Real estate VAT, business transfers

Article 257 bis of the French Tax Code (CGI): the VAT relief on the transfer of a going concern

Article 257 bis of the CGI relieves from VAT the supplies of goods and services carried out between VAT payers upon the transfer of a totality of assets or part thereof: the transferee is deemed to step into the shoes of the transferor, no VAT is invoiced and the input VAT adjustments are not required. Derived from Articles 19 and 29 of Directive 2006/112/EC, this regime applies in particular to the sale of let buildings with the continuation of leases subject to VAT, but recent case law of the Conseil d'État has clarified its limits: the parties' intention, the treatment of exempt lettings, and the VAT-payer status of both transferor and transferee. The firm secures the qualification and documentation of these transactions.

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What does Article 257 bis of the French Tax Code provide?

Article 257 bis of the CGI provides that the transfer, for consideration, free of charge or by way of contribution, of a totality of assets or part thereof between persons liable for VAT is relieved from VAT: no supply of goods or services is deemed to take place, and the transferee continues the person of the transferor, in particular for adjustments of input VAT.

The relief applies as of right, without any election, where the assets transferred allow an economic activity to be carried on: sale of a business, contribution of a branch of activity, sale of a let building with the takeover of leases subject to VAT, whether the building was completed less or more than five years ago. It is set aside where no autonomous activity is transferred: isolated sale of a building held as stock for resale, or of a building only partly let under VAT.

The article is repealed on 1 January 2027 by Ordinance no. 2025-1247 of 17 December 2025, which moves VAT into the CIBS: the rule becomes the "transfer of an autonomous economic activity" (articles L. 211-107 and L. 211-108 of the CIBS), the VAT group provision moving to article L. 234-14.

CGI art. 257 bis (Légifrance); BOI-TVA-IMM-10-10-10-40, § 40 (BOFiP); Directive 2006/112/EC, art. 19 and 29; CIBS art. L. 211-107, L. 211-108 and L. 234-14 as numbered by Ordinance no. 2026-671 of 27 July 2026, which defers entry into force to 1 January 2027; Law no. 2022-1726 of 30 December 2022, art. 58. Checked on 5 October 2026.

— In brief
Statute
Article 257 bis of the CGI, transposing Articles 19 and 29 of Directive 2006/112/EC
Principle
VAT relief on supplies of goods and services carried out between VAT payers upon the transfer of a totality of assets or part thereof
Conditions
Transfer of a going concern (business, branch of activity, let building with its leases), continuation of the activity by the transferee, transaction between VAT payers
Effects
No VAT invoiced, transferee deemed to continue the person of the transferor, adjustments under Article 207 of Annex II to the CGI not required
Watch points
Parties' intention, VAT-exempt lettings, dealer-resellers, reporting on the VAT return
— The text

The text of Article 257 bis of the CGI

Wording in force since 1 January 2023, introduced by article 58 of the Finance Law for 2023, applicable until 31 December 2026 (unofficial translation; only the French text is authoritative):

"Upon the transfer for consideration, free of charge or by way of contribution to a company of a totality of assets or part thereof carried out between persons liable for value added tax, no supply of goods or services is deemed to take place. The joining or leaving of a taxable person as a member of a single taxable person formed under article 256 C constitutes the transfer of a totality of assets benefiting from the provisions of this article. The beneficiary is deemed to continue the person of the transferor, in particular in respect of adjustments of the tax deducted by the latter and, where applicable, for the application of the provisions of e of 1 of article 266, of article 268 or of article 297 A."

French Tax Code, article 257 bis, Légifrance, consulted on 5 October 2026.

The text has three sentences. The first lays down the relief: between persons liable for VAT, the transfer of a going concern is neither a supply of goods nor a supply of services, so no VAT is due. The second extends it to joining and leaving a VAT group (single taxable person under article 256 C). The third organises the continuation of the transferor's person: the transferee takes over the adjustments of input VAT and, where applicable, the transferor's position for the VAT margin scheme on real estate (article 268) and for the margin scheme for second-hand goods and works of art (article 297 A).

Not to be confused with Article 257 of the CGI, which defines the real-estate transactions subject to VAT (building land, new buildings, self-supplies): Article 257 bis precisely removes from taxable supplies those that accompany the transfer of an activity. For the regime of each property sale, see the real-estate VAT table: which transaction, which regime.

— 01

A relief applying as of right, but a demanding qualification

Article 257 bis of the CGI, as amended by the Finance Act for 2023, provides that upon the transfer, for consideration, free of charge or by way of contribution to a company, of a totality of assets or part thereof carried out between VAT payers, no supply of goods or services is deemed to take place: this is the VAT relief. The provision adds that the transferee is deemed to continue the person of the transferor, in particular with respect to the adjustments of the tax deducted by the latter.

This regime transposes Articles 19 and 29 of Directive 2006/112/EC, which allow Member States to consider that, upon the transfer of a totality of assets, no supply has taken place. It is therefore not an exemption: the transaction is placed outside the scope of taxable supplies, which fully preserves the right to deduct input VAT and avoids the often considerable cash-flow burden on sales of buildings or businesses.

The difficulty lies in the qualification. The relief applies as of right when its conditions are met, but those conditions (existence of a going concern, continuation of the activity, VAT-payer status of both parties) are assessed in concrete terms, transaction by transaction. The case law of the Conseil d'État, in particular on the sale of let buildings, shows that a superficial analysis exposes the parties either to a VAT reassessment or to VAT wrongly invoiced, which is not deductible by the purchaser.

The firm deliberately limits the number of matters it takes on in order to guarantee the direct involvement of its partners on every file, and systematically assesses the relevance of its intervention before any engagement.

— 02

The Article 257 bis regime, point by point

01

The framework: a provision of European origin

The French relief rests on the option granted to Member States by the VAT Directive.

  • Articles 19 and 29 of Directive 2006/112/EC: the Member State may consider that no supply of goods or services has taken place
  • Article 257 bis of the CGI: relief applicable to transfers for consideration, free of charge or by way of contribution, carried out between VAT payers; since 1 January 2023, the provision states that no supply of goods or services is deemed to take place
  • Administrative guidelines published at BOI-TVA-CHAMP-10-10-50-10
  • The notion of totality of assets is interpreted in the light of the case law of the Court of Justice of the European Union: transfer of a business, or of an autonomous part of a business, capable of carrying on an economic activity
02

The conditions: going concern and continuity

Two requirements structure the regime, both assessed in concrete terms.

  • A totality of assets or part thereof: a business, a complete branch of activity, or a building used for a letting activity transferred together with the elements enabling that activity to be carried on
  • The continuation of the activity by the transferee: it must intend to operate the going concern transferred, and not to wind up the activity or simply resell the assets received
  • A transaction between VAT payers with respect to the going concern transferred, a condition which excludes in particular activities entirely outside the scope of VAT or exempt without a right to deduct
  • No election formality: the relief applies as of right when the conditions are met, which precludes waiving it as a matter of mere convenience
03

Let buildings: the friction points in case law

The sale of a let building with the continuation of the leases is the natural terrain of the provision, and of its disputes.

  • Accepted scenario: the sale of a building let under leases subject to VAT (as of right or by election), where the purchaser carries on that letting activity, constitutes the transfer of a going concern
  • Parties' intention: the Conseil d'État has held that the relief requires genuine operational continuity, the transferee having to intend to operate the going concern transferred and not to wind up the activity or resell the assets received (CE, 31 May 2022, no. 451379); it is open to challenge where the transaction amounts, on the side of either the transferor or the transferee, to a purchase-and-resale operation, the position of dealer-resellers calling for particular vigilance
  • Exempt lettings: where the building is let VAT-exempt without an election (in particular unfurnished residential lettings), the condition of a transaction between VAT payers is lacking in whole or in part; the administrative guidelines require a lease-by-lease review of the VAT treatment of the rents
  • Buildings partially let, being marketed or under restructuring: the qualification is debatable and warrants a documented analysis before signing
04

The effects: relief, continuation, adjustments

The transferee continues the person of the transferor, with all its consequences.

  • No VAT is due on the supplies included in the transfer; VAT invoiced in error is not deductible by the purchaser
  • The input VAT adjustments provided for by Article 207 of Annex II to the CGI are not required from the transferor: the running adjustment period continues in the hands of the transferee
  • The transferee takes over, where applicable, the obligations of the transferor: subsequent adjustments, commitments entered into, tracking of the deduction ratios attached to the building
  • For reporting purposes, the amount of the transfer is disclosed by both transferor and transferee on their VAT return, among non-taxable transactions
— 03

Our approach

The firm advises upstream of sales of let buildings, businesses and branches of activity: qualification of the going concern under Article 257 bis of the CGI and the case law, review of the VAT treatment of each lease, analysis of the parties' intention and of operational continuity, drafting of the tax clauses of the deed, reporting obligations and follow-up of the adjustments transferred. In the event of a tax audit, the firm defends the position taken or, conversely, challenges the application of the relief where the tax authorities have invoked it wrongly. The analysis is coordinated with the general rules of real estate VAT and with transfer duties.

  • Article 257 bis of the CGI
  • Transfer of a going concern
  • Sale of a let building
  • VAT relief (257 bis)
  • VAT adjustments
— FAQ

Article 257 bis and the VAT relief: your questions

What exactly does Article 257 bis of the CGI provide?

In its wording in force since 1 January 2023, it provides that upon the transfer, for consideration, free of charge or by way of contribution, of a totality of assets or part thereof carried out between VAT payers, no supply of goods or services is deemed to take place: the transactions included in the transfer are relieved from VAT. The transferee is deemed to continue the person of the transferor, in particular for the adjustments of the tax deducted. The provision transposes Articles 19 and 29 of Directive 2006/112/EC, and the administrative guidelines comment on it at BOI-TVA-CHAMP-10-10-50-10.

Is the relief under Article 257 bis optional?

No. When the conditions are met (transfer of a going concern, continuation of the activity, transaction between VAT payers), the relief applies as of right: the parties cannot choose to subject the transaction to VAT for convenience. Conversely, if the conditions are not met, the transaction follows its own regime. VAT invoiced in error on a relieved transaction gives the purchaser no right to deduct, hence the importance of correctly qualifying the transaction before the deed is signed.

Does the sale of a let building fall within Article 257 bis?

Yes, in the classic scenario: a building let under leases subject to VAT (as of right or under the election of Article 260, 2° of the CGI) is sold to a purchaser who carries on the letting activity by taking over the leases. The letting activity then constitutes a going concern being transferred and the sale is relieved from VAT. The solution requires genuine continuity: it becomes debatable where the leases are exempt, where the building is partly vacant or where one of the parties acts with a view to resale.

What happens to Article 257 bis of the CGI on 1 January 2027?

VAT leaves the CGI for the Code des impositions sur les biens et services (CIBS) on 1 January 2027, after the deferral decided by Ordinance no. 2026-671 of 27 July 2026. The CIBS no longer refers to the "transfer of a totality of assets" but to the transfer of an autonomous economic activity: the definition is in article L. 211-107, the relief and the continuation of the transferor's person in article L. 211-108, and the provision on joining or leaving a VAT group in article L. 234-14. Caution: the concordance table of December 2025 gave other numbers, superseded by the July 2026 renumbering. Deeds signed from 1 January 2027 should cite the new numbering; those signed before remain governed by the CGI.

Does Article 257 bis apply to a new building as well as to a building over five years old?

Yes, under the wording in force since 1 January 2023. The tax authorities accept that the sale of a let building held as a fixed asset, to a buyer who carries on the letting by taking over the current leases, is a transfer of a going concern whether it takes place within five years of completion or later (BOI-TVA-IMM-10-10-10-40, § 40), and the election under article 260, 5° bis cannot apply to a sale eligible for the relief (same BOI, § 50). Under the former wording, which relieved from VAT the supplies made upon the transfer, the Conseil d'État inferred that a sale falling outside the scope of VAT, in that case a building completed more than five years earlier and sold in 2009, could not be relieved, so that the adjustment of input VAT became due (CE, 31 May 2022, no. 451379). Article 58 of Law no. 2022-1726 of 30 December 2022 (Finance Law for 2023) rewrote the text: no supply is now deemed to take place, which no longer requires the transferred transaction to be itself subject to VAT. Transactions carried out before 1 January 2023 that are still in dispute remain governed by the former wording.

What if the building is only partly let under VAT?

The relief is set aside for the isolated sale of a building only partly used for a letting activity subject to VAT: the building sold does not, as a whole, constitute a part of a business capable of being treated as a partial going concern (RES no. 2008/4 of 4 March 2008, included in BOI-TVA-CHAMP-10-10-50-10, § 30). The sale then follows the ordinary rules, with, where applicable, an adjustment of input VAT under article 207 of Annex II to the CGI. Such mixed situations call for analysis before the preliminary agreement.

Why can the seller's or buyer's intention defeat the relief?

Because the regime rests on the transfer of an activity intended to be carried on. The tax authorities refuse the relief for the isolated sale of a building taken from the stock of a person carrying on a purchase-and-resale activity, even if the building is let under VAT pending its resale; they allow it where the same dealer transfers its whole trading activity to a buyer who carries it on (RES 2006/58, BOI-TVA-DED-60-20-10, § 285). It is therefore not the purchase-and-resale activity as such that excludes the regime, but the absence of an intention to operate: the resale of a building immediately after its acquisition does not prevent the relief where the new buyer carries on the letting of the premises (CE, 23 November 2015, no. 375054 and no. 375055, BOI-TVA-DED-60-20-10, § 286). The assessment is concrete: commitments made in the deed, conduct of the parties before and after the sale, regime under which the building was recorded. Documenting the parties' intention is therefore a central element in securing the transaction.

What happens if the building is let VAT-exempt?

Article 257 bis requires a transaction carried out between VAT payers with respect to the activity transferred. Where the rents are VAT-exempt without an election, for example unfurnished residential lettings, that condition is lacking and the relief is set aside for the activity concerned: the sale then follows the ordinary rules applicable to sales of buildings. For mixed-use buildings, combining leases subject to VAT and exempt leases, the analysis must be conducted with precision, lease by lease, and the administrative guidelines call for caution in these configurations.

What is the effect of the relief on the transferor's VAT adjustments?

This is one of the major benefits of the regime: the input VAT adjustments provided for by Article 207 of Annex II to the CGI, normally due where a building is sold within the twenty-year adjustment period, are not required. The transferee, deemed to continue the person of the transferor, takes over the running adjustment period and will bear, where applicable, future adjustments. The transferor must hand over the information needed to track the deduction ratios attached to the building.

What precautions should be taken in the deed of sale?

The deed should record the elements on which the relief rests: description of the going concern transferred, takeover of the current leases, commitment by the purchaser to carry on the letting activity subject to VAT, handover of the information relating to the running adjustments, and a clause dealing with the consequences of a possible challenge. Both parties must also report the amount of the transfer on their VAT return, among non-taxable transactions. A prior review of the VAT treatment of each lease usefully completes the arrangement.

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