Tax compliance & Reporting
Axtead assists its clients in meeting their annual, specific, and exceptional tax obligations. We manage both the preparation of tax returns and the securing of information disclosed to the French tax authorities.
Individual tax compliance
We handle the preparation and filing of the following returns, tailored to each taxpayer’s situation:
- Annual Income Tax Returns (Forms No. 2042 and 2042-C): salaries, employee share ownership schemes, professional income (commercial, non-commercial, and agricultural profits), rental income, furnished rentals, investment income (dividends, interest, life insurance), capital gains on securities, tax credits or deductions;
- Foreign-Source Income (Form No. 2047);
- Real Estate Wealth Tax (IFI) (Form No. 2042-IFI);
- Exit Tax & Relocation (Form No. 2074-ETD);
- Foreign Bank Accounts & Insurance Policies (Form No. 3916);
- Deferred Capital Gains (Form No. 2074-I).
Corporate & patrimonial entity compliance
We also manage the tax obligations of the following structures:
- Real Estate Holding Companies (Sociétés civiles immobilières-SCI): rental income returns (Form No. 2072);
- Annual 3% Tax on French real estate held through legal entities (TVVI – Form No. 2746);
- Trusts: annual and event-based reporting (Forms No. 2181-TRUST1 and 2181-TRUST2).
Voluntary disclosure
We support clients in rectifying non-compliant tax situations through voluntary disclosure procedures:
- Undeclared domestic or foreign-source income;
- Omitted foreign bank accounts or life insurance policies;
- Under-valuation of real estate assets within the scope of Wealth Tax (IFI).
We focus on safeguarding your tax obligations through comprehensive compliance, transparent communication with the tax administration, and effective mitigation of audit risks.
Questions
When you contribute shares to a holding company under the tax deferral scheme (Article 150-0 B ter of the French Tax Code), you must, for the year of the contribution:
- Declare the capital gain placed under the deferral scheme using Form No. 2074-I;
- Report the amount of this gain on your supplementary tax return, Form No. 2042-C.
Subsequently:
- In the event of an occurrence affecting the deferral (subsequent sale, contribution, exchange, reinvestment, etc.), a new declaration must be filed;
- Each year, the deferred capital gain must be mentioned in Box 8UT of your tax return No. 2042.
The beneficiary holding company is also subject to specific reporting requirements. Rigorous monitoring is essential to prevent any challenge to the deferral or any reporting errors.
The 3% tax applies to French or foreign legal entities (corporations, partnerships, trusts, foundations) that directly or indirectly own one or more real estate properties or real property rights located in France.
The tax amounts to 3% of the fair market value of the real estate assets held as of January 1st. However, several exemptions are available, notably when:
- The entity is not “real estate predominant” (i.e., french real estate assets represent less than 50% of its total French assets).
- The real estate assets are valued at less than €100,000 or represent less than 5% of the total assets held in France.
- The entity is established in an eligible jurisdiction (excluding non-cooperative jurisdictions) and:
- Provides detailed information annually regarding the properties and the beneficial owners (shareholders, partners, etc.), or
- Formally undertakes to provide this information upon request from the tax authorities.
Annual declaration no. 2746 allows this exemption to be formalized, and it is necessary to ensure that it is filed to avoid any tax penalties.
French tax law includes a “right to error” (droit à l’erreur) principle, allowing taxpayers to spontaneously correct inaccurate or incomplete filings.
You can regularize your situation by filing an amended return (Income Tax, IFI, etc.) before any audit is initiated. In this case:
- You will be required to pay the additional tax due;
- You will benefit from a 50% reduction in late payment interest (e.g., a rate of 1.2% per year instead of 2.4%).
Conversely, if the tax authorities initiate an audit before you have regularized your situation, you may face:
- Full-rate late payment interest;
- Hefty penalties (which can reach up to 80% in cases of fraudulent maneuvers).
At Axtead, we assist you in bringing your tax situation into compliance while minimizing risks and financial consequences.
