Tax alert – 3% tax penalties

Tax alert – 3% tax penalties

Penalties for late filing of the 3% tax return

Section 990 D of the French Tax Code (“FTC”) introduces an annual tax corresponding to 3% of the fair market value of a real estate property owned directly or indirectly by a French or foreign legal entity.

In certain cases, in order to benefit from a tax exemption, legal entities liable for the 3% tax may be required to file a tax return no. 2746 each year, no later than May 15th, mentioning the location, consistency and fair market value of the taxable real estate and real estate rights held on January 1st of the tax year, as well as the identity of the direct and indirect shareholders of the French real estate assets.

For legal entities which have not filed a tax return no. 2746 within the requested time limit, the French tax authorities accept, by way of tolerance, that such entities regularize their situation and thus be exempted from this tax.

“This measure of tolerance applies only to the first request for regularization and for all the years which are not statute-barred. Taxpayers are expressly informed of the exceptional nature of the measure. Of course, the French tax authorities do not refuse to regularize, outside the legal time limits, the situation of legal entities which, without receiving the formal notice mentioned above, subscribe or spontaneously take, according to the case, the tax returns or the commitment provided for respectively in the aforementioned articles 990 E-2/ and 990 E-3/”. LONCLE Ministerial Response of March 13th, 2020, Extract.

This measure of tolerance therefore applies only to the first regularization.

In its “LUPA” decision of November 4 th, 2020 n° 18-11.771, the French Civil Supreme Court confirms that this measure of tolerance applies only to the first request for regularization and that a second late filing leads to the liability of the tax itself (i.e. 3% of the fair market value of the real estate assets, per year) as well as the payment of penalties and interest for late payment.

The benefit of this tax exemption is now subject to strict compliance with the deadlines. The financial consequences of a late filing of tax return no. 2746 can therefore be very significant (3% of the market value on January 1st of the underlying assets per year). It will also be necessary to make sure that this formality is fulfilled in the case of share transfer (i.e. the purchaser being liable for the “past”).

As from 2021, tax returns no. 2746 will have to be made electronically before May 15th, 2021, which implies the implementation of specific formalities for foreign entities.


La Tour International remains at your disposal to assist you in complying with your annual tax obligations.
Benoît Philippart, Avocat Associé – +33 1 42 25 78 92 / +33 6 30 74 27 35
Nicolas Cys, Avocat Associé  – +33 1 42 25 78 84 / +33 6 87 44 81 68