French 3% Real Estate Tax Exemption
France and Jersey entered into a tax information exchange agreement (TIEA) on 23 March 2009. Jersey has previously entered into similar agreements with 11 other OECD countries.
One of the key benefits of the TIEA with France is that Jersey investment funds and real estate holding structures will qualify for exemption from the French 3% real estate tax which is assessed annually on the fair market value of the real property situated in France. The exemption also extends to interests, shares and units in certain intermediate structures holding French real estate assets. An extract from the text is set out below:
- "Subject to compliance with certain reporting obligations (information on the entity's owners and assets), the 3% tax will apply neither to entities with legal personality owning directly or indirectly one or more buildings in France or owning real property rights to such assets, provided that their registered office is in Jersey, nor to entities without legal personality owning directly or indirectly one or more buildings in France or owning real property rights to such assets, provided that they have been created under the laws of Jersey;
- the same goes for the provisions in the second paragraph of Article 123bis(3) of the French General Tax Code, which impose special rules (minimum fixed income) for calculating the taxable income of natural persons who own units or shares in entities located in a territory which has not signed an administrative assistance agreement with France."
The TIEA will following implementation result in the following vehicles being exempted from the 3% French tax in respect of real estate interests in France:
- Jersey companies directly owning property in France
- Jersey limited partnerships whose general partner is a Jersey company and which own property in France
- Jersey companies which are trustees of Jersey unit trusts which own property in France
The latest agreement is consistent with Jersey's policy of constructive international engagement and highlights the mutual respect between France and Jersey. Jersey is committed to staying at the forefront of well regulated international financial centres and complies with international standards of financial regulation as well as co-operating in combating the financing of international terrorism.
The TIEA will need to be ratified by the French Parliament and by the States of Jersey before being brought into force. Once the TIEA is implemented Jersey will be treated by France as a territory which has signed an administrative assistance agreement to fight tax fraud and evasion.
Jersey has previously entered into Tax Information Exchange Agreements with the USA (2002); the Netherlands (2007): the seven Nordic countries (Denmark, the Faroes, Finland, Greenland, Iceland, Norway and Sweden - in 2008) Germany (2008) and the UK (2009).
Jersey is close to signing a TIEA with Ireland and negotiations are well-advanced with Australia and New Zealand. Discussions are also underway with Spain and Italy and Jersey is more than willing to extend such agreement to all other jurisdictions, including OECD countries, when they are ready to engage.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.