% of real property) are taxed at 36.2% (19% tax plus 17.2% of social contributions). Individuals do, however, benefit from progressive holding period discounts—up to a 100% discount on income tax after 22 years and up to a 100% discount on social contributions after 30 years. They may also be fully exempt from tax on the gains resulting from the sale of their household.

A specific additional progressive capital gains levy applies to sales, on the basis of a specific calculation formula. This special tax is levied on capital gains realized directly or indirectly (via see-through partnerships) by individuals. The rates range from 2% for a gain of €50,000 to 6% for a gain of €260,000. Rates are calculated based on specific formulae.

1. The current list of non-cooperative jurisdictions includes the following jurisdictions: Anguilla, Seychelles, Bahamas, Turks and Caicos Islands, Vanuatu, Antigua and Barbuda, Belize, Fiji, Guam, US Virgin Islands, Palau, Panama, Russia, Samoa, American Samoa and Trinidad and Tobago.

This guide does not constitute tax advice and readers should note that the laws of each jurisdiction are regularly refined and/or revised, so the statements made in this report are not definitive. However, this guide does provide a summary overview of the state of the law as at 31 January 2025 and will hopefully serve as a useful tool for investors to ensure they understand the unique provisions and distinctions in the various jurisdictions.