The property society (SCI)

By SCI (Société Civile Immobilière), what is generally understood is the civil society for property, also sometimes named « the property society managing inherited buildings. »

The principal objective of the society is the management and rental of buildings and supporting  support the sale and construction of property.

The society is mainly involved with the gathering of funds, usually through loans, to acquire property directly or  to fund the construction of property for rental.
The  SCI is useful for holding properties and can be used to facilitate property handovers.

Advantages

- The society is a good option to avoid hold ups when a property has a number of owners as the SCI is able to able to make decisions when problems arise through property inheritance.

- The society is helpful with tax issues as instead of taking the rough value of a property, the debts of a property are deducted to give a net credit from which the tax will be calculated.

- The society can aid property  sales where instead of a single payment being paid, donations or social security support are available.
If there is enough time for this process tax allowances can be made according to French law when a will is made.
Moreover the society’s legislation allows donators with  little capital to allow the society to look after their estate.

Dis advantages

- It is important to note that associates of the SCI are indefinitely responsible for debts of the member’s own properties.
In theory this is not a sole responsibility.
On many occasions the creditors will insist that the most financially secure society member must pay the debt. It is then up to him/her to take this up with the other members

In allowing for all possible tax consequences, SCI members must be prepared for certain obligations: legal, financial and tax (Annual General meeting), which could have a lot of cost implications.

- Before joining the SCI  investigate its exact operations with specialist advice if available. The SCI is very useful if its constitution, i.e. knowing how and why it operates - is understood properly.

Also ensure that before forming an SCI, that the conditions to dissolve an SCI in the future, are clearly stated and understood.

Be wary of the apparent legal simplicity the society appears to be formed by.

Tax system

   Fiscally: a large majority of the SCI do not choose to be taxed through the society and therefore pay income tax.

We will thus refer to the category of a private individual SCI member (see below).

   These members are known as “fiscally transparent”, i.e. they are not taxed through the society, but in  the personal name of each associate based on how much profit he/she has made (article 8 of the CGI)

   Profits of those under individual status are assessed through income tax under the land/property tax categories.

NB :Assessment for an associate evaluated as an individual must include in addition income tax and 11% social security deductions (CSG, CRDS) deductions made by an external body (in general October 15).