Property lawyer, Zoubaïda Bouzou of Isegoria Conseils gives us some excellent information for those buying or looking to buy an investment property in France:
Did you know that you can purchase a French property as a ‘civil company’? There are many advantages to such a purchase, including the tax structure, and inheritance planning. If you are thinking about buying a property in France to be used as a principal or a second home, there are several advantages to proceed with an SCI.
Purchase with an SCI - An SCI “Société Civile Immobilière” is a non-trading company, with at least two shareholders, that is constituted for the ownership and management of the property. Very easy to set up, it also means that you will own the shares of the company which in turn owns the property.
What are the advantages? - There is a list of examples, depending on your situation but among these advantages, we can mention that it makes the transfer of property easier, permits the division of property rights between the owners (démembrement croisé), and it can also provide a certain extent of protection from business creditors. However, it is important to consider your particular situation before deciding whether or not an SCI is useful in your case. For sure, buying a French property through a French company is more advantageous than buying it through a foreign company, as specific taxes would apply in such a case.
Taxes – Taxes are due on your personal income tax return if you decide to rent out the property, but it has to be unfurnished - otherwise it would be considered a trading activity. This would mean your company will be subject to corporate tax (impôt sur les sociétés). Shareholders who have taken out debt to finance the acquisition of the property can obtain mortgage tax relief against their personal liability to income tax, provided the property is their principal home. Another advantage is the possibility to gift shares to children, which is highly appreciated by shareholders, especially if the purpose of the SCI is the ownership of family property.
Inheritance rules – Under French law, only fixed assets held by non-residents are subject to inheritance rules (except if the applicable law rules differently). Shares in a company are considered movable property, so the only applicable rules will be the ones that apply to movable properties. It is also important to note that if you are a resident in France, it is possible to obtain some relief from the inheritance laws through an SCI.
In all cases, it is important to protect your interests by obtaining legal advice from a professional who can provide impartial guidance to decide whether or not setting up an SCI is beneficial for your particular case.
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