Under French tax legislation, French or foreign companies (such as a Monegasque SCI/SCP) that own French real estate, directly or indirectly, may be liable for an annual 3% tax on the market value of the property unless an exemption applies.
A number of exemptions apply, particularly to foreign companies incorporated in a country that has signed a treaty with France containing either a provision for administrative assistance in preventing fraud and tax avoidance or a non-discrimination clause. The Double Tax Treaty between France and Monaco, dated 18 May 1963, includes such an administrative assistance provision.
Therefore, provided that the Monegasque SCI/SCP complies with certain filing requirements, it will not be subject to the 3% tax.
What Are the Filing Requirements?
To benefit from the exemption, the SCI/SCP must either:
Submit an annual 3% Tax Form (Form 2746) to the French tax authorities, disclosing certain required information, or
Provide an undertaking to supply this information upon request from the French tax authorities.
The most straightforward way to comply with these formalities and benefit from the exemption is to provide the undertaking, as this eliminates the need to file a 3% Tax Form each year.
The undertaking is a simple written statement in which the company's legal representative commits to providing the required information if requested.
However, it is crucial to understand that once an undertaking is given, the company may receive a request for information from the French tax authorities at any time. If the company receives such a request, it must respond and provide the requested information within 60 days.
Failure to respond or meet the strict 60-day deadline will result in the automatic application of the 3% tax, with no possibility of obtaining an exemption.
When an undertaking is provided, the company must therefore ensure that any correspondence addressed to it is handled promptly and efficiently.
It is also important to note that if the French tax authorities send a request to the company’s last known address and the company fails to collect and respond to it, the request will still be considered as received, and the 3% tax will then be due.
This is why compliance with the 3% tax formalities must be taken very seriously, as the tax liability—calculated at 3% of the market value of a multi-million-euro property—can be extremely high.
This information is for reference only. It is not intended to provide tax or legal advice and should not be relied upon as such.
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