Société Civile Immobilière and Property Purchase
Using an SCI to purchase a property in France
A common way of buying a property in France is through the use of a Société Civile Immobilière (SCI).
This type of company is used because it gives the founders a lot of flexibility to name the inheritor of the property instead of having to follow the normal French inheritance rules.
About an SCI
- An SCI is essentially a fully incorporated company with a registered office in France and the Registered Office can be the property itself.
- The SCI then owns the property in question.
- Being a company, the SCI is itself owned by shareholders, in most cases, family members.
- The shareholders can be resident or non-resident in France.
It is important to note at this point that the tax consequences of the purchase through an SCI should be analysed according to French law and the tax treaty between France and the home country before going ahead with any purchase.
Advantages of an SCI
Inheritance – the use of an SCI overcomes some of the problems caused by the traditional inheritance laws in France.
French law dictates that upon the death of the home’s owner, the property is divided up between the surviving spouse and any children.
However, using an SCI and its shareholder status means that the parents can appoint themselves as majority shareholders.
They can make provision that upon the death of one or the other that his shares are passed onto the surviving spouse, therefore ensuring that the controlling share remains in the hands of the parent, and any decision regarding the property belongs to the partner of the deceased.
Where succession remains the issue, shares in a company are easier to distribute than immovable property, and so managing inheritance, and transferring the property, is simplified.
The shareholder structure means that it is easier to divide up shares, rather than splitting the ownership of a property. In turn, this makes it easier for individuals with small budgets to pool their funds and buy a property that they would not be able to buy individually. It is also easier to dispose of the shares without the aid of a notaire, thereby making the SCI more flexible than direct ownership.
The SCI cannot trade or exercise a profession.
The company statutes are written purely so that the company can hold real property.
If the company wishes to trade, the statutes need to be rewritten, and the company needs to be taxed as a Sàrl.
A typical circumstance is when a group of people buy a French property and wish to rent their property as a furnished holiday letting. In this case, we recommend that you form a trading company and keep the SCI purely for holding property.
What about General Meetings (Assemblées générales)
Like all companies in France a general meeting annually, with a minute (procès-verbal) signed by the gérants (not by the associés). The rules of the meetings are set out in the statutes (statuts).
Can a company be the “gérant” of a SCI?
Yes, but the people behind the company then become the people responsible. The company which is “gérant” need not be a shareholder.
What are the obligations of the shareholders of a SCI?
The shareholders are responsible for a percentage of any debt in accordance with the percentage of their shareholding, in the case of bankruptcy.
Can a non-French person be “gérant”?
A person who can prove that they are resident in a country within the European Economic Area or in a country within the OECD, has an automatic right to become a gérant.
A person from a country not stated above; such as neighbours Switzerland, Monaco and Andorra, will be granted the right to be “gérant” following approval by the Clerk of the Commercial Court (the Greffe) during the incorporation.