Should I be buying using an SCI?

Posted by admin in Property Investment, Property Letters | September 12th 2005

The use of a “Société Civile Immobilière”, or SCI is a common way of buying a property in France … Advantages …

Inheritance – The use of an SCI overcomes some of the disadvantages of French Inheritance law. Under French law upon the death of the home’s owner, the property is divided equally between the surviving spouse and any children. This can be potentially a problem for any number of reasons, sousing an SCI and its shareholder status means that the parents can appoint themselves as majority shareholders and They can make provision that upon the death of one or the other that his or her shares are passed onto the surviving spouse, so that the controlling share remains in the hands of the parent, and any decision regarding the property belongs to the partner of the deceased.

For foreign residents in France, an SCI can be a great advantage if the inheritance laws of their home country are more flexible than French laws.
• Upon death, the applicable law is normally the one of the country where the property is located. However, if the property is owned through an SCI, then the applicable law will be the one of the last country of residence of the deceased.
• Owning a home in France via an SCI means that the French property becomes part of the estate of their country, as opposed to direct ownership of immovable property, which is subject to estate law in France. This is important to bear in mind in terms of inheritance.

In the event succession remains an issue, shares in a company are easier to distribute than immovable property

Likewise because it is easier to divide up shares, than to split ownership of a property it makes it easier for individuals to pool their funds. It is also easier to dispose of the shares thereby making the SCI more flexible than direct ownership.

The net worth of the property can be reduced for tax purposes by way of debt. This can minimise wealth and inheritance tax liability.

Disadvantages …

There are numerous advantages of an SCI, but there are also a few drawbacks, mainly relating to additional expense. One should make provision for the registration expenses as well as its running costs, for example the company’s accounts. You will need to establish and register your SCI and will be committed to producing annual accounts under the French Accounting system.

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