Under article 1594-0 G, A of the French Tax Code, acquisitions of real property by a person liable to VAT who undertakes to carry out, within 4 years, the works leading to the production of a new building are exempt from proportional transfer duties: only a fixed duty of EUR 125 remains payable. Where the deadline cannot be met, the legislation expressly provides for an annual, renewable extension. The procedure, codified in article 266 bis of Annex III to the French Tax Code, requires a reasoned application sent to the departmental director of public finances (DDFIP) by registered letter with acknowledgment of receipt, within one month following the expiry of the current period. This mechanism is essential to secure transactions whose construction schedule extends beyond the initial window.
The commitment to build under article 1594-0 G, A of the French Tax Code is a substantial preferential regime: full exemption from proportional transfer duties and application of the sole fixed duty of EUR 125, a saving of approximately 5.80% of the acquisition price (6.40% in the Paris region). In return, the purchaser, who must be liable to VAT within the meaning of article 256 A, undertakes to carry out within 4 years the works leading to the production of a new building within the meaning of article 257 of the French Tax Code.
Unlike the commitment to resell, the legislature has provided a safety valve: the annual, renewable extension codified in article 266 bis of Annex III to the French Tax Code. This procedure reflects an operational reality: construction projects rarely follow the intended course, given administrative contingencies (permits, third-party challenges), technical issues (soil, structure, decontamination), financial difficulties (structuring, contractor failure) and market conditions.
Tacit acceptance after two months without a reasoned negative reply is a useful feature, but it does not dispense with careful drafting: a poorly reasoned application exposes the applicant to a late refusal and to the forfeiture of the exemption.
The procedure laid down by article 266 bis of Annex III to the French Tax Code is precisely regulated. Each formal and substantive condition may trigger a refusal.
The extension application must be sent within one month following the expiry of the initial 4-year period (or of the previous extension). Outside this period, the application is inadmissible. The timetable must therefore be monitored rigorously: an automatic reminder schedule is indispensable.
The application is sent by registered letter with acknowledgment of receipt to the departmental (or regional) director of public finances of the place where the property is located. Proof of dispatch within the deadline is a condition of admissibility: the postmark is conclusive evidence.
The application must contain three sections: (a) a summary of the circumstances of the initial commitment (date of acquisition, nature and location of the property, planned construction programme); (b) the facts justifying the postponement (administrative, technical or financial contingencies, detailed and substantiated); (c) the nature of the planned works and the amount of the duties whose exemption remains conditional on their completion.
If the tax authorities do not respond with a reasoned refusal within two months of receiving the application, the extension is tacitly accepted. This rule protects the taxpayer against administrative inertia, but it does not apply if the application is held inadmissible (out of time, lack of reasoning, and so on).
The legislation (French Tax Code art. 1594-0 G, A and Annex III art. 266 bis) sets no expressly quantified cumulative ceiling beyond which an extension would become impossible. Each renewal nevertheless remains subject to the assessment of the DDFIP in light of the seriousness of the steps taken: the further the transaction moves beyond the initial period, the more substantiated the reasoning must be. Failing that, a refusal may always trigger the forfeiture of the exemption.
The firm secures extension applications at every stage: audit of the timetable (expiry date, whether an extension is appropriate), drafting of the reasoned application (circumstances, justifications, nature of the works), monitoring of receipt and of any refusal, and litigation where necessary.
On complex transactions combining a commitment to resell and a commitment to build, or involving a takeover by a sub-purchaser, the firm coordinates all the commitments to preserve the exemption over the full duration of the transaction, including beyond the initial period.
The initial period is 4 years from the acquisition (French Tax Code art. 1594-0 G, A). During this period, the purchaser, who must be liable to VAT within the meaning of article 256 A, must carry out the works leading to the production of a new building within the meaning of article 257 of the French Tax Code. The exemption is full (proportional transfer duties waived, with only a fixed duty of EUR 125 remaining payable).
By registered letter with acknowledgment of receipt sent to the departmental or regional director of public finances of the place where the property is located (French Tax Code, Annex III, art. 266 bis). The application must be sent within one month following the expiry of the current period (the initial 4 years or the previous extension). Outside this period, it is inadmissible.
Three elements: (1) a summary of the circumstances of the initial commitment (acquisition, construction project); (2) the facts justifying the postponement of the deadline (detailed and substantiated reasoning: permit delays, third-party challenges, contractor failure, technical contingencies, and so on); (3) the nature of the planned works and the amount of the duties whose exemption remains conditional on completion of the construction. A poorly reasoned application risks a refusal.
The absence of a reasoned negative reply within two months of receipt of the application amounts to tacit acceptance. This rule protects the taxpayer against administrative inertia. It does not apply if the application is vitiated by an admissibility defect (out of time, complete lack of reasoning, unreasoned application).
The extension is annual and renewable: each year, a new application may be filed within one month following the expiry of the previous extension. The legislation (French Tax Code art. 1594-0 G, A and Annex III art. 266 bis) sets no expressly quantified cumulative ceiling. In practice, however, each renewal is assessed in light of the seriousness of the steps taken, and the further the transaction moves beyond the initial period, the more substantiated the reasoning must be to avoid a refusal.
A refusal triggers the forfeiture of the exemption upon expiry of the unextended period. The duties not collected become payable within one month following the expiry of the commitment, increased by the late-payment interest of article 1727 of the French Tax Code (0.20% per month, i.e. 2.40% per year), on the basis of paragraph I of article 1840 G ter of the French Tax Code. A refusal of extension may be challenged through an internal administrative appeal, then before the administrative court.
Topics frequently linked with the extension of the commitment to build.
Overview: resell, build, extensions, takeover.
Voir la page Commitment to buildConditions for a takeover by a VAT-liable sub-purchaser.
Voir la page Commitment to resellThe asymmetry between the two regimes: a comparison with art. 1115 of the French Tax Code.
Voir la page Real-estate practiceGeneral framework of transfer duties and exemptions.
Voir la pageA confidential initial discussion to assess whether an extension is appropriate, draft the reasoned application, secure the timetable and defend your interests in the event of a refusal.
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