When an initial purchaser benefiting from the regime of article 1594-0 G, A of the French Tax Code resells the building before completing the works, the sub-purchaser may take over the commitment to build and preserve the exemption from transfer duties (DMTO). Administrative doctrine allows this mechanism under three strict conditions: the assignee must be a VAT-taxable person, the resale deed must contain an express mention of the assumption with a reference to the initial deed, and the remaining period must be complied with (not a new period). The sub-purchaser may combine its own undertakings with those it takes over; doctrine then allows a joint release of the undertakings at the nearest deadline, which avoids a double penalty.
The mechanism of the assumption of an undertaking answers an operational reality: a construction project may change hands in the course of its completion, whether through the financial failure of the initial purchaser, a restructuring of the operation, or a transfer to a better-suited operator. Without an assumption mechanism, the intermediate resale would cause the loss of the exemption from transfer duties (DMTO) obtained by the first purchaser, which would discourage any movement within the chain.
Administrative doctrine allows the assumption of the commitment to build under strict conditions. The sub-purchaser takes up the baton and undertakes to comply with the remaining period (counted from the initial acquisition, not from the sub-acquisition) and with the terms of the undertaking (production of a new building within the meaning of art. 257 of the French Tax Code). In return, the exemption from transfer duties obtained by the initial purchaser is preserved.
The practical stakes are twofold: the notarial drafting (express mention of the assumption, precise reference to the initial deed) and the coordination of undertakings where the sub-purchaser itself gives a commitment to build or an undertaking to resell on the same operation.
Administrative doctrine strictly regulates the assumption. A single missing condition is enough to invalidate the mechanism and trigger the forfeiture for the initial purchaser.
The sub-purchaser must be a VAT-taxable person within the meaning of article 256 A of the French Tax Code: typically a property dealer, a developer, a real-estate company or another professional real-estate operator. A private individual or a non-taxable purchaser cannot take over the undertaking, and the resale then causes the loss of the exemption obtained by the first purchaser (triggering the forfeiture).
The notarial resale deed must contain an express mention of the assumption of the undertaking by the sub-purchaser. This mention must refer precisely to the initial deed (date, registration number) and restate the terms of the initial undertaking (nature of the works, applicable period).
The sub-purchaser undertakes to comply with the remaining period of the initial undertaking, counted from the date of acquisition by the first purchaser, not from the sub-acquisition. If the initial period is 4 years and the sub-acquisition takes place 2 years later, the sub-purchaser has 2 years to complete the construction (unless an extension is granted).
The sub-purchaser may be bound by two undertakings: the assumption of the initial undertaking plus its own commitment to build or undertaking to resell on the same operation. BOFiP doctrine allows the tax effects to be combined in the event of non-compliance, in order to avoid double taxation. In practice, the two undertakings are then jointly released at the nearest deadline: only the most severe penalty remains liable to be claimed, and the tax authorities require only the duties owed under the initial undertaking.
Case law and doctrine accept that the physical completion of the works may be carried out by a third-party sub-purchaser without calling into question the exemption obtained by the first purchaser, provided the assumption chain is regular and the substantive conditions (a new building within the meaning of art. 257 of the French Tax Code) are met within the allotted period.
The firm acts at every stage of an operation involving an assumption: prior tax analysis (characterisation of the operation, coordination of the undertakings of the initial purchaser and the sub-purchaser, calculation of the remaining period), drafting of the clauses in the preliminary agreement and the authentic deed of sub-acquisition (express mention, reference to the initial deed, combination of undertakings), and, downstream, defence in the event of a challenge by the tax authorities.
Our direct coordination with notarial offices and our command of BOFiP doctrine make it possible to secure the drafting and prevent the formal defects that could compromise the exemption chain.
No. The assumption is possible only if the sub-purchaser is a VAT-taxable person within the meaning of article 256 A of the French Tax Code. This condition excludes private individuals and non-taxable persons. In practice, the assumption concerns property dealers, developers, real-estate companies and other professional real-estate operators.
Three essential elements: (1) the express assumption of the commitment to build (or of the undertaking to resell, as the case may be); (2) the reference to the initial deed (date, registration number, identity of the initial purchaser); (3) the applicable period (the remaining period of the initial undertaking). If any of these mentions is missing, the assumption may be challenged by the tax authorities and the forfeiture triggered for the initial purchaser.
No. The sub-purchaser takes over the remaining period of the initial undertaking, counted from the acquisition by the first purchaser. If the initial period is 4 years and the sub-acquisition takes place 18 months after the initial acquisition, the sub-purchaser has 2 years and 6 months to complete the construction. An extension may of course be requested by the sub-purchaser under the conditions of article 266 bis of annex III to the French Tax Code.
The sub-purchaser may combine the assumption of the initial undertaking with its own commitment to build or undertaking to resell. BOFiP doctrine allows the tax effects to be combined in the event of non-compliance, in order to avoid double taxation. The two undertakings are then jointly released at the nearest deadline: the tax authorities claim only the duties owed under the initial undertaking, waiving those that would have been owed under the assumption.
Yes, provided the assumption chain is regular (formal mentions, taxable-person status, deadlines complied with). Case law and doctrine accept that the physical completion of the works may be carried out by a third-party sub-purchaser without calling into question the exemption obtained by the first purchaser. The central criterion remains the production of a new building within the meaning of article 257 of the French Tax Code within the allotted period.
The tax authorities may consider that the assumption did not take place validly and trigger the forfeiture for the initial purchaser at the time of the resale. The recovery of the duties not collected, increased by the late-payment interest of article 1727 of the French Tax Code (2.40% per year), would then be claimed from the initial purchaser on the basis of I of article 1840 G ter of the French Tax Code. Hence the importance of careful notarial drafting and a prior audit.
Topics frequently connected with the assumption of an undertaking by a sub-purchaser.
Overview: reselling, building, extensions, assumption.
Voir la page Commitment to buildThe procedure provided for by art. 1594-0 G, A (DDFIP, registered letter, tacit acceptance after 2 months).
Voir la page Undertaking to resellGeneral framework of the undertaking to resell (French Tax Code art. 1115).
Voir la page Real-estate practiceGeneral framework of transfer duties (DMTO) and exemptions.
Voir la pageA confidential first exchange to analyse the exemption chain, secure the drafting of the deed of sub-acquisition, and defend your interests in the event of a challenge.
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