What is an SCI?
An SCI is a company made up of at least two people, enabling the purchase and management of one or more properties. The property is held by the SCI itself, with each partner receiving shares in proportion to his or her contribution.
It offers flexibility and tax advantages, particularly in the case of inheritance. More and more foreign buyers are looking to invest in French real estate, so the question arises as to whether a foreigner can be a partner in a French SCI.
What are its advantages and disadvantages?
The SCI facilitates the transfer of assets. SCI partners can transfer shares successively. Parents transferring shares to their children can therefore take advantage of the 100,000 Euro tax allowance every 15 years per child for each parent.
The family SCI also makes it possible to ensure stable indivision between heirs and/or to involve children in a real estate acquisition project.
Real estate assets are protected in the event of divorce. Dissociation of real estate ownership enables partners to negotiate the distribution of shares in the event of divorce, without directly affecting the real estate held by the SCI. In this way, the spouses avoid having to sell real estate assets.
The SCI allows real estate to be removed from the partners’ personal assets. As a result, the latter’s creditors can no longer seize property belonging to the SCI if the debtor defaults on payment. This arrangement is highly appreciated by entrepreneurs, who can thus protect their personal assets in the event of financial problems related to their business activity.
Partners are indefinitely liable for debts. This means that the partners’ personal assets are exposed if the SCI runs into financial difficulties. Mechanisms exist to limit the liability of minor partners.
Is an SCI also possible for foreigners and non-residents?
Partners do not need to be French nationals. Partners can be natural persons of French nationality, of foreign nationality living in France, of foreign nationality living abroad, or French or foreign companies.
EU nationals are entitled to the same rights as French nationals. Non-EU nationals are free to become partners, provided that their national law does not prohibit them from doing so.
Is the tax system advantageous?
Each partner must declare the amounts received through the SCI on his or her income tax return (déclaration des revenus). The profit made by the SCI is therefore subject to income tax (impôt sur le revenu). If they wish, partners can also opt to pay corporate income tax (impôt sur les sociétés). You need to assess which option is most advantageous for you. Please note: profits from the rental of furnished property are considered a business activity, and are therefore subject to corporate income tax.
If you have income in France, you must declare it in France. Non-residents may also be taxed in their own country, if there is no tax treaty eliminating double taxation. Depending on your country of tax residence, different regulations may apply.
Depending on your country of tax residence, shares in a SCI are considered as real estate or movable assets. This can have serious consequences for your tax situation.
SCIs can be advantageous in many cases. However, an international element can change the whole equation. If you’re not sure whether the SCI is the right choice in your case, we advise that you consult a specialist. We will be happy to advise you on this topic! We also offer consultation over the phone or via videoconference.
