In terms of tax purposes there is no real benefit to own a Real Estate property in France trough an SCI rather than as an individual. However in terms of transfer to the heirs it offers significant advantages.
First of all in case of transfer and or gift of the shares of the company, the stamp duties applicable on such transfer/gift would be calculated on the net value of these shares. This means that if the company took any loan or has any debts, such amount would be deducted from the gross value of the shares and ultimately the transfer tax to be paid on these shares would be lowered.
The other and main interest of holding a real estate property through an SCI implied that SUCH PROPERTY IS A SECOND OR THIRD HOME AND HAS BEEN PURCHASE FOR INVESTMENT PURPOSE.
In this case, instead of transferring or donating the property to the heirs and paying inheritance or donation taxes on such transfer. The owners (usually the Parents) will sold the said property to the SCI previously set up and registered by the heirs. Such company would then take mortgage to purchase the said property, the repayment of the mortgage being paid off entirely or partially by the rent coming out of the property of the said property.
In the same time, the owners (usually the Parents) could invest the amount coming out from the sale of the property into other life insurances on the names of their children, who would also be the beneficiary of the interests on such insurance investment.
Finally it is also possible to purchase a second or third home using the rentals coming out of the property owned by the SCI to finance the mortgage of this second or third property.
The SCI also present the benefit to be exempted from the payment of the Wealth tax, due on property of a value superior to 800 000 €.
In 2015 the wealth tax amounts to:
– Between 800,000 € & 1 ,300,000 € – 0.5 %
– Between 1 ,300,000 € & 2,570,000 € – 0.70 %
– Between 2,570,000 € & 5,000,000 € – 1 %
– Between 5,000,000 € & 10,000,000 € – 1.25 %
– Above 10,000,000 €- 1.5 %
The SCI is also much more flexible in case of death or in case of financial difficulties of one of the owners. In this case, the other owners in their quality of shareholders of the company they can buy back the shares through a simple private contract and pay some transfer taxes of 5 %.
In the event a property is owned by several individuals, in the same case an official sale through notary must take place, subject to a longer procedure and higher transfer taxes (7.5 % min).