If you are going to invest in French real estate, you may want to consider setting up an SCI. An SCI in France (Société Civile Immobilière) is a tax translucid civil real estate company with legal personality. In an SCI structure, the company becomes the owner of the real estate and the partners own share certificates. Those share certificates are movable rights and easily transferable. This makes the SCI an interesting instrument for asset organisation and succession planning. Therefore, this article will explain more about SCI in France.
Flexible way to invest in real estate
An important advantage of the SCI in France is that you can invest in real estate jointly with your family or business partners. Several people can contribute money to the SCI and thus acquire rights to the property without being direct co-owners.
Also, with an SCI, you are free to structure the purchase of real estate according to your wishes. You can record your mutual agreements in the articles of association.
The SCI can also take out loans to finance the purchase. And of course, you can later share the running costs.
Although a separate legal entity, the partners have unlimited liability for the debts of the SCI. And this in proportion to their contributions. For example, if the SCI cannot repay a bank loan, the partners are responsible for its repayment. However, creditors must first claim against the company.
Tool for organisation of family wealth
The flexibility makes the SCI an interesting succession planning tool. You can easily transfer ownership of all or part of the property through the share certificates in the SCI. For example, you can gift the share certificates to your children and/or family members while retaining control of the assets. In other words, you can distribute real estate without losing its management and associated income.
What about taxes?
In principle, the SCI is fiscally transparent in France. This means that the partners are taxed in France as if they were direct owners of the property. There is then no corporation tax and only a limited flat-rate cost deduction.
The SCI does have the option to opt for the application of French corporation tax. This can be interesting, for example, to depreciate the property and bring in interest expenses.
In addition, when the SCI rents out furnished real estate, French corporation tax is mandatory.
In case you pay corporate tax, as a partner of the SCI, you will be taxed on any dividends, both in France and in Belgium.
As with any form of company, the SCI comes with some administrative obligations. Think of incorporation formalities, an accounting system, annual general meeting, etc.
Do you have any questions about investing in property in France? If so, please feel free to contact on.