9. Ownership of Property in France through a French Property Company (SCI)

1. 9.1. What is an SCI?
2. 9.2. Advantages
3. 9.3. Disadvantages

9.1. What is a French Property Company (SCI)?

In the previous pages we considered owning French property indivision and en tontine. If neither of these ownership structures suits your needs, then you may wish to consider establishing a company to buy the property.

Many French and international buyers choose to do, because of the advantages it offers. With the concessions applicable from 2007 on inheritance tax (see our separate pages on this subject), it remains to be seen if, in the future, it is as popular.

An SCI is a rather specialist type of company that is constituted for the ownership and management of property.

Where an SCI is used for the purchase of a private home, the owners effectively then become non-paying tenants or occupants of the property owned by the company.

The company can be established with as little as €1 initial capital but, where the SCI is being set up at the same time as the purchase of the property, then it is normal to subscribe to the value of the purchase price.

The company must have at least two shareholders.

Children under eighteen years of age can hold shares in the company, provided they receive separate legal advice about their rights and obligations. It would also be normal, within the articles of the company, to limit in some manner the liability of any minors in the company.

Like any other company the SCI is a separate legal entity from those who own it. However, in the case of an SCI it affords no limited liability to the owners. Shareholders of the company are, therefore, liable for the debts of the company in the proportion in which they hold shares.

Shares can be held in proportion to the amount of capital that each party brings to the company, e.g. 70% / 20% / 10%.

Contrary to popular belief, an SCI is not, per se, a vehicle to reduce tax liability, although, depending on how it is structured and how it operates, there are tax advantages that can be created.

SCI are specifically not a commercial company; that is to say they can only be established for non-trading purposes. Nevertheless, there are certain types of SCI that can be established for the renting of unfurnished property or the construction and sale of property. We do not review this type of SCI in these notes.

Our focus will be on an SCI set up for the purchase and retention of a private property to be used as a principal or second home.

Alternatively, you may be able to find a legal advisor in your own country to advise you on the relationship between the laws in your own country and those in France. However, be careful about fees, as it is not difficult to spend several thousand pounds getting a professional advisor to set up an SCI for you, when you are likely to find it can be done more cheaply through a notaire in France.

Indeed, there are 'do-it-yourself' kits for an SCI available on the internet or from good bookshops, Whilst we do not recommend you use one of them without taking professional advice, it is easy to be misled into thinking that the whole process is rocket science, and that you need to spend a small fortune to get good legal advice and assistance. You do not.