Many foreigners and non-residents create an SCI for the purchase of their real estate in France. What are the tax consequences of this structure?
The taxes paid when the property is acquired by an SCI are the same as in the absence of such a company and are not affected by the presence of non-resident shareholders.
If I buy the shares of an SCI, will I pay more taxes?
You will be subject to a 5% duty, but be careful! Taxes may also be levied in your country of residence for tax purposes.
I have been told of an SCI subject to corporate tax and an SCI subject to income tax? What is the difference?
The SCI may be taxed on income tax. Its shareholders are then taxed directly on their share, and it may also be taxed on corporate tax as a traditional commercial company. When buying a property in France, it is most often advisable to opt for an income tax system. It should be noted that if the SCI rents the property furnished, it will automatically be subject to corporate income tax, which may have harmful consequences when the property is resold.
I intend to personally use the real estate that my SCI will hold. Are there any tax consequences?
In France, it is very common practice for an SCI (not subject to the corporate tax) to make the property it owns available to its shareholders free of charge. This transaction is not taxed in France.
Nevertheless, taxation in your country of residence may differ. In order not to be penalized, it is necessary to be well advised during the incorporation and management of the company.
Will I have to file an annual tax return in France?
You must declare your income in France, but only if you receive income in France. The principle is that of the taxation in France of real estate income. All the tax treaties signed by France give the State where the building is located the right to tax these real estate revenues.
A minimum rate of 20% will be applied, and social security contributions will be subject to a rate of 17.2% unless the non-resident proves that his tax rate would be less than 20% if he were a French tax resident and therefore subject to French taxation on all of its worldwide revenues. It is possible that the non-resident may also be found taxable in his own country. Everything will then depend – in the presence of a tax treaty – on the clause on the elimination of double taxation.
I have been told of a 3% tax that worries me……
All companies – French or foreign – owning one or more properties located in France on 1 January of the tax year are liable to an annual tax of 3%, based on the market value of these properties, but when an SCI submits a declaration n° 2072Il each year, it is exempt.
What will I pay in taxes when I resell?
You may pay a tax on the capital gain on the property. The sale of the property in France is still taxable in France.
In any case, acquiring property in France is an important move and consulting specialists will be a tax-savvy solution.
At Roche and Cie, we are specialists in French real estate taxation with 40+ years of experience, we have helped thousands of clients plan the best way to plan their acquisitions and move to France as well as supporting them afterwards with any tax and fiscal questions.
Cabinet Roche & Cie,
40 Rue du Président Edouard Herriot, 69001 Lyon
00 33 4 78 27 43 06
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