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, or SCI. The use of this method has benefits for French residents, as well as foreign residents.

An SCI is a property company. Although it can be used to minimise succession tax by gifting shares to your children during your lifetime, they are usually used by a group of unrelated people to purchase a property as co-owners. An SCI is meant to be non-trading. Taking professional advice is essential before deciding to go ahead and for the actual set up of the company.

When buying the property, the Promesse de Vente can be signed by one person and later the SCI can be substituted as the purchaser on the property. If you do decide to use an SCI, please be aware that your French bank account must be opened in the name of the SCI. It takes 4 to 6 weeks to create the company so don't wait too long before starting the administrative process. You can apply for the mortgage, if needed, as soon as you have draft bylaws of the SCI.

* An SCI is essentially a fully incorporated company with a registered office in France. This 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.

Where foreign residents are concerned, the use of an SCI can be a great advantage for people whose home inheritance laws are more flexible than French laws.

* Upon death, the applicable law is normally the one of the country where the property is located. However, if the property is owned through an SCI, then the applicable law will be the one of the last country of residence of the deceased.

* Owning a home in France via an SCI means that the French property becomes part of the estate of their country, as opposed to direct ownership of immovable property, which is subject to estate law in France. This is important to bear in mind in terms of inheritance.

Using an SCI to purchase a property will incur additional expenses.

For an SCI to exist as a real company it must:

* keep regular records,
* prepare annual accounts
* hold an annual general meeting of the members to approve the accounts.
* maintain statutory records in a legal register.

It is essential to seek professional advice when planning to set up an SCI.

Disclaimer: Tax law is complex and every effort has been made to offer information that is current, correct and clearly expressed. The information in this summary is intended to be no more than a general overview of the position and certain details have been deliberately omitted. The contents of this page should not be taken as an authoritative statement of French tax law and practice. Neither the author nor the publisher are responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. This text is not intended to render legal, accounting or tax advice. Readers are encouraged to seek professional advice concerning specific matters before making any decision.