Buy French Property The Right Way

For someone buying property in France, one option for the transaction is to form a SCI to directly own the property. This can provide some tax benefits, more ownership flexibility and help get around some of the property inheritance laws in France. On the other hand, a SCI will require more fees, additional paperwork annually and generally more red-tape than buying a property as an individual. It's simply one option for you to consider.

A SCI is a Société Civile Immobilière, which exists as an incorporated company with a registered office in France (usually the property to be purchased). The SCI is technically owned by shareholders, who can simply be family members. Shareholders in a SCI do not have to be residents of France.

Benefits Of Using An SCI

The largest benefit of using an SCI is to avoid the law that requires all property to be divided up between spouse and children upon the death of the owner. By using a SCI, the shares can be passed to whomever the owner wants, thereby effectively passing the property ownership to other members of the SCI and not necessarily living children.

Another benefit is that it makes is much easier for people with small budgets to gather their funds to by a property. Simply allocate the shares based on each person's individual investment. Shares can also be transferred between people without the need of a lawyer or notary, which makes ownership with a SCI more flexible than traditional property ownership. You are free to change the terms of a SCI any time.

One final upside to using a SCI is that you can reduce the value of the property for wealth tax purposes, by including debt aspects of the transaction.

Downsides Of An SCI

There are some downsides to buying a French property though a SCI, namely the added fees and complexity of managing such a corporation. There are costs to register the SCI, and costs to keep it running. The annual costs of a SCI usually involve the maintaining of paperwork and accounts. Buying a property with a SCI does not help you avoid paying the standard purchaser's fees that are part of the transaction to the notary, or lawyer.

Unless you are very familiar with French accounting (and the French language), this is usually done by a hired accountant. Annual tax returns are also required if you are buying a property to let or rent out (particularly for holiday rentals or any furnished properties). Accounts must be approved by all the shareholders of the SCI, usually done during an annual meeting.

UK Residents

If you are a UK resident, take particular care when arranging for a SCI in your property purchase. There have been some disagreements and confusion between the UK and French governments with regards to the nature of a SCI because no similar concept exists in the UK. This can complicate tax issues, so a taxation account should be consulted.

Using a SCI is one option that may or may not suit your specific investment situation. You should always consult with a professional to get all the details and possible consequences of this process before going ahead with it. All situations are different.

Bruno Jimenes is the editor of http://www.about-french-riviera.com the comprehensive guide to the beautiful French Riviera coast. More information about French investment property in the Riviera is posted at http://www.about-french-riviera.com/french-investment-property-riviera.html - Copyright: You may freely republish this article, provided the text, author credit, active links and this copyright notice remain intact.