There are four types of SCI: family SCI; family rental SCI; allocation-acquisition SCI; and construction-sale SCI. Each of these forms has its own objectives and advantages.
The family real estate investment company (SCI familiale) gives you the opportunity to manage a property portfolio with your family members. This status allows you to :
Not be subject to majority decisions imposed by the joint ownership,
Managing real estate assets as a family,
Save on inheritance tax,
1. No joint ownership
Indivision is a concept in inheritance law, which gives each heir a right to the assets open to inheritance. This is the point at which no distribution has yet been made, so that any decision concerning these undivided assets must be taken by majority vote.
The advantage of the SCI is that there is simply no joint ownership. Decisions do not need to be unanimous.
2. Family property management
The family real estate investment company (SCI familiale) is the only legal form dedicated to managing real estate assets as a family. This form of management has the advantage of uniting you around a common property project.
3. Save on inheritance tax
If there's one certain event, it's death. Knowing how to prepare for it is certainly a form of wisdom. SCI is just such a tool.
By giving your children 100,000 euros of assets every 15 years, via the transfer of shares in the SCI, you save on gift tax, and your children save on inheritance tax.
The purpose of a rental SCI is to enable several partners tobuy and rent out a property . It offers a number of advantages. In particular, it enables you to :
Indirect property management,
Protect professional assets,
Increase your investment,
Facilitate bank loans.
1. Indirect property management
When you rent a property, unless you go through a rental agency, you have to deal directly with your tenant. Refusal to carry out work, or rent increases in line with the IRL, are all causes of tension.
The advantage of a family rental SCI is that you can put these kinds of decisions in the hands of the partners. So you can relax your relationship with your tenant.
2. Protection of business assets through the SCI
In most cases, when you are an entrepreneur, you create a company with the idea of separating your business assets from your personal assets. This means that, in the event of debts, only your company's real estate assets can be seized by its creditors.
However, there is a judicious legal solution to this problem: create an SCI (non-trading property company) in which the business assets are integrated. As a result, it is no longer your company that owns the business assets, but the SCI that makes them available to the business.
3. Increase your investment
Investing in real estate with several partners means sharing the fruits of rental income. You'd think that investing alone would earn you more money, since you don't have to share the income.
Nothing could be further from the truth. The creation of an SCI enables you toincrease your financing capacity, and therefore to buy either a more profitable property (geographical position, size, standing, etc.), or several properties.
Not only will this increase rental yields, but one or more quality properties will also offer significant added value when sold.
4. Facilitate bank loans
This advantage follows directly from the previous one. An SCI offers the bank a far more complete project than an individual could propose on his own. So, in the eyes of the bank, it tends to limit the risk involved in taking out a loan.
The SCI d'attribution consists of dividing the ownership or enjoyment of a property in proportion to the capital investment of each partner. It offers several advantages:
A transparent tax system.
A high degree of management freedom.
The obligation to make collective decisions.
1. The transparent tax system of the SCI d'attribution-acquisition
The SCI d'attribution-acquisition is not subject to corporate income tax, but to income tax.
As a partner, you will be taxed according to the progressive income tax scale.
2. The freedom of management of the SCI attribution-acquisition manager
The management principle governing SCI is that of contractual freedom. In other words, when drafting the Articles of Association, you and the other partners decide whether or not to limit the powers of the SCI manager.
In the absence of any statutory limitation, the SCI manager has all the powers, or almost all the powers...
3. Binding collective decisions
When we say that the manager of a SCI d'attribution-acquisition has all the power, that's not quite true. Certain decisions must be taken by the company's partners.
These include decisions that affect the very existence of the SCI:
Statement of conformity on completion of a building,
Default of a partner leading to a forced sale of his rights,
SCI construction vente has just two aims, which are clearly stated in its name: to build and sell a property. Its advantages are numerous:
Exemption from capital gains tax,
Best suited to construction for sale,
A strong investment.
1. Capital gains exemption for SCIs
Like the SCI attribution-acquisition, the SCI construction-sale benefits from theincome tax system. Under this system, after 22 years' ownership of a property, any capital gain on sale is exempt from income tax (IR).
In detail :
After 15 years: 60% exemption on income tax and 16.5% on social security contributions,
After age 22 : 100% exemption on income tax and 16.5% on social security contributions,
After 30 years: total exemption from income tax and social security contributions.
2. A status adapted to construction for sale
It is the exact opposite of other types of SCI, whose purpose is to manage a property portfolio. The sole purpose of the SCI construction-vente is to enable you to build and sell a property in order to realize a capital gain.
This is the only type of non-trading company that allows regular capital gains. It enables you to manage a property portfolio more effectively as a developer.
Each of your real estate projects will benefit from its own financing and accounting methods.
3. Strong investment potential
SCI construction-vente is the preferred form of company for developers, as it enables them to raise the funds needed for large-scale projects.
If you're like many savvy investors, you can put your money into real estate projects run by SCI construction vente.
Written by our expert Cyril SCHWASTIAK
September 12, 2022
What are the risks of a family SCI?
Here are the main ones:
1. Partners have unlimited liability
Any mismanagement on the part of the manager, who has extensive powers, binds the partners to their personal assets.
2. Income from rental is subject to corporation tax
The corporation tax (IS) regime for SCIs can make property management more costly than conventional management. Individuals are subject to the progressive income tax scale.
3. Disagreements between partners can paralyze the company
Family relations can be complicated. The disagreement of one partner can be enough to paralyze an SCI, to the point where it can be judicially dissolved.
Disadvantages include: unlimited liability of associates; formalities involved in setting up the company (articles of association, registration, publication of an advertisement, registration); costly to set up; no access to 0% interest loans; extensive powers of the manager.
What are the differences between an SCI and a family SCI?
In the case of family-owned SCIs, the partners must be related to each other, but family ties are also accepted, and the lessor is not considered to be a professional (minimum lease of 3 years instead of 6).
