Legal & Operational Structure

What is an SCI?

An SCI (Société Civile Immobilière) is a popular legal structure in France for group property investment and management. Its primary purpose ('objet social') is typically the ownership, administration, and potentially the rental of real estate assets. It's considered 'transparent' for certain tax purposes (see SCI IR vs IS below), meaning profits and losses often flow through to the shareholders.

SCI Governance: The 'Statuts'

The SCI is governed by its articles of association ('statuts'), a crucial legal document agreed upon by all shareholders before the SCI's formation. The statuts define the rules of operation, including:

• Appointment and powers of the manager ('gérant').
• Procedures for shareholder meetings and decision-making (voting rights, majorities required).
• Rules for transferring or selling shares (e.g., pre-emption rights for existing shareholders).
• Policies for profit distribution or reinvestment.
• Conditions for dissolving the SCI.

We work with experienced French notaries and lawyers to draft comprehensive statuts tailored to the specific project and investor group, ensuring clarity and protecting everyone's interests.

SCI Tax Regimes: IR vs IS

An SCI can be subject to two main tax regimes:

• SCI à l'Impôt sur le Revenu (IR - Income Tax): This is the default regime. The SCI itself is not taxed; instead, any net rental income (or loss) is allocated to shareholders based on their shares.
  • French Residents: Add their share of the income to their other revenues and pay French income tax based on their overall tax bracket.
  • Non-Residents: Are generally taxed in France (as the source country) on their share of the income, often via withholding tax. Illustrative rates (as of early 2025, subject to change and DTTs): The standard minimum rate is often 20% (up to a certain income threshold, 30% above), but the applicable Double Taxation Treaty (DTT) between France and their country of residence frequently provides for a lower maximum rate (e.g., 15% or less), which would then apply. They must also declare this income in their home country, where the DTT typically provides relief (e.g., a tax credit or exemption) to prevent double taxation.
  This regime is often simpler for straightforward property holding with regular income distribution.
• SCI à l'Impôt sur les Sociétés (IS - Corporate Tax): The SCI can opt for corporate tax. Here, the SCI itself pays French corporate tax on its net profits (after allowable deductions, including building depreciation). Shareholders are then taxed only on dividends they actually receive. Illustrative rates (as of early 2025, subject to change and DTTs): Dividends paid to non-residents are typically subject to a French withholding tax based on the domestic 'PFU' rate (currently 12.8%, potentially plus social levies unless exempted by treaty), however, applicable DTTs often provide for a lower maximum withholding tax rate (e.g., 5% or even 0% in some cases), which would take precedence. Dividend income must also be declared in the home country, with DTT relief applying.

Fiscal Considerations for Non-Residents (Summary)

Owning shares in a French SCI as a non-resident generally triggers tax obligations in France:

• Income Tax: As mentioned above, your share of rental income (SCI à l'IR) or dividends (SCI à l'IS) is typically subject to French tax, usually withheld at source. The effective rate depends on French domestic law and the applicable DTT. You must also declare this income in their home country, where the DTT dictates how double taxation is avoided (e.g., tax credit).
• Capital Gains Tax (CGT): If you sell your SCI shares or the SCI sells the property, any capital gain is generally taxable in France.
  • Rates (Illustrative, as of early 2025): French CGT rates and social levies for non-residents can change and depend on residency (EU/EEA vs non-EU/EEA). As a general illustration, the standard CGT rate might be 19%, plus social levies around 17.2% for non-EU/EEA residents (potentially lower rates or exemptions apply for EU/EEA residents or based on DTTs) - applied to the taxable gain *after* tapering relief.
  • Calculation & Tapering Relief: French CGT rules apply. A significant feature is the allowance based on duration of ownership (tapering relief or 'abattement pour durée de détention'), which reduces the taxable portion of the gain over time. Non-residents may also be subject to social levies ('prélèvements sociaux') on top of the CGT, which have their own, slower tapering relief schedule. Exemptions from social levies may apply based on residency and social security affiliation.
    Illustrative Tapering (based on rules applicable in recent years, e.g., early 2025 - subject to change):
    • Years 1-5: No abatement. 100% of the gain is subject to CGT and social levies.
    • From Year 6 onwards: Abatement begins.
      • For CGT (Income Tax portion): Abatement is 6% per year from year 6 to year 21, and 4% in year 22. Full exemption from CGT is reached after 22 years.
      • For Social Levies: Abatement is 1.65% per year from year 6 to year 21, 1.60% in year 22, and 9% per year from year 23 to year 30. Full exemption from social levies is reached after 30 years.
    • Example Milestones (Approximate Cumulative Abatement):
      • After 10 years: ~30% abatement for CGT / ~8% for social levies.
      • After 15 years: ~60% abatement for CGT / ~16.5% for social levies.
      • After 22 years: 100% abatement for CGT / ~28% for social levies.
      • After 30 years: 100% abatement for CGT / 100% for social levies.
    This shows how holding the property longer significantly reduces the tax payable on capital gains. Professional calculation based on the rules at the time of sale is essential.
  • Home Country Taxation & DTTs: You will likely also need to declare the gain in your home country. The DTT between France and your country is crucial here. Typically, France retains the primary right to tax the gain on French property. Your home country will then usually offer relief (e.g., a credit for French tax paid) against its own CGT liability, preventing double payment but ensuring you pay at least the higher of the two countries' effective rates.
• Wealth Tax (IFI - Impôt sur la Fortune Immobilière): This is an annual tax. If the net value of your French real estate assets held on January 1st exceeds a certain threshold (currently €1.3 million as of early 2025, but subject to change), these assets (including SCI shares valued based on underlying property) are included in the calculation for French wealth tax, regardless of residency. As of early 2025, the tax applies only if the total net French real estate assets exceed €1.3M. The rate starts at 0.5% for the portion of assets between €800,000 and €1.3 million and increases progressively in bands up to 1.5% for assets over €10 million.
• Inheritance/Gift Tax: French inheritance and gift taxes may apply when SCI shares are transferred. Tax liability and rates depend on the residency of the donor/deceased and beneficiary, the relationship between them, the amount transferred (after applicable allowances), and the relevant DTT. Illustrative rates (as of early 2025) are progressive and vary significantly:
  • Between spouses/civil partners: Often exempt (0%) for inheritance, subject to conditions. Gift tax may apply above certain allowances.
  • Parent to child: A significant tax-free allowance applies (currently €100,000 per child per parent, renewable typically every 15 years for gifts). Above this allowance, progressive rates apply, starting at 5% and increasing in bands up to 45% for amounts over approx €1.8 million.
  • Other relationships (siblings, unrelated): Allowances are much lower or non-existent, and rates are higher, potentially reaching 60% for unrelated individuals.
  An SCI structure can facilitate estate planning, for example, by allowing the progressive gifting of shares over time to potentially make use of recurring gift tax allowances (like the parent-child allowance), but this requires careful planning with a qualified professional.

If you are a UK, US, or other EU country fiscal resident

• UK Resident: The France-UK DTT applies. Income/gains are taxed first in France. UK fiscal residents declare the income/gain and claim Foreign Tax Credit Relief (FTCR) for French tax paid, up to the amount of UK tax due on that same income/gain. Specific rules apply post-Brexit regarding social levies: generally, UK fiscal residents covered by the Withdrawal Agreement and affiliated with the UK social security system may be exempt from the main social levies (CSG/CRDS) but may still be subject to a solidarity levy (currently 7.5% as of early 2025). This is a complex area requiring verification based on individual circumstances.
• US Resident: The France-US DTT applies. Similar principle: France taxes first, US taxes the worldwide income/gain but provides a foreign tax credit for French taxes paid, subject to US rules and limitations. US citizens also have specific reporting obligations (e.g., FBAR, Form 8938) for foreign assets/accounts.
• Other EU Resident: DTTs exist between France and other EU countries. The principles are generally similar (taxation at source in France, relief in the home country), but the exact mechanisms (credit vs exemption method) and rates can vary.

Links to official government pages on foreign assets and taxes

• French Tax Authority for Non-Residents: impots.gouv.fr/international_en
• UK Guidance on Foreign Income: gov.uk/tax-foreign-income
• US IRS Guidance on Foreign Income/Assets: irs.gov (FATCA/FBAR sections)
• List of French Tax Treaties: impots.gouv.fr (in French)