Real estate taxation, planning taxation

The development tax (taxe d'aménagement): scope, calculation and the rebuilding trap

The development tax (taxe d'aménagement) applies to construction, rebuilding and extension operations subject to planning permission (building permit, development permit, prior declaration). Governed by articles 1635 quater A et seq. of the CGI since its transfer from the planning code by ordinance n° 2022-883 of 14 June 2022, it arises upon the grant of the permission and becomes payable upon completion of the works. Its amount results from a calculation that looks simple, taxable floor area multiplied by a flat-rate value per square metre, then by the municipal and departmental rates, but is riddled with pitfalls: the most expensive is the demolition-and-rebuild trap, as the tax is assessed on the entire rebuilt floor area, with no deduction for the demolished areas. The firm quantifies the tax upstream of the project and challenges erroneous assessments.

Have your development tax quantified See the Real estate taxation practice
Paris · Geneva · Marseille · Cannes · Lisbon
— In brief
Scope
Construction, rebuilding and extension operations subject to planning permission (CGI, art. 1635 quater A et s.)
Chargeable event
Grant of the planning permission; tax payable upon completion (CGI, art. 1635 quater G)
Tax base
Taxable floor area multiplied by a flat-rate value per square metre, updated every year
Rates
Municipal share from 1% to 5%, raised up to 20% by sector; departmental share; regional share in Île-de-France
Main pitfall
Demolition and rebuilding: tax assessed on the entire rebuilt floor area, with no offset against the demolished areas
— 01

A flat-rate tax in appearance, a project cost that is decided at the permit stage

The development tax (taxe d'aménagement) is owed by the holder of the planning permission in respect of construction, rebuilding and extension operations on buildings, as well as certain developments and installations (swimming pools and outdoor parking spaces, in particular). Long governed by the planning code, it now falls under articles 1635 quater A et seq. of the CGI, ordinance n° 2022-883 of 14 June 2022 having transferred its administration from the planning authorities to the DGFiP, which assesses it on the basis of the items declared by the taxpayer after completion.

Its mechanics look simple: the chargeable event is the grant of the permission (or the arising of a tacit permit, or the official report recording a construction carried out without permission), and the tax becomes payable upon completion of the operations, within the meaning of the declaration provided for by article 1635 quater G of the CGI. The tax base is flat-rate: the taxable floor area, multiplied by a value per square metre set by statute and updated every year, to which the rates voted by the municipality and the department are applied.

It is precisely this flat-rate design that catches taxpayers out. The taxable floor area matches neither the planning-law floor area nor the habitable area; municipal rates can be sectorised up to 20%; the exemptions and the 50% allowance must be identified and, for some of them, claimed. Above all, where a demolition is followed by a rebuild, the tax is assessed on the entire rebuilt floor area: the demolished square metres are not deducted. On a heavy restructuring project, the gap between the anticipated cost and the tax actually due can run into tens, even hundreds of thousands of euros.

The firm deliberately takes on a limited number of engagements to guarantee the direct involvement of its partners on every matter, and systematically assesses whether its involvement is warranted before accepting any engagement.

— 02

The development tax regime, point by point

01

Scope, chargeable event and payability

The tax covers operations subject to planning permission; it arises at the permit stage and is paid after completion.

  • Taxable operations: construction, rebuilding, extension of buildings and certain developments or installations, as soon as they require a building permit, a development permit or a prior declaration
  • Chargeable event: the grant of the permission, the arising of a tacit permission or, for unlawful constructions, the official report recording the infringement
  • Tax payable upon completion of the operations (CGI, art. 1635 quater G): the taxpayer declares the assessment items within the regulatory deadlines following completion, after which the tax authorities issue the collection notice or notices
  • Administered by the DGFiP since the 2022 reform, with the declaration filed electronically in the taxpayer's online account; payment is made in one or two instalments depending on the amount
02

The tax base: taxable floor area and flat-rate value

The tax base is a flat-rate formula: the square metres of taxable floor area, multiplied by a unit value updated every year.

  • Taxable floor area: the sum of the enclosed and covered floor areas with a ceiling height above 1.80 metres, measured from the inside face of the facades, after deducting voids and shafts; it includes areas excluded from the planning-law floor area (cellars, storage rooms and convertible attics, in particular)
  • Flat-rate value per square metre set by statute (CGI, art. 1635 quater H et suivants), with a higher value in Île-de-France, updated on 1 January each year in line with the construction cost index
  • Certain developments are taxed on a flat-rate basis per unit or per square metre: swimming pools, parking spaces not included in the taxable floor area, ground-mounted photovoltaic panels, wind turbines
  • 50% allowance on the flat-rate value for the first 100 square metres of the main residence, as well as for certain premises (housing financed with subsidised loans, industrial and craft premises, warehouses and hangars operated commercially, covered car parks)
03

The rates: municipal share, departmental share, sectorisation

The overall rate is the sum of several locally voted shares; sectorisation can push it well beyond the standard level.

  • Municipal or intermunicipal share: standard rate between 1% and 5%, set by resolution
  • Increased rate by sector: the resolution may raise the rate up to 20% in certain sectors, where substantial public infrastructure works are made necessary there; the reasoning of the resolution is a ground for challenge
  • Departmental share, voted within a statutory ceiling, funding in particular sensitive natural areas and the CAUE; a regional share is added in Île-de-France
  • The applicable rate is the one in force on the date of the chargeable event: the date the permission is granted locks in the regime, which can justify managing the filing timetable
04

Exemptions and the demolition-and-rebuild trap

Exemptions exist, as of right or by local resolution; but rebuilding attracts no offset against the demolished areas.

  • Exemptions as of right: constructions with a floor area of 5 square metres or less, constructions assigned to a public service, certain agricultural premises, as well as, subject to conditions, the identical rebuilding of a building destroyed or demolished less than ten years earlier (art. L. 111-15 du code de l'urbanisme) and the rebuilding of disaster-damaged premises
  • Optional exemptions by resolution of the local authorities: certain subsidised housing and garden sheds subject to prior declaration, in particular; they must be checked municipality by municipality
  • The rebuilding trap: outside the exempt cases of identical rebuilding and disaster-damaged premises, demolition, whether total or partial, followed by a rebuild is treated as a new construction; under the published administrative doctrine (BOI-IF-TU-10-20-10, § 60), the tax is assessed on the entire rebuilt taxable floor area, with no credit for the demolished square metres
  • Practical consequence: a restructuring project may be taxed less as a retain-and-refurbish scheme than as a demolition and rebuild for the same final floor area; the approach chosen at the permit stage must factor in this parameter
— 03

Our approach

The firm acts at both ends of the project. Upstream: quantifying the development tax under the project variants (retention, extension, demolition and rebuild), checking the local resolutions (rates, sectorisation, optional exemptions), identifying the allowances and exemptions available and factoring the tax into the operation's financial model. Downstream: reviewing the collection notices issued by the DGFiP (floor area used, flat-rate value, rates, omitted allowance), filing contentious claims and applications for relief, challenging insufficiently reasoned sectorised rates, and assisting in the event of an ex officio assessment following an official report.

  • Development tax (taxe d'aménagement)
  • Taxable floor area
  • Sectorised rates
  • Demolition and rebuilding
  • Articles 1635 quater A et s. du CGI
— FAQ

Development tax: your questions

Who has to pay the development tax and on which operations?

The tax is owed by the holder of the planning permission (or, where a construction is carried out without permission, by the person responsible for it) in respect of construction, rebuilding and extension operations on buildings, as well as certain developments and installations, as soon as they require a building permit, a development permit or a prior declaration (CGI, art. 1635 quater A et suivants). Purely interior works that create no taxable floor area and involve no change subject to permission fall outside the scope of the tax.

When is the development tax due: at the permit stage or at the end of the works?

The two moments play distinct roles. The chargeable event is the grant of the planning permission: it is on that date that the applicable rates and regime are assessed. Payability, for its part, occurs upon completion of the operations (CGI, art. 1635 quater G): the taxpayer declares the assessment items after completion, and the DGFiP then issues the collection notice or notices. Payment is made in one or two instalments depending on the amount due.

How is the taxable floor area calculated?

The taxable floor area is the sum of the enclosed and covered floor areas with a ceiling height above 1.80 metres, measured from the inside face of the facades, after deducting voids and shafts (staircases, lifts). It is broader than the planning-law floor area: it notably includes cellars, storage rooms and attics that meet the enclosure, cover and height criteria, even if unconverted. A measurement error or the wrongful inclusion of unenclosed areas feeds straight into the amount of the tax, since the base is obtained by multiplying those square metres by the flat-rate value.

Which rates apply and can they exceed 5%?

The municipal share is voted between 1% and 5%. The municipality may nevertheless institute, by a reasoned resolution, an increased rate of up to 20% in sectors where substantial public infrastructure works are made necessary by the future constructions. Added to this are the departmental share, capped by statute, and, in Île-de-France, a regional share. The applicable rate is the one in force on the date of the chargeable event: before filing a permit application in a sector with an increased rate, the local resolutions must be read, and their reasoning can moreover be challenged.

How does the 50% allowance for the main residence work?

The flat-rate value per square metre is reduced by 50% for the first 100 square metres of residential premises constituting the taxpayer's main residence and of their annexes. The same allowance benefits other categories of premises, including housing financed with certain subsidised loans, industrial and craft premises, warehouses and hangars not open to the public and operated commercially, and covered car parks operated commercially. Beyond the first 100 square metres, the full value applies for the main residence.

I am demolishing a building in order to rebuild: are the demolished areas deducted?

No, and this is the most expensive trap of this tax. Outside the exempt cases of the identical rebuilding of a building destroyed or demolished less than ten years earlier and the rebuilding of disaster-damaged premises, demolition followed by a rebuild is treated as a new construction: under the published administrative doctrine (BOI-IF-TU-10-20-10, § 60), the development tax is assessed on the entire rebuilt taxable floor area, with no offset against the demolished square metres. Demolishing 1,000 square metres in order to rebuild 1,000 therefore results in 1,000 square metres being taxed, as if nothing had previously existed. For a comparable final floor area, a retain-and-refurbish project can be taxed significantly less, which must be weighed up before the permit is filed.

What are the main development tax exemptions?

Some apply as of right: constructions with a floor area of 5 square metres or less, constructions assigned to a public service or of public utility, certain agricultural premises, and, subject to conditions, the identical rebuilding of a building destroyed or demolished less than ten years earlier (art. L. 111-15 du code de l'urbanisme) as well as the rebuilding of disaster-damaged premises. Others are optional and require a resolution of the local authority: certain subsidised housing or garden sheds subject to prior declaration, in particular. The benefit of an exemption must therefore be checked municipality by municipality and operation by operation, as at the date of the chargeable event.

Cité par

A tax to quantify before the permit, a collection notice to challenge?

An initial confidential conversation, without obligation. We reply within 48 business hours.

Outline your project See the Real estate taxation practice

© BENSAID Avocats, The information on this website does not constitute legal advice.