An SCI (Société Civile Immobilière) is a company whose object is real estate. It is a legal entity with its own legal existence.
Its main role is to acquire a property jointly and manage it jointly through the company.
It also guarantees a number of advantages when it comes to passing on assets. Why set up an SCI? When and under what conditions should it be set up?
Making the right choices can lead to substantial savings
Buying a property often requires financing.
SCIs offer more possibilities for individuals than individual loans. It is possible to borrow using conventional credit, i.e. on an individual basis, and to contribute the funds within the SCI.
Alternatively, the SCI can borrow the funds directly
Borrowing funds on behalf of the company can be an advantage.
There's no better way to share the value of a property between several people than SCI.
It enables capital to be pooled, after which each partner is free to acquire a certain number of shares in the company.
In most cases, funds are allocated on a pro rata basis .
The value of the property is therefore shared fairly and representatively between the people who contributed to its purchase.
Passing on real estate is never a simple task.
In fact, bequeathing shares in a company is simpler than bequeathing an asset itself.
Similarly, it is relatively easy to make a gradual gift of shares to heirs , while benefiting from lower taxation than that applied when transferring a property.
Children can be partners, and the inherited value is based on the SCI's net assets after deduction of debts.
A property can be transferred gradually over time, with no impact on management.
Undivided ownership is a frequent situation, and is often a source of blockages when it comes to inheritance.
Obtaining the agreement of undivided co-owners is never easy, and the simple sale of a property can take several years of negotiations.
Thanks to the SCI, the manager appointed by the partners has more powers and can resolve this type of conflict.
Flexible and clever drafting of the articles of association can help avoid indivision.
Instead of requiring unanimity among the heirs, certain decisions require only a majority designated by the bylaws.
Different types of majority are possible, depending on the decisions to be made.
The SCI offers a number of tax advantages, as it gives associates the choice of opting for income tax or corporation tax.
In most cases, income generated by the company's activities is subject to income tax on a pro rata basis to the shares held by each partner in the company.
If associates are taxed in the higher income tax brackets , opting for corporate income tax is an advantageous solution.
In this case, profits are taxed at 15% up to €38,120 a year, then at 33.33% above that.
The IS option is compulsory for commercial activities such as furnished rental.
The resale of shares held in an SCI is subject to a number of tax advantages.
In this case, capital gains realized at the time of sale benefit from a 10% annual allowance from the fifth year of ownership.
After 15 years, capital gains are fully tax-exempt.
Setting up a non-trading property company (SCI) can be an excellent opportunity to make substantial savings, both in terms of management and when it comes to passing on your real estate assets.
It is possible to form a partnership with the person of your choice, but this tax arrangement takes on its full importance when carried out as a family.
Written by our expert Paul LASBARRERES-CANDAU
July 17, 2018
