Buying Property via an SCI in France

Buying property via an SCI (société civile immobilière) in France means acquiring and holding real estate through a French non-commercial property company rather than directly in the names of the buyers. The SCI itself becomes the legal owner of the property, while the parties hold shares in the company in proportion to their contributions. Under French law, an SCI must have at least two shareholders, has separate legal personality, is managed by one or more managers, and must retain a civil, not commercial, purpose.

This question usually arises before or alongside a property purchase, not after it. In practice, buyers tend to consider an SCI in France where the acquisition is intended to be held over time, where several persons are involved, or where ownership, management and succession need to be structured from the outset. For a straightforward purchase in one’s own name, it may add complexity without adding sufficient value.

How an SCI changes property ownership in France

Where property is acquired through an SCI, the SCI becomes the legal owner of the asset and the buyers hold shares in the company rather than title to the property directly. Their rights are exercised through their shareholding and the company’s articles of association. This changes the legal structure through which the property is owned, managed, transferred and, where relevant, passed on.

Purchase through an SCI compared with purchase in one’s own name

Why an SCI comes up in a property purchase

An SCI is usually considered where the acquisition needs to be structured, not simply completed. In practice, that is most often the case where:

• the property is being acquired by more than one person

• the parties want ownership and management to be organised through a company rather than held directly

• the property is intended to be held over the long term rather than resold quickly

• management powers and decision-making rules need to be defined in the articles of association

• the acquisition is being approached with future transmission in mind

Service Public also notes that company debt may affect share value in transmission planning, and that gradual share transfers may, in some cases, allow use of the ordinary French gift tax allowances.

Articles of association and formation

The articles of association are central to the SCI. They are not a procedural formality. They define how the company is structured and operated, including its corporate purpose, share allocation, management rules, duration and registered office. For an SCI, the company’s purpose must remain property-related and non-commercial.

The company’s formation also requires formal steps. Once the articles of association have been signed, a legal notice of incorporation must be published before the registration application is filed. The legal notice must include core corporate information, including the company name, legal form, registered office, corporate purpose, duration, share capital and the identity of the manager.

Civil purpose and the limit of commercial activity

A fundamental point in French law is that the SCI must remain a non-commercial company. Its principal activity must be civil, such as the letting of unfurnished property, and not commercial, such as buying property for resale, furnished rental, or accommodation with hotel-like services. A commercial activity may exist only on an ancillary basis.

This distinction matters because it affects the tax regime. According to Service Public, an SCI becomes subject to French corporate income tax (impôt sur les sociétés, IS) where commercial activity, including furnished rental, goes beyond what is merely ancillary. The same source indicates that the French tax administration treats such activity as no longer ancillary once it exceeds 10% of turnover excluding VAT.

SCI tax in France: income tax vs corporate income tax

For many buyers, the real SCI tax question in France is whether the company remains under French income tax (impôt sur le revenu, IR) or falls under French corporate income tax (impôt sur les sociétés, IS).

Income tax versus corporate income tax

By default, an SCI is taxed under French income tax, with each shareholder taxed on their share of the profits whether or not those profits are distributed. It moves into French corporate income tax where it opts for that regime or where its commercial activity exceeds the ancillary threshold. The ordinary corporate income tax rate is 25%, with a reduced 15% rate on the first €42,500 of profit for eligible SMEs, and a move into this regime can also trigger immediate taxation of profits and gains not previously taxed.

Furnished rental through an SCI in France

This is one of the areas where the SCI structure is most often misunderstood, especially by buyers who assume it works as easily for furnished letting as for long-term unfurnished holding. Furnished rental is a commercial activity, not a civil one. An SCI can carry on that type of activity only on an ancillary basis if it is to remain within the French income tax framework. Beyond the 10% of turnover excluding VAT threshold, it must move into French corporate income tax.

In practical terms, that means an SCI is generally more suited to holding and managing unfurnished real estate than to a property strategy built mainly around furnished rental income. Where furnished rental is a core part of the proposed structure, the tax consequences need to be analysed from the outset.

Management and decision-making

One of the practical reasons for using an SCI is that internal governance can be organised more clearly than in direct ownership. Service Public notes that the SCI is managed by one or more managers, who may be appointed in the articles of association, by separate instrument, or by a decision of the shareholders. The manager may also be a third party and does not need to be a shareholder.

The same guidance confirms that the articles of association can define the internal powers of management and the way collective decisions are taken. This allows the parties to determine which acts can be carried out by management alone and which require shareholder approval, such as borrowing, sale of property, or amendment of the company’s purpose.

Liability of shareholders

An SCI does not operate as a limited-liability vehicle in the ordinary sense. Service Public describes shareholders’ liability for company debts as unlimited, non-joint and subsidiary. In practice, that means personal assets may be exposed if the SCI cannot satisfy its debts, each shareholder is liable only in proportion to their holding, and creditors must first pursue the SCI itself before proceeding against shareholders personally.

This point is especially important where the SCI is financed through debt. The SCI is a governance and holding structure, not a full liability shield.

SCI share transfer in France and transfer duties

This is one reason SCI share transfers in France are often discussed in the context of succession planning: ownership can be reorganised through the transfer of shares rather than through a direct transfer of the property itself. As a matter of principle, transfers to third parties require shareholder approval, while transfers to ascendants or descendants are generally exempt from approval unless the articles of association provide otherwise. The transfer must also be registered with the French tax authorities.

Registration duty on the transfer of SCI shares

According to Service Public, the 5% rate applies where the company is classified as real-estate-heavy for transfer duty purposes, meaning that more than 50% of its assets consist of property not allocated to its own professional activity.

Capital gains on sale

When an SCI sells property, the tax treatment of the gain depends on the company’s tax regime and on the status of its shareholders. Where the SCI has individual shareholders and remains within the private-property framework, the relevant holding period runs from the date on which the SCI acquired the property, not from the date on which the shareholder acquired their shares.

Under the current rules, full exemption from income tax on private real estate gains is reached after 22 years, while full exemption from social charges is reached after 30 years. The use of an SCI therefore does not eliminate capital gains taxation by itself. The outcome depends on the applicable tax regime and on the holding period.

Principal residence treatment and French real estate wealth tax

Where the property is intended to be used as a principal residence, the SCI requires additional caution. Service Public indicates that the usual 30% principal residence allowance for French real estate wealth tax (IFI) does not apply where the property is held through an SCI. The same applies to the usual 20% succession allowance on a deceased person’s principal residence.

French real estate wealth tax applies where the net taxable value of non-professional real estate exceeds €1.3 million, and indirect holdings through company shares are relevant where those shares represent French real estate.

The 10-day cooling-off right

An SCI purchaser should not assume that the statutory 10-day cooling-off right applies automatically in the same way as it does for an individual private buyer. Notaires de France states that the right applies to a non-professional purchaser, and that whether an SCI qualifies is assessed case by case. The same source gives an example of case law in which an SCI whose corporate purpose was the acquisition of real estate was not treated as a non-professional purchaser.

For practical purposes, this means the point should be checked expressly before signing the preliminary sale agreement. The buyer should not assume that the SCI automatically benefits from the same withdrawal right as an individual purchaser.

Ongoing filing and compliance

An SCI is not a passive label attached to a title deed. It is an operating legal structure with continuing obligations. Service Public notes that managing an SCI requires compliance with administrative and accounting formalities, including accounting records, articles of association and an annual results return. Filing obligations also vary depending on whether the SCI is taxed under French income tax or French corporate income tax.

When an SCI is generally suitable and when it is not

For a buyer considering property in France, the question is therefore not whether an SCI is inherently better than direct ownership. The question is whether the acquisition requires a more structured ownership framework from the outset. Where the purchase is straightforward and intended for direct personal ownership, buying in one’s own name may be more suitable. Where the acquisition involves several parties, long-term holding or succession considerations, the SCI may deserve closer review before the purchase structure is finalised.

Key legal points to review before acquisition

Before buying property via an SCI in France, the following points should be reviewed together:

• the company’s corporate purpose

• the drafting of the articles of association

• whether the SCI will remain within French income tax or fall within French corporate income tax

• the intended use of the property, especially if furnished rental is planned

• the financing structure

• the rules on management powers and share transfer approval

• the likely holding period

• the anticipated exit or succession strategy

• whether the buyer may or may not benefit from the 10-day cooling-off right

• whether holding the asset through an SCI affects IFI or principal residence treatment

When buying property via an SCI in France makes sense

An SCI is not a standard route for every property purchase in France. It is a specific ownership structure that may be appropriate where the acquisition involves several persons, long-term holding, internal governance or succession planning. In other cases, direct acquisition in one’s own name may be simpler and more appropriate.

For that reason, the question should be assessed at the structuring stage of the purchase, not after the acquisition has already been set up. The relevant issues are the intended use of the property, the number of persons involved, the holding period, the tax position and the expected transfer strategy. Where those factors point towards a structured holding vehicle, the SCI may be relevant. Where they do not, it may add complexity without enough practical benefit.

The final structure should be reviewed before completion with a French notaire and, where the tax implications are material, with a French tax lawyer or other qualified French tax adviser.

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This article is provided for general information only and does not constitute legal, tax, financial, succession or investment advice. The legal, tax and administrative treatment of an SCI in France may vary depending on the company’s articles of association, tax regime, intended use of the property, shareholders’ situation and holding strategy. Buyers should seek advice from a French notaire and, where tax or structuring issues are material, from a qualified French tax or legal adviser before setting up or buying property through an SCI.

Sources

• Service Public Entreprendre — Real Estate Civil Society (SCI): what you need to know

• Service Public Entreprendre — Creation of a business: drafting and registration of statutes

• Service Public Entreprendre — Publish a legal announcement of business formation (creation notice)

• Service Public Entreprendre — Taxation of furnished rental activity (French only)

• Service Public — Real estate wealth tax (IFI): persons and property concerned

• BOFiP — Private real estate capital gains and holding-period relief (French only)

• Notaires de France — SCI and the 10-day cooling-off right (French only)