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 within the meaning of article 257, I, 2, 2° of the French Tax Code, or the works necessary to complete an unfinished building, are exempt from proportional transfer duties: only a fixed duty of EUR 125 remains payable (French Tax Code art. 691 bis). Where the deadline cannot be met, the legislation expressly provides for an annual, renewable extension. The procedure, codified in article 266 bis, III 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 6.32% of the acquisition price at the standard rate, the departmental increase to 5% from which that rate derives applying only to deeds executed and agreements concluded between 1 April 2025 and 31 March 2028 (5.81% in the eleven departments that remained at 4.50%), or of only 0.715% where the acquisition already qualifies for the reduced rate (building land subject to VAT on the full price, commitment to resell). In return, the purchaser undertakes to carry out within 4 years the works leading to the production of a new building within the meaning of article 257, I, 2, 2° of the French Tax Code, or the works necessary to complete an unfinished building. The regime is not reserved to property dealers: it is open to any purchaser liable to VAT within the meaning of article 256 A and acting as such (developer, property company, land developer), under the same conditions.
Unlike the commitment to resell, which may be extended only in the specific case of property located in a concerted development zone (ZAC) and acquired by the developer of that zone (French Tax Code, art. 1594-0 G, A, IV bis), and whose deadline may otherwise be exceeded only by substituting for it, before its expiry, a commitment to build (French Tax Code, art. 1594-0 G, A, II), the legislature has here provided a safety valve: the annual, renewable extension codified in article 266 bis, III 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 reasoned refusal within two months and, consequently, to the forfeiture of the exemption.
The procedure laid down by article 266 bis, III 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 (CA Colmar, 6 déc. 2007, n° 05/03382) and the commitment expires without extension: the duties become payable (French Tax Code art. 1840 G ter, I). 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. The date of dispatch of the registered letter, evidenced by the deposit receipt, establishes that the deadline has been met.
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. In practice, however, an application filed out of time cannot benefit from it, since the period to be extended has already expired; the legislation does not expressly settle the question for an insufficiently reasoned application, which calls for complete reasoning from the outset.
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. According to the administrative doctrine (BOI-ENR-DMTOI-10-40, § 340), a refusal may be based on the fact that the applicant is not in a position, in the short or medium term, to fulfil the commitment, has abandoned it, or that construction has become definitively impossible in light of planning, environmental or safety constraints: 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; in the event of land consolidation, the starting point is postponed to the close of the consolidation operations, French Tax Code art. 1594-0 G, A, V). During this period, the purchaser, liable to VAT within the meaning of article 256 A and acting as such (property dealer, developer, property company, land developer), must carry out the works leading to the production of a new building within the meaning of article 257, I, 2, 2° of the French Tax Code, or the works necessary to complete an unfinished building. The exemption covers proportional transfer duties; only a fixed duty of EUR 125 remains payable (French Tax Code art. 691 bis).
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, III). 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 (CA Colmar, 6 déc. 2007, n° 05/03382).
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. In practice, an application filed out of time cannot benefit from it, since the period to be extended has already expired; the legislation does not expressly settle the question for an insufficiently reasoned application, which calls for complete reasoning from the outset.
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. Each renewal nevertheless remains subject to the assessment of the tax authorities: according to the administrative doctrine (BOI-ENR-DMTOI-10-40, § 340), a refusal may be based on the fact that the applicant is not in a position, in the short or medium term, to fulfil the commitment, has abandoned it, or that construction has become definitively impossible in light of planning, environmental or safety constraints. The further the transaction moves beyond the initial period, the more substantiated the reasoning must therefore be.
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 (French Tax Code art. 1840 G ter, I); they are assessed at the rate in force on the date of the acquisition (BOI-ENR-DMTOI-10-40, § 440) and increased by the late-payment interest of article 1727 of the French Tax Code (0.20% per month, i.e. 2.40% per year), which runs not from the refusal but from the first day of the month following the expiry of the statutory period for presenting the deed of acquisition for registration (BOI-ENR-DMTOI-10-40, § 450): after four years, the interest alone represents close to 10% of the duties avoided. A reasoned refusal may be discussed with the tax authorities and then, once the duties have been assessed for collection, challenged by way of a formal claim (Tax Procedure Code art. L. 190 and R.* 196-1) and, if the claim is rejected, before the tribunal judiciaire, which has exclusive jurisdiction over registration duties and land registration tax (Tax Procedure Code art. L. 199; CE, 4 févr. 1985, n° 40594; Cass. com., 5 mai 1981, n° 80-10.569; Cass. com., 24 janv. 1995, n° 93-13.680).
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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