Buying with a SCI in France

Buying a property in France can be an attractive investment opportunity for foreign buyers. One avenue often explored is purchasing property through a Société Civile Immobilière (SCI), a legal entity commonly used for property ownership in France. In this article, we’ll explore what a SCI is, the process of creating one as an expat, the associated costs, the benefits and considerations of buying with a SCI in France, as well as pitfalls to avoid. 

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What is a SCI?

A Société Civile Immobilière (SCI) is a legal entity used in France for property ownership. It allows individuals to jointly own real estate assets, providing legal and tax advantages. The SCI is governed by articles of association and can have one or more directors responsible for managing its affairs.

What is the process to create a SCI as an expat?

Establishing a SCI involves several steps, particularly for expats unfamiliar with French legal procedures.

Drafting articles of association: The first step is to draft articles of association outlining the SCI’s purpose, structure, and governance. This document defines the roles and responsibilities of the SCI’s members and directors. 

Registering with French authorities: Once the articles of association are drafted, the SCI must be registered with the appropriate French authorities. This typically involves submitting paperwork to the local commercial court or registry, along with any required documentation. 

Appointing directors: The SCI must have at least one director responsible for managing its affairs. Expats can appoint themselves or other individuals to serve as directors, depending on their preferences and legal requirements. 

Opening a bank account in France: To operate effectively, the SCI will need to open a bank account in France. This account will be used for managing financial transactions related to property ownership, such as collecting rent and paying expenses. 

What is the cost to create a SCI?

The cost of creating a SCI can vary depending on the different situations of each associate.

Here are the costs of the main formalities to be carried out: 

  • Administrative documents (including articles of association): between 200 € excluding tax if done online and 2,500 € excluding tax if done with a notary
  • Announcement fees: approximately 222 € including all taxes
  • Declaration of beneficiaries: 21.41 € including all taxes
  • Registration fees: 66.88 € including all taxes.

 

This results in a total estimated cost ranging between 510 € and 2,810 €.

Why buying with a SCI in France?

Buying with a SCI in France offers several advantages that make it an attractive option for foreign buyers. These advantages include asset protection, succession planning and tax optimisation. 

> You might be interested in this article: Buying a house in France: 5 essential steps

Benefits of using a SCI to buy a house in France

Facilitating purchase by multiple persons: A SCI allows multiple individuals, often unrelated, to pool their resources and jointly own property. This enables friends, family members or business partners to invest in real estate collectively, facilitating larger property purchases that might be unattainable individually. 

Stability and continuity in ownership: By structuring property ownership through a SCI, families can ensure stability and continuity in the management and ownership of family property across generations. The SCI’s articles of association can specify rules for succession, ensuring smooth transition of ownership over time. 

Streamlining property transfer: Property owned by a SCI can be transferred more easily compared to individual ownership. Changes in ownership or the addition of new shareholders can be managed through the transfer of shares in the SCI, simplifying the transfer process. 

Avoiding constraints of French inheritance laws: Inheritance laws in France can be complex and may not align with individuals’ preferences for distributing assets. By holding property within a SCI, individuals can bypass certain constraints of French inheritance laws and exert more control over the distribution of their assets.

Tax advantages: Owning property through a SCI can offer tax benefits, including reduced inheritance tax liabilities and greater flexibility in managing tax obligations. The SCI’s structure allows for tax optimisation strategies that may not be available with individual ownership.

Protecting family home from business creditors: Holding the family home within a SCI can provide protection against business creditors. In the event of financial difficulties or legal disputes related to business activities, the family home held within the SCI may be shielded from creditors seeking recourse. 

Considerations

While there are significant benefits to using a SCI to buy a property in France, buyers should carefully consider several factors before proceeding.

Ongoing administrative obligations: SCI ownership entails ongoing administrative responsibilities, including maintaining accurate records, filing tax returns, and adhering to legal requirements. Buyers should be prepared to fulfil these obligations or seek professional assistance to ensure compliance. 

Potential legal complexities: Creating and managing a SCI involves navigating French legal procedures and regulations. Buyers should seek expert advice to understand the legal implications and ensure proper compliance with all requirements. 

Tax implications: While SCI ownership can offer tax advantages, buyers should carefully assess the tax implications and obligations associated with property ownership through a SCI.

Consulting with tax professionals can help buyers understand the tax implications and make informed decisions.

Requirements to buy a house in France with a SCI

To buy a house with a Société Civile Immobilière (SCI) in France, certain requirements must be met. Firstly, establishing a SCI involves drafting articles of association outlining the purpose, structure and governance of the company. These articles typically specify the roles and responsibilities of the shareholders and directors. 

Additionally, the SCI must be registered with the relevant French authorities, which may require submitting paperwork to the local commercial court or registry. 

Furthermore, appointing directors is necessary for the operation of the SCI. Directors are responsible for managing the company’s affairs and making decisions on behalf of the shareholders. It’s essential to ensure that the appointed directors are suitable for the role and have the necessary qualifications and expertise.

Moreover, opening a bank account in France is crucial for the SCI to conduct financial transactions related to property ownership. The bank account will be used for various purposes, such as collecting rent, paying expenses and managing financial assets. 

> You might be interested in this article: Opening a french bank account for expats : The complete guide

Pitfalls to avoid when buying with a SCI

When using a SCI to purchase a property in France, several common pitfalls can arise if not carefully managed. 

Inadequate legal structuring: One of the most significant pitfalls is inadequate legal structuring of the SCI. This can lead to complications in ownership arrangements, governance issues, or disputes among shareholders. It’s essential to ensure that the articles of association clearly outline the roles and responsibilities of all parties involved and that the SCI is structured in a way that aligns with the buyer’s objectives.

Failure to comply with regulatory requirements: Another pitfall is failing to comply with regulatory requirements. This can include proper registration of the SCI with French authorities, adherence to tax regulations, and compliance with local zoning laws or building regulations. Non-compliance can result in fines, penalties, or legal challenges that can disrupt property ownership and lead to financial losses.

Overlooking tax implications: Tax implications are a critical consideration when using a SCI to buy a property in France. Buyers must understand the tax implications associated with property ownership through a SCI, including potential capital gains taxes, inheritance taxes, and ongoing tax obligations. Failure to properly assess and plan these tax implications can result in unexpected financial burdens or complications down the line. 

Is an SCI right for you?

In our podcast episode, our expert guest, Vicky from Compass Immobilier, delve into the intricacies of Sociétés Civiles Immobilières (SCIs) and their relevance in today’s French property market. Ben and Vicky explore the benefits and potential drawbacks of using SCIs for estate planning, family property investments, and properties with a business component. Whether you’re considering purchasing a property in France for personal use or investment, this episode is packed with practical advice and expert tips to guide you through the complexities of SCIs.

Final notes

Buying with a SCI in France offers foreign buyers a flexible and efficient means of property ownership. However, it’s crucial to understand the intricacies involved and seek professional guidance to ensure a smooth and successful transaction. More on the SCI on the French government website here. 

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