SCI – SOCIETE CIVILE IMMOBILIERE
An SCI is similar to that of a private limited company, which has been incorporated. However it also has a registered office/property in France which can either be rented out professionally or freely available for its shareholders; this is because it is the shares of the SCI which own the property. These shareholders own the property relative to their proportion of shares declared in the company statutes and can be resident or non-resident in France. The shareholders are liable for the debts of the SCI and if there are two (the minimum number necessary) each if responsible for 50%. It is by collective decision of all shareholders that decisions are made concerning the SCI.
Process of incorporation
1. Due diligence of shareholders- Proof of identity and country of residence (passport, national identity card, birth/marriage certificates, utility bills)
2. Notary prepares company statutes which is signed by all shareholders and submitted to the Chamber of Commerce. Statutes must include:
• Company name
• Address of property or shareholder if French-resident
• Amount of capital
• Company’s activities
• Details of manager
3. Opening a bank account once statutes are signed
• All invoices of income/expenses relating to property must be in the name of the company and Paid through the company’s bank account
4. After a few weeks the certificate of incorporation (Kbis) will arrive
Note – an SCI can be created on purchase of a property, after the signed of a preliminary contract and the title deed before a notary.
• As shares are considered as movable assets, an SCI is taxed in the country of residence of the shareholder and thus can benefit from lower tax regimes
• The property held by the SCI can be sold at any time and another property purchased, without having to dissolve the SCI
• Can avoid French wealth tax (ISF) by maintaining liquid assets at zero value
• In the event of the death of a shareholder, shares are not subject to urban pre-emption rights or to a notary act – the law of the country of residence applies
• The manager is not subject to social security taxes, retirement fees of any specific tax regime. Although an annual report must be filed (form 2072), taxes are not declared unless the property is rented out professionally and thus shows revenue.
• Accounting is simple if properties are not let professionally
• Can declare for capital gains tax (provided bank account is in name of company)
• The collective decision by shareholders can cause conflict, especially in the case of a death
• In general mortgages are more expensive and difficult to secure
• HM Revenue and Customs are considering taxing French SCIs which have British shareholders according to average rental income (because shares are considered to be movable and therefore a UK asset)
• If the SCI rents out one or more properties, accounting and tax declarations become complex.
• For changes of shareholders, applying for a mortgage and dissolution, the collective decision, “deliberation” must be drawn up by a notary
• After deliberation, for dissolution, the form M3b must be completed by a notary and filed with the Chamber of commerce. A small fee will be charged.