The “Grenelle II” and “Greater Paris Area” (le Grand Paris) draft bills contain, logically, a great many rules in terms of urban development and planning, and even in the field of property law for the former. However we were not expecting the draft bill on the Greater Paris Area to adopt, in such a precipitated manner, at the initiative of the Sénat (the upper house), a new tax impacting the real estate sector, even if it is merely recycling the tax mechanism contemplated in the Grenelle II draft… which had expressly excluded the Ile-de-France Region. We already underlined (see our Newsletter issue of 30 November 2009) that the real estate sector was under a great deal of tax pressure, on the occasion of the reform of business tax which introduced land corporations into the scope of the new Territorial Economic Contribution. In the Ile-de-France Region, this sector is subject to up to 19 different types of tax levies on commercial property. This did not however dishearten the legislator, who of course runs no risk of buildings being delocalized…
No-one can question the need to finance future transport infrastructures in the Ile-de-France Region or the fact that the real estate sector stands to benefit from an improved transport network (although it would seem doubtful for real estate value to increase in a zone such as La Défense merely due to a new interconnection). What is surprising is the method of adoption of a tax mechanism which, as you will see here, raises a great many questions and brings to light serious technical inconsistencies (both within the framework of the Greater Paris Area and of Grenelle II). Indeed, contrarily to what took place in other countries such as Great Britain, the creation of the Greater Paris Area tax was not the subject of any discussion with the sector’s professionals.
However, as is explained below by Alain Béchade, who heads the working group of ORIE (regional monitoring group for commercial property) focusing on the taxation of commercial property, this monitoring group including public and private operators has been
considering this question for eighteen months and swiftly concluded that the presumptive taxation of capital gains would prove to be a solution less useful than might appear.
Let’s hope that the next few months will provide an opportunity to give additional thought to the matter and for considering more rational alternatives, such as increasing transfer tax (ORIE’S proposal of 1%) or a tax on rent. Regarding this issue, we would point out that the surveys used by the British Treasury when adopting a tax mechanism with a similar objective (implemented for instance within the framework of the financing process of the Crossrail line in London) show that, ultimately, the cost of a rental tax is borne essentially by landlords and not by tenants.
This issue also addresses certain legal rules of significance stemming from the “Grenelle II” roundtable (environmental schedule within the framework of certain leases, increasing construction possibilities for buildings which satisfy certain criteria related to energy performance) as well as recent developments in legislation and case-law, particularly intensive during this period.
Dossier on Grenelle II and the Greater Paris Area
- Financing the Greater Paris Area: the project for the creation of presumptive taxation on capital gains p.2
- Tax reductions for rental investments or main residence: digest of “green” standards p.4
- Self-inspection during a building site p.6
- The new terms for exceeding density and girth laid down by the Grenelle II law p.7
- Interview of Alain Béchade : “We propose to create an economically intelligent tax” p.8
- The “Green lease”: the materialization phase of the concept p.10
- Withdrawal from a company (squeeze-out) is not equivalent to the re-sale of the securities p.11
- A third index for commercial rent review p.12
- Upward-only indexation clauses p.13
- The first few weeks of application of the real estate VAT reform p.14
- Restructuring SIICs, Inter- SIIC operations and subsidiaries p.15
- A preliminary question of constitutionality regarding the law of commercial leases p.16