The bill on combating social security and tax fraud contains a measure that deserves close attention from international groups, private holding companies and intermediary structures holding real estate in France. Article 23 bis of the bill seeks to tighten the reporting regime applicable to the 3% tax on the market value of real estate: exemption would no longer rely on a mere undertaking to provide information upon request from the tax authorities, but on the systematic filing of an annual return. In addition, non-resident entities with no permanent establishment in France would be required to appoint a tax representative in France.
How does the 3% tax currently work?
The 3% tax on the market value of French real estate, provided for under Article 990 D of the French Tax Code (Code général des impôts – CGI), in principle applies to legal entities — companies, bodies, trusts or comparable institutions — that directly or through one or more intermediary entities own one or more properties located in France or hold real property rights over such assets. The tax rate is set at 3% of the market value of the relevant real estate or rights as at 1 January of the relevant year.
The scope of the regime is broad. It does not only target direct ownership of French property. An entity may also fall within the scope of the tax where it holds an interest, whatever its form or percentage, in another entity that itself owns real estate located in France or holds a real property right over such property. In other words, the tax captures the ownership chain, not merely the immediate owner of the real estate asset.
This tax serves a purpose that goes beyond revenue collection alone. Above all, it is a tax transparency tool designed to identify the beneficial owners behind structures holding real estate in France and to limit the opacity of certain private wealth or international holding arrangements. This explains why, in practice, the main issue is often not so much the existence of the tax itself as compliance with the conditions required to benefit from an exemption.
In practice, the tax is often neutralised by the exemptions set out in Article 990 E of the CGI. Some of these depend on the nature of the entity or the composition of its assets; others are based on reporting obligations. BOFiP notably states that entities within the scope of the tax may, subject to certain conditions, benefit from a full exemption under Article 990 E, 3°, d of the CGI if they provide certain information annually to the French tax authorities or undertake to provide such information upon request.
This is what makes the current regime unusual. For certain structures, a full exemption may currently be obtained either by filing information spontaneously or by merely undertaking to disclose it (such undertaking having, where relevant, to be made as from the acquisition date of the relevant property or real property right, with a two-month administrative tolerance in practice following the acquisition date). BOFiP also specifies that where the required information is included in form No. 2746-SD filed spontaneously no later than 15 May of the relevant year, a full exemption may be granted; but it also confirms that the current regime still rests on this alternative between filing and undertaking.
A low-profile tax, but a formidable one in the event of an audit
The 3% tax is sometimes treated as a secondary issue, although it can have very significant consequences in the context of a tax audit. First, because its taxable base is the market value of the real estate asset. Second, because failure to comply with the relevant formalities and reporting obligations may result in the loss of the exemption and lead to particularly costly taxation. BOFiP reminds taxpayers that entities effectively liable for the tax must file, each year and no later than 15 May, a return stating in particular the location, description and market value of the taxable real estate and real property rights owned as at 1 January, as well as the identity and address of their shareholders, partners or other members and the number of shares, units or other rights held by each of them.
The issue is therefore of prime importance for foreign groups, private wealth structures and, more generally, all ownership chains in which a non-resident entity appears above a French real estate asset. In reality, the tax operates as a tax enforcement tool: it strongly encourages relevant structures to document the economic ownership of the real estate and to make that information available to the tax authorities.
What would Article 23 bis change?
Systematic annual filing
Article 23 bis of the bill on combating social security and tax fraud is intended to alter this logic. According to the parliamentary work, the aim is to remove the option consisting in simply undertaking to provide information upon request from the tax authorities and to replace it with an annual filing obligation. Exemption would therefore no longer rest on information being available “upon request”, but on information being submitted systematically and in advance.
The parliamentary report of the French National Assembly clearly presents this change as a strengthening of audit effectiveness. The underlying idea is straightforward: the tax authorities consider that the current mechanism does not provide sufficiently immediate and operational knowledge of ownership chains, even though the 3% tax also serves, indirectly, to support the audit of other taxes relating to wealth and assets. The reform therefore seeks to move the regime from a logic of information availability to one of systematic reporting.
In practical terms, the version of the text resulting from the parliamentary work provides that the entity would have to file, each year and no later than 15 May, a return containing the information required to benefit from the exemption. Substantively, the expected content is not radically new: it still consists, essentially, in identifying the real estate or real property rights held, their value, as well as the partners, shareholders or other members of the entity and the extent of their rights. The change is primarily procedural, but its practical consequences are real.
Appointment of a tax representative in France
The other notable contribution of Article 23 bis concerns non-resident entities with no permanent establishment in France. The text provides for the mandatory appointment of a tax representative domiciled or established in France, authorised to receive all communications, procedural documents and notices relating to the audit of the 3% tax, whereas previously the tax authorities merely had the option to request such an appointment. The logic here is highly operational: to ensure that, in all cases, the administration has an identified contact person for the conduct of its procedures.
The contemplated mechanism is even more robust than a simple obligation to appoint a representative: in the absence of an expressly designated representative, the legal entity closest to the real estate or real property rights in the ownership chain, provided that it is known to the French tax authorities, would be deemed authorised to receive such procedural acts. In other words, the absence of a formal appointment would no longer prevent the valid service of procedural documents. This is an important point, particularly from an audit and litigation standpoint.
A formalistic reform, but far from insignificant
At first glance, one might be tempted to view this reform as a mere reporting adjustment. That would be too hasty a reading. Article 23 bis does not create the 3% tax, nor even the transparency obligation associated with it. What it does, however, is significantly reduce the flexibility that some structures have so far benefited from, by replacing an undertaking-based option with a mandatory annual filing requirement. It therefore transforms an exemption “subject to being able to respond” into an exemption “subject to having already disclosed”.
For practitioners, the consequence is immediate: compliance processes for foreign groups and structures holding French real estate, whether directly or indirectly, will have to be revisited. Entities that considered themselves to be relatively low-risk because they fell within an exemption will now need to secure the upstream collection of information, verify the identification of all relevant links in the ownership chain and, where applicable, organise the appointment of a tax representative in France.
Where does the bill currently stand?
Caution is still required as regards the wording of the reform. As at 12 March 2026, this remains a bill still under parliamentary review. The legislative file of the French National Assembly indicates that the bill was tabled before the Senate on 14 October 2025, adopted by the Senate on 18 November 2025, and then debated at first reading before the National Assembly on the basis of the committee’s text, with discussion in public session on 25 February 2026. It is therefore more accurate to describe this as a reform in the process of being adopted rather than a rule already in force.
In other words, the political signal is very clear, but any commentary must still be expressed in the conditional tense. If the bill is definitively enacted in its current form, the 3% tax exemption available to relevant entities will become more formalistic, more systematic and easier for the tax authorities to monitor.
Conclusion
Article 23 bis does not overturn the rationale of the 3% tax; rather, it reveals its underlying logic. This levy is not merely a potential charge on French real estate held by legal entities; it is also, and perhaps above all, a transparency tool. By removing the information commitment option in favour of a mandatory annual filing requirement, the bill reinforces that dimension and confirms a well-known trend in contemporary tax law: exemptions remain available, but only on condition that they are increasingly documented, traceable and organised in advance.
SEO FAQ
What is the 3% tax on the market value of real estate?
It is an annual tax provided for under Article 990 D of the CGI, in principle due by certain legal entities that directly or indirectly hold real estate located in France or real property rights over such assets.
Who is affected by the 3% tax?
It applies to companies, bodies, trusts or comparable institutions, including where the real estate is held through another entity.
How can the 3% tax be avoided?
The CGI provides for several exemptions, including exemptions based on the nature of the entity and exemptions depending on the location of its registered office, in particular where certain transparency obligations are complied with under the conditions set out in Article 990 E of the CGI.
What is the new measure introduced by Article 23 bis?
The bill provides for the removal of the option consisting in merely undertaking to communicate information to the tax authorities, replacing it with a mandatory annual filing requirement, together with a mandatory appointment of a tax representative in France.
Which return is concerned?
In practice, this is form No. 2746-SD, already referred to in BOFiP in relation to reporting obligations connected with the 3% tax.
Will foreign entities have to appoint a tax representative in France?
Yes. Under the text currently under review, non-resident entities with no permanent establishment in France would be required to appoint a tax representative authorised to receive documents relating to audits of the tax.
Is the reform already applicable?
No. As at 12 March 2026, the bill is still going through the parliamentary process.
Sources
French National Assembly, Bill on combating social security and tax fraud – legislative file, 17th legislature.
Légifrance, Bill on combating social security and tax fraud (legislative file SFHT2521808L).
Légifrance, CGI, Article 990 D.
Légifrance, CGI, Article 990 E.
BOFiP-Impôts, BOI-PAT-TPC-30 – reporting obligations, payment, audit, penalties and litigation.
BOFiP-Impôts, BOI-PAT-TPC-20-20 – legal entities eligible for an exemption depending on the location of their registered office.
