SCI

[Busy Bee]

Does anyone know the advantages of forming an SCI to purchase a property and how to go about it?  Also what are the implications of selling if one person is UK tax resident and the other is French tax resident?

Thanks for any information anyone may have!

[makeiteasy]

Dear Tracyk,

please find more explanation below(paste from a brochure done by a bank):

Buying a property in France through a French non-trading property company (Société Civile immobilière or SCI) can be beneficial. The principal advantages of a SCI are that its shares can be simply transferred to new owners and after the company has been established for three years, stamp duty is lower than it is on direct transfers of property. On the death of an owner, shares in an SCI are treated as movable assets and can be bequeathed in accordance with the laws of the owners place of domicile, thus avoiding the restrictions of French succession law. If you plan to buy a property through a SCI, this should be done at the outset and ail advantages and disadvantages must be considered in advance. One concern for example is that the British tax authorities consider that a taxpayer who owns shares in a SCI may be deemed to be an employee of the company and therefore receiving a taxable benefit in kind for the use of the property.

ADVANTAGES REGARDING INHERITANCE

The creation of a SCI avoids the application of the French Civil "Heir ship" rule. As a consequence of the SCI, the law of the country in which you are a resident at the time of death prevails.

However, French tax law will apply and your heirs could be liable for French Inheritance Tax.

From a French point of view, managing the SCI would be a solution to keep a certain control of thé property. If thé children are also implicated in thé SCI, the survivor spouse would be able to keep a control on the property that would be inherited by thé children.

          ADVANTAGES REGARDING WEALTH TAX

You will be allowed a deduction of approximately 10% of the taxable value for French Wealth tax purposes as the property is not owned directly by you but through a SCI.

 

Hope it will help

Céline Monier www.makeiteasyconsulting.com

 

[bizzer]

Hi Tracy

We have a SCI and it was set up by our Notaire (an accountancy firm could set one up too) the cost being around 1100€ (although some charge 2000€ and more). The reason we set up the SCI was to make ensure that the property was safe from "family inheritance" allowing us to choose who we could have as share holders and who we could leave our shares to if the worst was to happen.. I am currently living in France and my partner is living in England. The SCI is registered with the French address, which is currently let as two appartments on the first floor and a ground floor shop premises hence another reason for using an SCI...Ours is taxed as an independant entity. We have been told about the benefits and hopefully they will come into being as time progresses and needs arise.

I hope this has been of some help

cheers

[Anton Redman]

You need also to have a look at postings about the UK tax risk and check out French Tax Position.

UK IR/HMCE are trying to assess the directors/shareholders who visit their properties for a benefit in kind for the notional rental cost that they would pay for visiting the properties which are owned by the company. As far as I am aware there is no clear case law on this yet.

You also need to check the exact legal status of SCIs as one of the French types of company used to circumvent French Inheritance laws are inappropriate for properties which are going to be let out to third parties.

[Busy Bee]

Thank you very much for your time and replies everyone, you've been really helpful, cheers Tracy