French and International Property and Tax Matters in 2023

French and International Property and Tax Matters in 2023

French real estate and tax law can be a multifaceted subject, relying on tax structures that are distinct from peer nations.

This grows especially pertinent when an international element is added to the subject. In this feature, we hear from DPZ Avocats’ Delphine Parigi as she takes a look at the key concerns for HNWIs and other foreign investors in France as we move into the new year.

To provide a foundation for this conversation, can you give a brief overview of the main regulations concerning real estate and property acquisitions in your jurisdiction?

France has developed a continuous, complex tax and legal system when it comes to investment in real estate by foreign investors, which demands a specific approach.

Whereas real estate investments are clearly secured from a property standpoint with the required involvement of a notary public for any transactions (including the transfer of foreign shares, which are predominantly real estate for French tax purposes), the French tax regimes applicable for ownership, resale and inheritance purposes are extremely numerous and depend on many factors. These include the type of real estate investment, ownership structure, destination, ownership and capital gains involved.

How can the introduction of an international element complicate such situations?

Beyond the potential for double taxation in case of a cross-border investment, France has implemented an extremely detailed patchwork of procedures when it comes to international investors.

As a few examples, any entity (French or foreign) has to be registered in France. In addition, any investment via a special purpose vehicle triggers a 3% tax declaration by 15 May to disclose the channel of investors up to the UBO. In case of a second omission, delay or mistake, the French tax authorities reassess the taxpayer (with a joint liability of intermediary entities) at 3% of the fair market value of the property and generally apply a 40% penalty.

When French real estate assets or rights have been financed abroad, the deductibility of the financing is often challenged if the financing has not complied with French rules. In case of a French property owned by a trust, yearly reporting is also required. Many other specifications apply which require significant administrative and accounting costs to be anticipated upon acquisition. We highly recommend that foreign investors ask their French tax advisors to determine the exact tax and indirect costs upon acquisition, ownership, resale and inheritance upon the acquisition.

France has developed a continuous, complex tax and legal system when it comes to investment in real estate by foreign investors, which demands a specific approach.

It is ideal to insert a substitution clause upon the promise of sale to take the time to define the relevant type of acquisition (direct or indirect) before the final deed. Indeed, modifying the structure after acquisition incurs a significant transfer tax in France.

What are the main tax issues encountered during property-related transactions in France and across borders?

Due to the French tax declarative system, the burden is put on the investor’s shoulders. Contrary to many overseas authorities, the French tax authorities tend to consider any HNWI or foreign company as potentially fraudulent. The French procedural rules for prosecution of tax fraud have been significantly amended since October 2018 in order to increase the number of tax fraud prosecutions against both individuals and legal entities. Our practice focuses on assisting cross-border investments.

Since October 2018, the French tax authorities automatically refer cases to prosecutors where:

  • the tax reassessment exceeds €100,000, and;
  • the French tax authorities apply a 100%, 80% or 40% penalty.

This new procedural rule mechanically increases the number of files which arrive at the prosecutor’s level. Today, the 40% penalty applies almost automatically when there is an omission in any tax filing.

This period is particularly complex as clients have to deal with a lack of responsiveness from the authorities and the tight timeline of the transaction. Today, it takes approximately one year for a deed to be fully registered by the land registry.

In what ways can procedural tax issues be prepared for before they become problematic?

The ideal time of action is definitively before the closing of the transaction. This is where one is able to determine a strict costs and modalities plan with the support of a coordinated team of lawyers, surveyors and experts in valuation who are aware of the French tax landscape for international clients. In addition to their technical expertise, the capacity of the advisors to connect with involved parties is key to easing the full process.

In this new environment, it is critical to anticipate the criminal risk as soon as possible in order to limit the risk that the tax audit leads to a criminal enquiry for tax fraud against the HNWI, the legal entity or its directors. The most difficult tax audits often begin due to a mail issue caused by failing to swiftly follow up on a request from the French tax authorities.

Today, it takes approximately one year for a deed to be fully registered by the land registry.

How would you advise a high-net-worth client or large company on beginning a tax-efficient investment in French property? What additional elements would need to be taken into account if the investment were being made across international borders?

To be tax-efficient today requires first and foremost to set up a consistent SPV with the purpose of avoiding any discussion about artificial settlements. For instance, in case of significant renovation and a decision to rent the real estate, it may be in the scope of the paid VAT to obtain a full reimbursement. However, such steps require a long term renting with services.

If the investment were being made across international borders, perfect coordination between the advisors is absolutely necessary. Although we are part of an integrated world, the tax world is still defined by procedures individual to each country. Many tax-efficient regimes do exist in France, but detailed conditions must be met. As an example, given the objectives of a project, the dividend taxation regime tends to be the most favourable, and therefore the SIIC and the SPPICAV should be the most efficient structuring.

Please find below a summary of the key elements of the SIIC and the SPPICAV:

Registered capital Minimum €15 million NA
Shares Listed Unlisted
Types of assets of the structure Minimum 80% in real estate assets –        Minimum 51% in real estate assets

–        10% in 12 months’ liquid assets

–        Others: financial products (at least five different real estate assets representing >20% of the total real estate assets)

Corporate purpose Renting

Buying and selling activities may be requalified under the property trader regime (marchand de biens) under certain circumstances

Tax regime of the structure Exempt from CIT under certain conditions related to capital split CIT
Tax regime of the investors Dividend regime – taxation in the country of residence

The SIIC (listed company) requires the fulfillment of the following obligations:

  • 60% of the share capital should not be held by the same investor or investors who agreed to act in the same way, and;
  • At least 15% of the share capital should be held by investors holding each not more than 2%.

Furthermore, at least seven investors, in addition to the two main shareholders, should hold a part of the SIIC capital.

The SIIC is also subject to specific distribution obligations every year:

  • 85% of the rental income received by the SIIC every year from the SCIs
  • 50% of the capital gain derived from the sale of real estate by the SCIs
  • 100% of other incomes (e.g. dividends received from subsidiaries of the SIIC)

Failure to comply with the distribution obligation may lead to the loss of the benefit of the CIT exemption regime of the SIIC.

In addition, dividends distributed by the SIIC may be subject to withholding tax to its legal investors holding, directly or not, at least 10% of the SIIC in case such investors are not subject to CIT (or, if foreign investors, to an equivalent taxation).

Due to these quite restrictive conditions, the SPPICAV often appears as a more convenient structure. Even if the SPPICAV is subject to CIT, it may be more convenient when compared to the SIIC, notably for the following reasons:

  • the SPPICAV is not a listed entity, which is therefore not subject to stronger regulations;
  • there is no minimum share capital;
  • there is no restriction on the capital repartition.

However, the assets repartition of the SPPICAV is limited to the obligation of holding at least 51% in real estate.

Similarly to the SIIC, the SPPICAV is subject to distribution obligations every year:

  • 85% of the rental income
  • 50% of other income

In this new environment, it is critical to anticipate the criminal risk as soon as possible

Have there been any legislative changes during 2022 when it comes to tax and property in France?

Pursuant to article 279-0 bis of the FTC in application of the Finance Bill for 2023, VAT is levied at the reduced rate of 10% on improvement, transformation, development and maintenance work relating to residential premises completed over two years ago. Similarly, pursuant to the provisions of Article 278-0 bis A of the FTC, VAT is collected at the rate of 5.5% on energy quality improvement works in the same dwellings.

At the same time, when the work is carried out by a professional lessor, article 257, II-1-2° of the FTC provides that if this work contributes to the enhancement or extension of the life of the building, it must give rise to the taxation of self-delivery when the building subject to the work is assigned to operations not subject to VAT – which is the case when the building is assigned to a rental activity for residential use (this type of rental being exempt from VAT).

As for the rate applicable to this self-delivery, it is in principle 20% except for works relating to social housing.

What tax developments should French corporates watch out for in the year to come?

The tax developments are mainly issued by the OECD rules with a specific practice and by case law (although France is supposed to be a civil law country). A substantial change concerns VAT with the electronic filing.

The system adopted by article 26 of the Amended Finance Bill for 2022 and the Finance Bill for 2023 is based on two objectives relating to the generalisation of electronic invoicing in transactions between persons subject to VAT and the transmission of transaction data:

  • widespread use of electronic invoicing;
  • the obligation to transmit to the administration and in a dematerialised manner the information relating to the operations carried out by persons subject to VAT which are not taken from electronic invoices.

In practice, the implementation of electronic invoicing will be done according to a gradual schedule, which will limit the effects of this transition on companies and gradually include them according to their size. The dates will be 1 Janary 2024 for large companies, 1 January 2025 for mid-sized companies (ETI) and 1 January 2026 for SMEs and VSEs.

Article 62 of the Finance Bill for 2023 completes this reform by making two changes. The first complements article 289-VII of the CGI, relating to the terms under which taxable persons can issue or receive invoices. They will now be able to use the qualified electronic seal procedure within the meaning of the European regulation known as the ‘eIDAS regulation’. This procedure is in addition to those already provided for, namely the electronic signature, the reliable audit trail and the structured message.

The second modifies article L. 102 B of the Tax Proceedings Code in order to provide that the books, registers and documents drawn up or received on a computer medium must be kept in this form for a period of six years from the date of the last transaction mentioned in the books or registers or the date on which the documents or records were drawn up. There would therefore no longer be the possibility of keeping them for three years on a computer medium, then of switching to another medium for the last three years.

About Delphine Parigi

Please tell us about yourself and your journey into law.

I believe I took the journey of international tax law in because I am driven by solving the most complex and challenging legal issues as efficiently as possible. I hesitated with a diplomatic career, but tax law answered just as well to this need by governing the financial foundation of our society and by giving me the opportunity to be involved in cases where the human part is the basis.

Nowadays, with the trend of tax law becoming criminal tax lax, I understand fully my vital need for freedom and defence of taxpayers.

Liberty is at an end whenever the laws permit that, in certain cases, a man may cease to be a person, and become a thing.” – Cesare Beccaria

What would you say have been your proudest achievements in your career to date?

I find this question difficult to answer for a lawyer, as the essence of our career is to battle in the shadow and in silence for the interest of our clients.

It would be a lie to say that I feel indifferent to being part of billion-euro transactions, having represented one of the few cases to the French Constitutional Council, being contacted by top leading firms to launch their office, being a speaker at worldwide conferences including at the Harvard Business Club, winning complex cases at transactional level, or solving issues which other advisors said were impossible.

But I think my biggest renewed achievement is that I wake up every day with the chance to do the profession that I have chosen with the people I am grateful to work with. Working happily with a grateful team and clients over the years, whatever the challenges, is an amazing gift.

I received two messages received today, the first from a long-term client: ”I appreciate we are getting into deeper tax advice and I really appreciate you being available at short notice.” The second, from a successful young alumnus trainee who sent me his wishes: “I also wanted to thank you for your time and for everything you gave me during my months of internship in your firm, which are now of great help to me for my new experiences.”


Delphine Parigi, Founding Partner

DPZ Avocats

81 Avenue Raymond Poincaré, 75116 Paris, France

Tel: +33 9 81 25 89 87

Fax: +33 9 81 38 38 77



Delphine Parigi has been a tax lawyer since 2005, having begun her career with EY Société d’Avocats in Paris and New York. She launched DPZ in 2011 to better provide high-value technical services to international clients, in addition to working within her values of proximity and accessibility.

DPZ Avocats is a boutique law firm located in Nice and Paris, providing services both in France and abroad. The firm counts clients among the private and public sector, in addition to non-profit organisations, investment funds, banks and individuals, providing both advice and litigation services.



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