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The revision of the rental values for business premises (RVLLP) was confirmed by Article 34 of the amending finance law of December 29, 2010. It came into effect six years later, on January 1, 2017, to serve as the basis for direct local taxes: the business property tax and the property tax on built and unbuilt properties for the aforementioned premises.
While many inconsistencies have remained since 2017, the 2021 finance law has not addressed these anomalies. This year’s finance law aimed to reduce the impact of production taxes on businesses’ finances. The objective has been met regarding the contribution on the value added by companies (CVAE), the business property tax (CFE), and the property tax on built properties (TFPB) for industrial establishments. However, the big omission remains the property tax on built premises for business premises.
2017 Revision: Context and Objectives
After a failed attempt in the 1990s and multiple delays, the revision aimed to end the inconsistencies in evaluations created by an outdated system established in 1970, which no longer reflected the evolution and state of the real estate market. Indeed, values were simply updated annually by a national coefficient but were never adjusted to reflect the reality of the rental markets, leading to many disputes with the tax administration.
The 2017 revision of rental values was intended to align rental values with the actual market conditions, thereby reducing these inequalities. This revision affects 2.5 million business premises for property tax and 1.6 million establishments for the business property tax (source: DGFIP).
Since 2017, the base for rental values of business premises is determined based on actual rents observed. Depending on the main activity carried out there, each premises is classified into one of 38 categories. Rates per square meter have been established for each evaluation sector and for each category of premises within a department. To account for the specific situation of each parcel, location coefficients have been set within evaluation sectors and apply to the square meter rates of all premises on the parcel.
Although the intention of this revision was to eliminate inequalities and inconsistencies from the previous system, the calculation methods have created new ones for certain sectors that have seen their contribution amounts explode.
In Practice, Many Anomalies Identified
a/ Taxable Surfaces
Even from the calculation of the taxable surface area, obtained after applying weights on the components of the surface based on their importance, it is noticeable that part of the weights previously assigned to certain surfaces before the revision has been removed. These ancillary surfaces have therefore been grouped with other surfaces benefiting from lower weights or have been integrated with main surfaces, losing the weight they had before the revision.
Indeed, before 2017, many weights were applied to various covered surfaces ranging from 1 for main surfaces, 0.5 for secondary surfaces, and 0.3 for less important ancillary surfaces. Since 2017, only two possible weights are applicable to interior surfaces: 1 for main surfaces and 0.5 for ancillary surfaces.
b/ Office Premises
For office premises, except for technical rooms and archives located on a different level, ancillary surfaces that before 2017 benefited from a weight of 0.3 — such as hallways, toilets, or break rooms — are now integrated with the main surface, losing the benefit of their previous weights.
c/Commercial Premises
The same applies to commercial premises. Starting in 2017, it was necessary to distinguish between premises accessible to the public, which were not weighted, and those not accessible to the public, whose surface was weighted at 0.5. For example, certain surfaces such as butchery or bakery laboratories, dishwashing rooms, locker rooms, toilets, and hallways, which previously had a weight of 0.3, are now weighted at 0.5.
Other significant observations regarding commercial premises: Premises integrated into a commercial complex, such as stores located in shopping galleries with a main surface area of less than 400 m², must be classified in the MAG 3 category and therefore apply the highest rates compared to other commercial premises categories (MAG 1, 2, 4, 5).
d/ Parking
Shopping center parking lots are treated differently depending on whether or not they belong to the owner of the commercial premises. If the parking lots belong to the owner of the commercial premises, they are linked to these premises and will consequently benefit from a weight (either 0.5 if they are covered parking lots (PK1) or 0.2 (PK2) if they are uncovered parking lots).
If a hypermarket and the exterior parking lots are owned by the same owner, the parking lots will be considered as annexes to the commercial premises classified in MAG 5 (if the main surface area is 2,500 m² or more). The surface area of these parking lots will therefore be weighted at 0.2 (PK2).
However, if the commercial complex is a co-ownership and the exterior parking lots are owned by someone other than the commercial premises owner, and the latter only owns the parking lots, these parking lots must be classified either as DEP 3 (open-air parking lots) without any weight.
e/ Non-profit Organizations
Another inconsistency in this revision concerns non-profit organizations. Until the end of 2016, they applied department coefficients corresponding to residential premises, which were more favorable than those applicable to business premises, leading to a reduced rental value for their premises. Since 2017, no mitigation mechanism has been applied to the rental value of these premises.
f/ Storage Premises
Another anomaly in this revision concerns storage premises. Until the end of 2016, simple storage premises were distinguished from well-developed ones with distinct and gradual rates. Today, there are only two categories applicable to storage premises: DEP 1 (open-air storage sites and commercial or industrial land) or DEP 2 (covered storage sites). Thus, simple warehouses, which before 2017 benefited from more favorable rates than better-developed warehouses, have been grouped into the same DEP 2 category since 2017.
These changes result in an increase in the total weighted surface area calculated and concern all business premises, regardless of size (SMEs, mid-market enterprises, groups) or business sector (commerce, storage, tertiary, hospitality...).
The proposed elimination of the neutralization coefficient with the possible entry into force of the revision of residential premises and the disappearance of the capping and smoothing mechanism scheduled for 2026, which together helped mitigate the soaring business property tax contributions, is likely to cause property tax amounts for all business premises to skyrocket and highlight the various anomalies already identified.
The analysis of the rental value of business premises requires both technical, legal, and fiscal expertise to better understand the financial stakes. RSM experts can assist you in determining a fairer rental value step by step:
- Taxation analysis
- Declaration diagnostics
- Surface analysis and calculation
- Premises category analysis
- Study of cadastral documents
- Corrections to declarations
- Measurement of the financial impact on the business
- Support on the company’s strategy regarding its real estate assets
Contact : Sifdine Sahed, Manager Fiscalité Locale – Expertise Comptable
