Ways of buying French property

13 June 2017

Buying through your own name

When buying a property in France, most people choose to buy in their own name or as a couple. Depending on whether you're buying a resale property or are purchasing a property off-plan (known as vente sur plan) the buying process, including that of the various sales contracts, can vary slightly.

What doesn't change is the protection both the vendor and buyer are afforded by the purchase process. Largely due to the role of the French Notaires in the buying process, France has one of the most secure and transparent property purchase processes in the world.

Advantages

Disadvantages

  • No costs for setting up the company
  • Lower accountancy costs
  • Sometimes it can be easier to get a mortgage
  • When purchasing a property with other people, you can’t resell the property unless you have the approval of all parties
  • If you’re planning to pass the property on to your children this is not the most tax efficient way of purchasing
  • Not the best way of purchasing if you want to buy with others within a structure which is based in the country of residence for the purchaser

Buying using an SCI (Société Civile Immobilière)

There are different types of companies that can be set up to buy and own a French property but the most commonly used is the SCI (Société Civile Immobilière). Its designation as a ‘Civile’ (civil) company means that it is non-trading and is therefore not a company in the traditional sense, one that has a commercial objective.

You can hold more than one property in an SCI and they can be second homes, investment properties and also the primary residence.

There are advantages and disadvantages to both ways of buying French property, which is why it is very important to discuss your long term plans and goals with an expert.

Advantages

Disadvantages

  • Can be purchased with extended family or even a group of unrelated people
  • Only 2 partners are needed with no minimum contribution
  • Ownership can be transferred gradually to children
  • Children and grand children can be granted shares tax-free over time
  • Very tax efficient
  • No notary fees are payable on share transfers
  • Transfers of ownership (by way of shares) are tax free
  • An SCI is a tax transparent structure and in the eyes of banks and lenders it as seen as the same as if you were buying through your own name which means mortgage application are just as easy and you benefit from the same taxation system as if you were purchasing in your own name (Capital gain tax, taper relief, inheritance threshold)
  • Tax efficiency helps avoid Wealth tax
  • There are some formalities such as holding annual general meetings and preparing annual accounts
  • An Sci is not the best structure when you intend to rent your property furnished to benefit from the amortisation system. In this case an SCI can be taxed as if you were a limited company.

Whilst SCI's are very tax efficient and offer non-residents an easy way of bequeathing assets to their children, there are some additional costs and rules when compared to buying property in your own name:

  • Repairs and improvement works, as well as the running costs of the property, must be processed through the SCI with funds deposited in the company bank account by the owners.
  • If you set up a new SCI at the same time as the purchase of a property then expect to pay in the order of €1,000 in additional taxes and Notaire fees, although this is often mitigated in the long run.
  • Set up costs are normally around €1,000 and yearly accountancy fee around €800.

Other purchasing structures

There are also a number of other structures which can be used to purchase a property in France. If you intend to rent your property furnished, we would recommend buying through a ‘SARL de famille’ as it is a structure that will remain tax transparent even if you receive rental returns through a furnished rental property. However setting up a SARL de famille can be a little bit more expensive to set up.

There are a number of other ways to structure property purchases in France in ways which will be tax efficient depending on your circumstances.

For further information on these please contact one of our French property advisers.

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