3% Tax: Changes Resulting from the Law on Combating Social Security and Tax Fraud

The French Act on Combating Social Security and Tax Fraud has just been published (Act No. 2026-534 of 25 June 2026). Several of its provisions have a significant impact on the real estate sector.

This article focuses on the measures relating to the annual 3% tax on the market value of real estate located in France (hereinafter the “3% tax”).
A Brief Overview of the 3% Tax Regime

Under Article 990 D of the French Tax Code, the 3% tax is payable by all legal entities, whether French or foreign, that hold, directly or indirectly, one or more properties located in France or real estate rights pertaining to such properties.
 

In practice, this tax is rarely paid. The legislature has, in fact, provided for numerous exemptions, most of which are subject to a location-based condition.
•    Certain exemptions apply automatically, particularly due to the nature of the entity (entities not considered to be predominantly real estate companies, listed companies, nonprofit organizations, pension funds, etc.) or the low value of the French real estate (properties valued at less than €100,000 or an ownership share in such properties representing less than 5% of their market value);
•    Otherwise, entities may qualify for an exemption provided they comply with reporting requirements designed to enable the tax authorities to identify the ultimate actual owners of real estate assets located in France.
 

The new law specifically strengthens these reporting requirements.
 

1. Elimination of the Disclosure Commitment
Until now, entities liable for the 3% tax could exempt themselves from it by simply making a disclosure commitment, which involved agreeing to provide the required information upon the first request from the French tax authorities.
This mechanism has now been eliminated.

From now on, only the annual filing of the 3% tax return (Form No. 2746-SD) will allow entities to continue benefitting from the exemption based on reporting obligations.
Entities that have previously relied on such a commitment must now file an annual return starting in 2027 (the first return must be filed no later than 15 May 2027).

Note: This change has no impact on automatically exempt entities, which remain exempt from any reporting obligations provided they comply with the specific conditions of the exemption they are utilizing.

In this context, undertaking a review of real estate ownership structures is essential to identify any entities that have, until now, relied solely on a simple disclosure commitment. This will enable the entities concerned to prepare for their new reporting obligations and, where applicable for foreign entities, to complete their preliminary registration in France, which is required for the electronic filing of 3% tax returns.

2. Mandatory Appointment of a Tax Representative in France
A new Article 990 FA of the French Tax Code introduces an additional requirement for foreign entities that do not have a permanent establishment in France but are subject to the 3% tax reporting obligations.

These entities must now appoint, in their annual 3% tax return, a representative established in France (an individual or legal entity that is tax-domiciled in France or whose head office is located in France).

This representative will be authorized to receive, on their behalf, all communications from the tax authorities in connection with the monitoring and enforcement of this tax.

In the absence of an express appointment, the entity in the chain of ownership that is closest to the real property or real property rights and known to the tax authorities will be deemed authorized to receive such communications.