Possible renegotiation of the France-Luxembourg tax treaty: impact on taxation of capital gains on disposal of shares in French real estate companies

By Laurence Clot


According to rumors, France has asked Luxembourg to renegotiate certain provisions included in their tax treaty which were designed to avoid double taxation.

Among the issues discussed by the two countries was the allocation of taxation on capital gains realized from the disposal of shares in French real estate companies.

Currently, when a company located in Luxembourg, with no fixed establishment or business in France, sells shares in a French real estate company, capital gains realized by the company are non-taxable in France under the tax treaty provisions and might also be exempt in Luxembourg in certain conditions.

The right to tax such capital gains in France would mean that the French government could impose a tax amounting to 34.43% of the capital gain realized (the current corporation tax rate, excluding exceptional contributions).

It is therefore important to anticipate these amendments, by reviewing without delay the structure of groups owning real estate assets in France and, if possible, by realizing capital gains before the amendment comes into force.


Constance de La Hosseraye – Real Estate Partner
constance.delahosseraye@twobirds.com / +33 1 42 68 60 90

Laurence Clot - Tax Partner
laurence.clot@twobirds.com / +33 1 42 68 63 44

Vaea Pery – Tax Associate
/ +33 4 78 68 63 29