The tax advantages of buying with a French family SCI company
The tax advantages of the family SCI
A better spread and more flexible donation
From a tax point of view, the family SCI offers many advantages to its partners. Above all, it allows you to take full advantage of the legal deductions in the event of a donation. Every 15 years, a parent can pass on €100,000 to their child, tax-free. Within the SCI itself, the parent can therefore transmit part of their shares (up to €100,000) in order to gradually optimize the transmission of their assets. This operation can be carried out every 15 years within an SCI in a more flexible way than a donation in your own name. The objective being that on the death of the partner, almost all of the shares are transmitted thanks to these allowances.
Take advantage of the donation with reserve of the usufruct in a family SCI
Thanks to the donation with reserve of the usufruct, it is possible to transmit shares of SCI on the value of the bare ownership (therefore at a lower cost than in full ownership).
Thus, upon death, the children legally recover the usufruct without having to pay additional inheritance tax on this part. This is one of the best tax and asset strategies offered by the family SCI.
A reduction in taxation thanks to the use of borrowing
Finally, if the SCI needs a French mortgage, the donation will be more advantageous than a classic donation in its own name.
Indeed, net assets (gross assets minus debts) serve as the basis for calculating tax. In other words, the mortgage reduces the valuation of the shares and therefore the taxation in the event of a donation.
Family SCI: Income or Corporation tax?
Two forms of taxation apply to SCIs:
The SCI to company tax (corporation tax);
The SCI to the income tax (tax on the income of each partner).
The partners choose the one that best suits their interests according to their situation. By default, a family SCI is subject to personal income tax. In this case, we speak of transparent SCI. In other words, the income generated by the company is taxed on the tax return of the partners up to their participation.
Thanks to the SCI on personal income tax, the partners can deduct the land deficit of the SCI from their overall income. They thus reduce the price of the tax to be paid by their tax household. To do this, it is necessary to complete the appendix dedicated to property income, and if the SCI is in deficit, the deficit may be charged to the overall income of the unitholder.
In some cases, the SCI on Corporation tax is more advantageous. However, it is rarer in the context of a family SCI (we can create other structures like the “Family Limites Company”, contact us for more info.
In addition, the SCI on Corporation tax requires much stricter and more rigorous management (it is often necessary to call on an accountant, which we are happy to help with).
More articles on purchasing a French property with a family SCI company: