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Can we put French house into an SCI and include son?

We own property in France and would like to put it into an SCI and include our son and his children who live in France. Can we do this and can we set it up in the UK or do we need to do it in France?  P.I.

An SCI is a French company so it does need to be established in France, even though it can hold foreign property.

With regard to transferring your home, yes, this can be done, as can a lifetime donation to your children of some of the shares. However, there are points to consider.

First, stamp duty will be due at around 7% of the value of the house on the transfer, since this transfer is no different to a person-to-person sale, even though it is still your home and, principally, your SCI.

Secondly, if you gift part of the SCI, and therefore part of the value of the house to your children, depending on the amount, they may be liable to inheritance tax, roughly at 20% on the first €552,000 after an exemption allowance of €100,000.

The donation would need to be notarised.

Thirdly, if the children own some of the SCI and the house is sold during their lifetime, you would benefit from the principal private residency exemption on taxation of the inherent capital.

However, your children do not live in the house so they would be liable to capital gains tax on their share of any inherent capital gain

Finally, if you do decide to donate some of the shares to the children, doing so under the “donation partage” system may alleviate some inheritance tax that they may be liable to.

Under this system, the children only receive the ownership aspect of the SCI shares, while you retain the use element of those same shares.

As a result of the children only inheriting the ownership element of the shares, the tax authorities discount the value inherited for taxation purposes according to a set table.

Discount to the beneficiary depending on the age of the beneficiary: 50-60 50%; 60-70 40%; 70-80 30%; 80-90 20%; over 90 10%.

Be careful of how SCIs are used due to the effects of the marriage regimes, so, as always, it is best to see a qualified adviser. Remember that what is donated to the children no longer belongs to you, so you have no control over their holdings.

 

Reader's query answered by Hugh MacDonald

The Connexion welcomes queries and regularly publishes a selection with answers. However, please note that we cannot enter into individual correspondence on money topics. Queries may be edited for length and style. Due to the sensitive nature of topics we do not publish full names or addresses on these pages. Send your financial query to news@connexionfrance.com

The information here is of a general nature. You should not act or refrain from acting on it without taking professional advice on the specific facts of your case. No liability is accepted in respect of these articles. These articles are intended only as a general guide. Nothing herein constitutes actual financial advice

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