The 3% tax: what the annual obligation changes in property valuation

Not all structures holding real estate in France are affected in the same way.

The reform targets in particular entities which until now could benefit from the exemption by providing certain information to the tax authorities or by undertaking to provide it on request. These may be French or foreign companies, sociétés civiles (non-trading companies), holding companies or other intermediary structures holding property in France directly or indirectly.

However, legal form or country of establishment is not enough to determine whether an entity is affected. The first step is to review the ownership chain and identify the precise basis of the exemption enjoyed by each structure.

This analysis is a matter for legal and tax advisers. The valuer’s work then begins with determining the property value to be declared.

The value set at 1 January 2027 will be followed by a value at 1 January 2028, then in 2029 and the following years.

After a few years, the file will therefore no longer contain an isolated value, but a series relating to the same asset.

Any significant change will need to be traceable to identifiable factors: market trends, works, a change in the composition or occupation of the property, new transaction evidence.

Stability must also be explainable, for example by an inactive market or by new evidence confirming the level previously adopted.

Consistency does not mean that the value must follow a steady trend. It means that its variations must be understandable in the light of the property and its market.

The declaration is drawn up on the basis of the position of the properties at 1 January.

This date must be clearly distinguished from the date of inspection and the date on which the report is written.

This distinction is standard in property valuation, but it becomes more important when the same value has to be updated every year. A property may be restructured, its layout may change, works may be carried out or its occupation may change.

For large or atypical assets, the first valuation therefore usefully serves as a baseline: plans, areas adopted, dated photographs, standard of specification, letting position, assumptions and market evidence.

An annual update does not necessarily require a new full valuation. It must nevertheless state what has been checked and the assumptions on which the new conclusion is based.

Transaction databases are an essential tool, but a raw data extract is not enough to establish the value of an atypical asset.

Two transactions in the same street may have very different characteristics: original condition or recent refurbishment, floor, view, aspect, outdoor space or standard of specification.

The question of floor areas is just as important. Habitable area, tax area, usable area and weighted gross area do not follow the same definitions. A comparison expressed per square metre only makes sense if the areas used are themselves comparable.

For hôtels particuliers (private mansions), Alpine residences, coastal properties or exceptional apartments, a few properly documented and adjusted comparables are often more relevant than a much larger sample of unadjusted data.

The first declaration has a particular feature: it will open the series of future values.

For a large or atypical asset, it therefore seems appropriate for this first valuation to be based on a file documented thoroughly enough to serve as the basis for subsequent updates.

In particular, it should make it possible to retrieve the areas and their definition, the condition and composition of the property, the plans and photographs used, the occupation position, the comparable transactions analysed, the adjustments made and the main assumptions adopted.

The following year, it then becomes possible to identify precisely what has changed, rather than trying to reconstruct after the event the condition of the property and of the market at the time of the previous declaration.