Using an SCI company to Purchase a Property
An SCI is a French « Private Limited Company ». The purpose of this property investment partnership (société civile immobilière, or SCI) is to acquire or, in some cases, provide for the construction of buildings to be rented to third parties or provided free of charge to the partners. An SCI must consist of at least two partners.
A written contract, known as the « statuts » (French articles of association), is required of every SCI. These « statuts » must contain information on the firm and its partners (including its name, headquarters, total assets, functions, conditions such as clauses on reduction of capital, selling of properties, details of the Company manager etc….). Once the « statuts » have been signed by the founding partners, the partnership is registered with the local trade and companies register. (French Tribunal de Commerce).
The shareholders own the shares which own the property in the proportions specified within the statutes. The shareholders of the SCI are responsible for the debts of the company in proportion to their portion of the shares. If an SCI has two shareholders, each one is responsible for 50 percent of the debts of the company.
The creation of the SCI has a number of benefits when purchasing and owning real estate in France.
Children and parents can be included in the acquisition (such as the purchase of a second home or vacation home). Later on, the parents' share of the property can be gradually transferred to children or grandchildren in small increments.
Non-resident shareholders in an SCI are not taxed in France as the shares are considered movable assets; they are taxed in the country of residence. This means that if a shareholder dies, because the shares are considered mobile assets, the probate laws of the country of residence of the deceased apply.
An SCI is liable for Capital Gains tax for the first 15 years however, as it is considered a transparent company. The only time when taxes are declared is when the property within the SCI is rented out professionally.
- When several partners join forces, they are able to undertake projects that would have been impossible for one person acting alone.