In this article you shall find brief explications on how to use a French Real Estate Company (SCI) in order to transfer your property to the younger generations. In the first place, it shall be noted that the SCI can be an excellent “tool to give”. However, where the older generation would like to pass on their property for tax purposes, they might also still want to keep the control of the property. For this purpose, “Golden Shares” in the SCI can be given to the older generation in order for them to have the majority in the SCI.
In the case of a donation, the basic figure is the case where ‘A’ donates a piece of real estate to ‘B’.
Consequently, ‘B’ pays the due taxes (droits de mutation à titre gratuit). At the succession of ‘B’, ‘C’ receives the property and pays, in turn, and again, the same amount of taxes. This can however be avoided through a Gradual Donation (donation graduelle).
A gradual donation is a donation where the initial donor, ‘A’, donates an asset to ‘C’, through a donation to ‘B’. Whereas ‘B’ receives the asset in the first place, he has a prohibition to dispose of it and the obligation, at his own succession, to transfer it, in turn, to ‘C’, who was initially designated as the donee by ‘A’.
As a consequence, ‘C’ is considered to have received the property directly from ‘A’. However, when ‘A’ made the donation to ‘B’, ‘B’ already paid the taxes linked to the donation. ‘C’ must thus in principle not pay any taxes linked to the donation as he or she benefits of a tax credit of the same amount as paid by ‘B’.
I. SCI – A TOOL TO GIVE
II. SCI AND THE TECHNIQUE OF “GOLDEN SHARES”
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