A tax on premises, even with no premises

SARL Kessler rents 45 m² of offices with a rental value of 6 200 € and pays 1 612 € of business property tax. Its neighbour, a consultant working from home with no professional premises at all, still pays 1 088 €. Before you read on: what does a property tax bear on when there is no property?

Who owes it, and what it bears on

The business property tax is owed by every business and every person carrying on a self-employed professional activity in France, unless exempt. Legal form is irrelevant: companies, sole traders and micro-businesses are all liable.

The base is the rental value of property liable to land tax which the business had at its disposal for its activity. That value is taken not for the tax year but for the year before last, that is two years back.

That two-year lag has a practical consequence. A business moving into larger premises will only see its tax rise two financial years later, and the reverse holds when it reduces its floor space.

The rate, for its part, is voted by the municipality or the inter-municipal body. Two identical businesses on either side of a municipal boundary may therefore pay appreciably different amounts, without any national rule explaining it.

Without premises, a minimum base by band

A business working from its director's home or at its clients' premises has no professional rental value, or a negligible one. Article 1647 D of the tax code then applies a minimum base to it.

That minimum base is not a single amount: it is a six-band scale indexed on the turnover or receipts of the year before last. Each band sets a floor of 250 € and its own ceiling.

Within that range it is the municipality that sets the amount used. The same turnover may therefore produce a base of 250 € in one place and 4 183 € in another, with nothing the business can do about it.

The rule most often missed: the minimum base applies ONLY where it exceeds the actual rental value. Premises whose rental value exceeds the band ceiling are taxed on their actual value, the minimum base having no effect.

The first two years, and the permanent exemptions

In the year of creation, the business is exempt. The exemption is not a discretionary favour: it follows from the lag in the reference period, no rental value existing two years earlier.

In the second year, the base is halved. This is an explicit transition, meant to prevent a young business from facing a full charge all at once on premises it has only just occupied.

A permanent exemption covers very small activities: businesses with turnover or receipts of 5 000 € or less are exempt, subject to the European rules on de minimis aid.

Other exemptions turn on the nature of the activity: craftspeople employing only apprentices, farmers, artists, photographer-authors, midwives, certain taxi drivers and organisations with a social purpose.

One consequence of the two-year lag deserves stating for a young business. In its third year, it is taxed for the first time on a full base — the year its activity is often still building up, and the year the charge arrives without warning.

Providing for it from the second year is therefore sound practice rather than caution. The amount is knowable in advance: the rental value is on the lease and the rate is published by the municipality.