In the world of real estate investment, it may be wise in some situations to invest through a legal structure. Mainly, investment in companies attracts advantageous conditions on taxation, transmission or simply to avoid unbundling. To respond to these challenges, two structures stand out in family asset strategies: the Société Civile Immobilière (SCI) and the family limited liability company. Each one meets different objectives, whether in terms of taxation, transmission or management. But which should we prefer for our rental project? Decoding of our team of experts.

• Governance:

The ICS is the preferred tool for families looking to build, manage and pass on real estate in a civil setting. One of the strengths of this legal structure comes from the free drafting of the articles; the partners can adapt the governance to their needs. About the family SARL, due to its commercial nature, it has a more rigid legal framework and a more binding formalism.

• Taxation:

Regarding taxation, the SCI is to Income Tax (IR) in default, which means that it is translucent for tax purposes. Thus, the income generated is taxed as property income directly in the context of the tax return of the partners to the extent of holding each other’s shares. In cases where the ICS generates too much income, you have a high IMT or you still want to rent furnished, the IS option is still possible.

If you still want to do furnished rental and have a tax transparent company, then the choice of the family SARL is offered to you.  The latter is by default to the IS mainly due to its commercial status, however it benefits from the permanent option to the IR if the latter consists exclusively of members of the same family. It will not, however, be useful for the naked rental, we will prefer SCI.

Whether it is a SCI or a family SARL, the change of tax regime must not be taken lightly which could lead to expensive taxation.

• What about capital gains during resale?

In concrete terms, the capital gains regime will depend on the option to IS or FI. In the first case, you will be subject to the professional’s capital gains and in the second case to the individual’s capital gains.

Here are two articles providing additional information on the taxation of real estate capital gains:

https://www.wealth-a7.com/fr/actualites/sci-et-revente-que-se-passe-t-il-en-cas-de-plus-value-/

https://www.wealth-a7.com/fr/actualites/reintegration-comptable-et-fiscalite-des-plus-values-en-lmnp-tout-ce-que-vous-devez-savoir-sur-l-evolution-de-ce-regime-fiscal-avantageux-/

• The transmission:

Finally, the great advantage of transmission by companies results in the possibility of transferring not a property directly but social shares allowing more flexibility.

Expert advice: do not choose blindly.

Before creating your structure, it is essential to make a personalized heritage study: family situation, borrowing capacity, current and future taxation, and transmission objectives. An ill-chosen structure can be costly to modify later. SCI or SARL family, there is no better vehicle in absolute. There is one that matches your project. Let us help you build a coherent, optimized and sustainable strategy.

Finankap Group, always by your side to give life to your desires.