Holding St. Barths property through a company: how is it taxed?

In St. Barths, placing a property in a company does not lighten the real estate tax bill. As soon as a company owns real estate on the island, it becomes a “real estate entity” for tax purposes: a sale of its shares is taxed at 5% like a sale of the property, the gain follows the real estate regime, and a 3% annual tax applies if the company does not disclose its shareholders.

What is a real estate entity?

Article 74 of the St. Barths Tax Code defines it very broadly: any company or entity, whatever its legal form and wherever its registered office, whose assets include one or more properties or rights in real estate located in St. Barths.

No minimum proportion is required: the concept is far wider than the “predominantly real estate company” test used in French tax law. A consulting firm that buys its own office immediately becomes a real estate entity.

Direct ownership or a company: what changes?

Topic	Direct ownership	Through a company
5% duty on sale	On the price of the property	On the value of the shares
Capital gain	35% or 20%	Same regime
Gift	Local gift tax	Local gift tax
3% annual tax	Does not apply	Due, unless an annual return is filed

Selling the shares: 5% instead of the sliding scale

	Company with no real estate	Real estate entity
Duty	Sliding scale from 0% to 1.40%	5%
Allowance	€23,000, prorated to the shares sold	None
Registration	Within one month	Within one month

For an island company with no real estate, the scale is 0% up to €23,000, 0.60% from €23,000 to €107,000 and 1.40% above, with a €125 minimum: see our insight on selling company shares.

For a real estate entity, the 5% duty is calculated on the actual value of the real estate less the related debt (articles 56 and 73). The rate is the same as for the duties owed on a purchase of real estate. In both cases, the transfer must be registered within one month, even between family members. Missing the deadline triggers late-payment interest of 0.75% per month and a penalty of 10% to 80%.

How is the capital gain on the shares taxed?

Article 102 bis, rewritten in December 2024, aligns a sale of shares with a sale of the property:

• the gross gain is the difference between the market value of the real estate on the day the shares are sold and its market value when it entered the entity, or on the day the seller acquired the shares;
• the transfer deed must set out the price formula based on the value of the real estate and include, as an exhibit, reference accounts prepared by a certified accountant;
• the holding period runs from the date the property entered the entity.

The rates and allowances are those of the real estate capital gains tax. Distributing a property to a shareholder, through a liquidation, a capital reduction or a withdrawal of assets, is taxed as a sale unless a holding commitment is given.

How do you avoid the 3% annual tax on real estate?

Companies that own real estate on the island owe an annual tax of 3% of the market value of that real estate (articles 110 to 112).

The tax is not due if the company files a return each year, before March 31, stating:

• the location, description and value of the real estate;
• the identity and address of the shareholders, with the number of shares each one holds.

The Tax Code also accepts a commitment to provide this information on request.

Gifting shares in a company that owns real estate

A gift of shares in a company with no real estate is outside the scope of local gift tax. A gift of shares in a real estate entity is within it. The holding commitment that reduces the gift tax then extends to the real estate owned by the company. See our insight on inheritance and gift tax.

Example: a villa held through a company

Take Hélène, the sole shareholder of a company whose only asset is a villa. The company bought it for €3,000,000 five years ago. The villa is now worth €4,000,000, and €1,000,000 of the loan remains to be repaid. The amounts are assumptions, for illustration only.

Every year. If the company files its return before March 31, the 3% tax is not due. Without a return or a commitment: €4,000,000 × 3% = €120,000.

If Hélène sells all of her shares today.

1. Base for the 5% duty: €4,000,000 - €1,000,000 = €3,000,000.
2. Registration duty, borne by the buyer of the shares: €3,000,000 × 5% = €150,000.
3. Gross gain: €4,000,000 - €3,000,000 = €1,000,000.
4. Capital gains tax, owed by Hélène: the villa entered the company five years ago, so before the eighth year. The rate is 35%, with no allowance: €1,000,000 × 35% = €350,000.

Item	Who pays	Amount
5% duty on the shares	The buyer	€150,000
Capital gains tax	Hélène	€350,000
3% tax, with a return	The company	€0
3% tax, without a return	The company	€120,000 a year

The company has therefore removed neither the 5% duty nor the capital gains tax.

Holding property through a company: common mistakes

• Assuming the company must hold mostly real estate. A single property on the island is enough, even an incidental one.
• Placing a property in an operating company. All of its shares are then affected: 5% duty on every share sale, the 3% tax or the annual return, taxable gifts.
• Forgetting the annual return. Without it, the 3% tax is due.
• Thinking that selling the shares avoids the 5% duty or the capital gains tax.
• Assuming a registered office outside the island changes the rule.

Setting up a company and its tax residency follow rules of their own, covered in our insight on setting up a company in St. Barths. See also the full range of taxes in St. Barths.

Holding property through a company: the bottom line

Holding property through a company in St. Barths removes none of the island’s real estate taxes. Any company that owns real estate on the island is a real estate entity for tax purposes, with no minimum proportion and wherever its registered office is. A sale of its shares carries a 5% duty, instead of the 0% to 1.40% sliding scale that applies to ordinary share transfers, and the gain follows the real estate regime, at 35% or 20%. An annual tax of 3% of the real estate’s market value is due, unless an annual return is filed before March 31. The choice between direct ownership and a company therefore turns on other considerations, specific to each situation, and should be prepared with an advisor before the purchase.

A note for U.S. readers: this article covers French and St. Barths rules only. U.S. citizens and green card holders remain subject to U.S. tax on their worldwide income wherever they live.