In brief
The Paris Judicial Court1 has ruled that shares of French “sociétés civiles immobilières” (SCIs) held by Dutch tax residents, where the SCI’s assets consist principally of French real estate, must be treated as real estate assets for the purposes of the France-Netherlands tax treaty, and are therefore subject to French real estate wealth tax.
In more detail
This decision concerns a Dutch tax resident couple who owned two French SCIs, which in turn owned two properties located in the South of France. Following a tax audit of their real estate wealth tax returns for 2018 to 2020, the French tax authority notified the taxpayers (i.e., the couple) of an adjustment to their real estate wealth tax liability, together with a 10% surcharge and late payment interest.
The taxpayers challenged these reassessments, arguing that the France-Netherlands tax treaty did not allow France to subject the SCI shares to real estate wealth tax. They argued that the SCI shares should be characterized as intangible movable property and, as such, be taxable only in the State of residence (i.e., the Netherlands). In support of their position, they relied on a decision of the French Supreme Court dated 2 October 2015 (No. 14-14.256), pursuant to which the shares of a Monegasque SCI owning French real estate had been characterized as movable property falling within the scope of the France-Monaco inheritance tax treaty’s Article 6 (relating to shares and corporate interests), rather than as real estate assets falling within the scope of Article 2 of that treaty.
Unlike in certain other treaties concluded by France (in particular with Germany, Spain, Italy and Switzerland), the wealth taxation provisions of the France-Netherlands treaty do not contain any express provision concerning real estate-rich companies. The taxpayers argued that, in the absence of such provisions, SCIs shares should be treated as intangible movable property and therefore taxable only in the shareholder’s State of residence (i.e., the Netherlands).
The Paris Judicial Court rejected the taxpayers’ arguments and upheld the position of the French tax authority, adopting a combined reading of several provisions of the tax treaty. It first relied on Article 23, § 1, pursuant to which “Capital represented by immovable property, as defined in paragraph 2 of Article 6 may be taxed in the State in which such property is situated”. It then noted that Article 6, § 2 refers, in defining the term “real estate”, to the law of the State where the property is located, while Article 3, § 2 specifies that any term not otherwise defined by the tax treaty shall have the meaning assigned to it by the law of the State governing the taxes to which the treaty applies, unless the context requires otherwise. Based on the treaty’s reference to domestic law, the Court applied Articles 964 and 965 of the French Tax Code, examining whether the SCI’s shares fell within the category of real estate included in the real estate wealth tax basis. The Court supported the position of the French tax authority and noted that “case law has consistently applied these provisions so as to include SCI’s shares in the real estate wealth tax base”.
The Court also distinguished the Supreme Court decision on which the taxpayers relied, arguing that it was not applicable to the case at hand: first, because the decision was made in the context of the France-Monaco tax treaty on inheritance tax; and second, because the France-Monaco inheritance tax treaty contains an express provision specifically targeting “shares and corporate interests”, unlike the France-Netherlands treaty in question.
The Court therefore concluded that France retains the right to tax real estate located on its territory, “a concept which includes SCI shares that own real estate assets”, even where such shares are held by Dutch tax resident non-French tax resident individuals.
Although this decision appears to be part of a broader case law trend in support of the position that French real estate held through companies is taxable in France pursuant to international tax treaties, it seems to us that a strict interpretation of the relevant treaty and of Articles 964 and 965 of the French Tax Code could support a different analysis. Indeed, the provisions of the French Tax Code defining the scope of real estate wealth tax, on which the Court based its reasoning, do not, strictly speaking, characterize shares or interests in real estate-rich companies as “real estate assets.” These provisions merely include in the real estate wealth tax base the portion of the value of such shares or interests representing the real estate assets or rights held, directly or indirectly, by a company. By concluding that shares in SCIs can constitute “real property” for the purposes of the French real estate wealth tax rules, the Paris Judicial Court adopts a broad interpretation of this concept.
Inès Chandeclerc, Associate, has contributed to this legal update.
1 (Paris Judicial Court, 9th Chamber, 1st Section, 5 May 2026, No. 24/13163).