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SCI: Another way to hold ownership of property in France
An SCI ‘Société Civile Immobilière’ is a type of French company that is used to hold and manage properties in France. It can be set up to purchase property in France – family homes, second homes, and rental investment properties – the owners then become ‘shareholders,’ while the property is ‘owned’ by the company.
There are a few reasons why you might want to do this – including possible tax benefits for international buyers. It also makes it easier for several people to invest in the property, spreading the load, and potentially creating a higher borrowing capacity should you need it. If several individuals are coming together to make the purchase and they require a mortgage, all of their financial situations are collectively taken into account. This can boost the amount you are able to borrow.
Buying a property this way can also remove the stress of traditional joint ownership – which requires that all decisions must be unanimous. This can create tension between the partners. With an SCI, you must appoint a manager, known as a gérant. They will oversee the day-to-day decisions and usually host an annual meeting. As well as business investors coming together to purchase real estate, an SCI can also be a good option for families or a group of friends looking to purchase together, and to share in the benefits. Having your assets in an SCI rather than directly in a property also protects your money should you face a demand from a creditor. An experienced notary or lawyer can assist with the creation of an SCI.
An SCI requires a minimum of two associés (partners) but there is no maximum. As you will be a shareholder and not a property owner, your investment is meubles (a movable asset). This can be advantageous to those who don’t live full-time in France. It means your share in the property might not be taxable here, but instead in your country of residence. Also, when an SCI shareholder dies, the probate laws of their country of residence apply. There are many more possible tax benefits depending on your own financial circumstances. It is also possible to gift your children and grandchildren shares in your SCI property over time, without having to pay inheritance tax. The limits for this are currently up to €100,000 for children and up to €31,865 for grandchildren every 15 years. Careful planning over time can reduce the amount of inheritance tax due when you die.
As many advantages there are to setting up an SCI, setting up a company involves paying professional fees – which could be several thousands of euros. Being part of a company also demands a certain amount of paperwork and accounting every year – again this can add up. If you are planning to rent out your property, it must be totally unfurnished. Otherwise, your SCI company could be liable to pay corporation tax. A notaire can give you expert advice on whether there is a benefit to this type of ownership structure for you.
The bottom line is – every situation is different. And you should always seek professional advice before making the decision to use an SCI.