The tax on the market value of real estate (Taxe sur la Valeur Vénale des Immeubles, TVVI), often referred to as the “3% tax”, is a specific feature of property taxation in France: it applies to certain legal entities that hold (directly or indirectly) real estate and real property rights located in France, on the basis of their market value on 1 January. The rate is 3% and the regime is strongly geared towards “transparency / identification”: in practice, a large share of the exemptions depends on the ability to document the ownership structure and to justify the market value.
In this context, the valuer’s work is not a mere “comfort”: it is often at the heart of securing the position (tax base, evidence, overall consistency, defence in the event of a tax audit).
01Understanding the TVVI and its tax rationale
The TVVI is provided for by Articles 990 D to 990 G of the French General Tax Code (CGI). It is an annual tax based on the market value of the real estate and real property rights held in France on 1 January of the tax year.
Its position is unusual: it targets structures (and not, in principle, individuals holding property directly in their own name), with a system of exemptions largely linked to the ability to provide transparency about the holders and to the information supplied to the tax authorities.
Historically, the TVVI was introduced in 1983 to combat tax evasion and fraud involving assets, and its regime was adjusted in 2007.
02Who is liable for the TVVI, and on which properties
The TVVI applies to French or foreign “legal entities”: companies, bodies, trusts or comparable institutions, whether or not they have legal personality, which on 1 January own real estate or real property rights located in France, either directly or through an intermediate holding.
The assets concerned cover both built and undeveloped property, as well as real rights over such property (e.g. usufruct, right of use).
A decisive technical point: where there is a chain of shareholdings, the tax is payable by the entity or entities “closest” to the properties (where they are not exempt), and the intermediate entities may be held jointly and severally liable for payment.
The legislation also provides for a notable exclusion: the tax is due in respect of the properties or real property rights owned on 1 January, with the exception in particular of assets duly recorded as stock by legal entities carrying on business as property dealers or developer-builders.
03Market value: the heart of the risk, the heart of the valuer’s profession
The TVVI is a tax that is “simple in its rate” but demanding in its base: everything turns on market value.
The tax doctrine restates a reference definition: case law defines market value as the “normal price” that any purchaser would have agreed to pay, without any exceptional reason of convenience for preferring the property in question to other similar properties; this value is assessed by taking into account all the factors that make it possible to come as close as possible to the normal interplay of supply and demand.
In operational terms, the tax authorities also explain (for other wealth taxes, but with the same logic regarding the tax base) that properties are valued according to their actual market value, i.e. the price at which they could normally have been traded had they been sold on 1 January of the tax year.
Above all, the doctrine is explicit on a point that highlights the usefulness of a valuer: valuation at market value rules out “flat-rate” estimates based on indicative tables (price per square metre, standard coefficients, etc.), as these would be contrary to the spirit of the law. In short: the tax base requires a contextualised and well-supported analysis.
From a methodological standpoint, property valuation standards traditionally distinguish three main (internationally recognised) approaches: market, income and cost.
Beyond the terminology, the TVVI question is this: is your declared value defensible with regard to:
- the nature of the property (residential, offices, retail, industrial, land, atypical asset),
- its legal characteristics (split ownership, easements, planning constraints, leases, vacancy),
- and the quality of the market data (genuinely relevant comparables, adjustments, timing)?
Market value is the price at which a property could be sold, at the valuation date, under normal market conditions, between informed and willing parties.
For TVVI purposes, this value:
- constitutes a tax base
- must be objectively verifiable and justified
- may be audited after the event by the tax authorities
In practice, the determination of the market value adopted for TVVI purposes has a direct bearing on the taxpayer’s tax certainty. An insufficiently supported value, even if apparently consistent, may be challenged several years after it was declared, on the basis of partial or inappropriate comparables. Using a property valuer places this value within a recognised, documented and enforceable methodological framework, taking into account the specific features of the property, the valuation date and actual market conditions. The valuation does not seek to steer the value, but to make it defensible, traceable and legally sound, including in the context of a tax audit or adversarial proceedings with the tax authorities.
The TVVI is a tax that is “simple in its rate” but demanding in its base: everything turns on market value.
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