Buying property in France for a legal entity SCI in 2024
To optimise taxes on property ownership in France, as well as to manage funds more conveniently, our experts recommend registering a legal entity to invest in housing in France. The civil property company SCI (Société Civile Immobilière) is a real estate holding company incorporated under French law and it is an optimal solution, available to both residents and non-residents of the country.
What is SCI needed?
The French tax system is notable for its complexity. French taxes are among the highest in the European Union. In this way, the country ensures the level of well-being and stability of its citizens and guarantees the security of expatriates of other states. By buying a property in France, an investor automatically becomes an active participant in the tax system.
From 295,000 €
Completion in: 2024.III Total of 35 apartments
From 248,000 €
Completion in: 2025.IV Total of 120 apartments
From 402,000 €
Completion in: 2025.I Total of 48 apartments
From 258,000 €
Completion in: 2026.III Total of 30 apartments
259,000 €
Total area 44 m² 1 bedroom
317,000 €
Total area 46 m² 1 bedroom
From 270,000 €
Completion in: 2024.IV Total of 20 apartments
From 340,000 €
Built in 2024 Total of 36 apartments
One of the most important ways of minimising the tax on property ownership is to set up a non-profit company (SCI) specifically for the purpose of buying property. The participants in such an organisation are members of the same family, or a group of people, each of whom has their own share and is an equal owner of the property.
A family organisation may own more than one property. In this case, they can also be divided into shares between the members. Such a system makes it possible to simplify the inheritance process, which in France involves the payment by the heirs of up to 60% of the cost of the property, and also avoid paying luxury tax if the amount of your property investment exceeds 1.3 million euros.
The Tranio team can help with SCI registration and tax planning in France.
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Tax optimisation
The principle of operation of a civil property company is that, upon registration, a family company charter is drawn up, which determines the number of participants and their shares in the cost of property. The charter determines the order of inheritance, sale, purchase and operation of real estate. According to the articles of association, there may be an unlimited number of shareholders, including both residents and non-residents of France. SCI participants may also be minor children. The standard duration of such a company is 99 years, with the possibility of renewal.
Setting up a family business is an optimal strategy, as there is no luxury tax to pay if the amount of your investment exceeds 1.3 million euros.
According to the legislation, if this limit is exceeded, property owners must pay a tax of up to 1.5% of the property value. However, if the cost of the property is divided according to the SCI charter between several owners — members of a family business — in accordance with the SCI Charter, and the size of each share does not exceed the specified limit, there is no need to pay the luxury tax.
Properties on the balance sheet of the SCI company may be let unfurnished. A property is considered «unfurnished» if none of the items on a special furniture list are present. For example, if there are no bed linen or kitchen utensils in the apartment. In this case, the rental income is considered as the income of an individual, and is subject to income tax ranging from 0% to 45%, according to French law. The rental income received by each member of the family business is proportionate to his or her share. The tax in France is not calculated individually, but for the whole family. It is based on the annual income of all family members, including minors. Thus, the income tax of the members of the family business is calculated on the basis of the income of a family.
Inheritance and donation
The inheritance and donation procedure in France involves the compulsory payment by heirs of up to 60% of the value of the inherited property in the form of inheritance tax. The creation of a family real estate company allows you to reduce the percentage of tax paid, depending on the strategy chosen. Our experts recommend taking this factor into account when buying a home.
One possible strategy is to take advantage of the tax benefits for the heirs of SCI family businesses. According to this benefit, every 15 years during his or her lifetime, a child is entitled to receive a share of 100,000 euros from each parent without having to pay inheritance tax. The remaining amount is taxed at a progressive rate ranging from 5% to 45%.
Another strategy is the initial division of property rights between parents and children. In such a decision, the actual ownership of the property is registered to the children, but at the same time the parents are given a lifelong right to use and profit from the property. Such a system is called «usufruct» and comes from Roman law. At the end of the period for which the usufruct was established, it is cancelled and the children become full owners without paying any tax. It is important to note that if the term was not initially set, children receive full ownership rights when they reach the age of 16.
In addition, it is worth mentioning the process of adding a new member to an already established family real estate company. The entry of a new member is possible in two cases. The first is when a new member contributes to the company’s capital in any form (property, securities, money). In exchange for the contribution, he receives shares and rights to manage his share in the family business. The second is the sale of a share by an existing SCI member to a new participant in exchange for financial compensation.
We always advise our clients to register a family company in order to optimise the inheritance process when buying property in France. For more detailed information please contact our managers for a personal consultation.
How to register an SCI
The procedure for registering a family real estate company is relatively quick. It is registered in the process of buying a property, in the interval between the signing of the preliminary contract and the final contract for the purchase of the property. All registrations are carried out by a notary.
The registration process has four stages:
- Drafting of the company’s charter.
- Publication in the Journal of Legal Notices (JAL).
- Registration with the Chamber of Commerce and Industry.
- Registration with the tax authorities.
A certificate of registration is then issued with information about the company and its founders.
In the charter of the company, it is important to list all the shareholders and the amount of their share in the value of the property. The company must also choose its name and legal address. The address can be either the actual address of the property, or any other address associated with the SCI participants. The founders can choose a manager from among the participants to optimise home accounting.
SCI annual declaration
An annual declaration of the company’s activities must be submitted by 1 May each year. If the property is not used for rental, then the declarations are submitted zero. If there is a commercial rental activity (unfurnished), then the income of each participant is declared separately, as well as the income of an individual. Property and residence taxes for SCI participants do not differ from those of individuals.
If the company’s participants are Russian tax residents (residing on the territory of the Russian Federation for at least 183 calendar days in 12 months), the family company is considered a CFC (Controlled Foreign Company) under Russian legislation. If such a company makes a profit, the owners are obliged to declare the income in accordance with the legislation of the Russian Federation. Russian residents can notify the tax authorities of a CFC online through their personal account with the Federal Tax Service.
The Convention concluded in 1996 between France and Russia prevents double taxation in the following way: if a resident of Russia receives income or owns property which is taxed in France in accordance with the provisions of this Convention, the amount of tax on this income or on this property payable in France is deducted from the Russian tax levied on the income or on the property of this resident.
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