French SCI Mortgages enable unconnected joint buyers to purchase French property tax efficiently.
An SCI (Société Civile Immobilière) is a French company which can purchase property.
The SCI is the French structure of choice for two reasons. Firstly, it provides tax and inheritance tax advantages for property investors. Secondly, it permits the mortgaging of property owned by unconnected buyers.
Therefore, before looking at the SCI mortgage, let’s review what a French SCI is and why you should consider using one.
Why Use French SCI Mortgages
The SCI is a form of French limited company created specifically to invest in French property. It can be thought of as a property owning SARL.
As a company, it must have articles and memoranda of association. These set out the company’s ownership share structure, its objectives and management structure.
Because its purpose is the purchase of property for the benefit of its shareholders, it is fiscally transparent. It is not therefore liable to French Corporation Tax in normal circumstances.
The members of the SCI are individual shareholders who hold shares in the SCI. They do not hold property directly.
Advantages SCI Mortgages
An SCI mortgage is particularly useful at minimising French tax and inheritance difficulties and it is often used to achieve:
- Inheritance management under the French Code Napoleon
- Transfer of personal or professional real estate
- Asset management
- Gite Income Taxation advantages for income derived from French property
- Interest on an SCI mortgage is normally allowable against tax on SCI income.
The European CCD
The European Mortgage Credit Directive has made the use of an SCI the most attractive option for some borrowers. The mortgage credit directive was intended as a step towards an EU-wide mortgage credit market with a high level of consumer protection.
The directive applies to all loans made to consumers and businesses for the purpose of buying residential property.
The directive includes the following provisions.
- An obligation for lenders to provide clear and detailed information on loan conditions to consumers.
- An obligation for lenders to assess the creditworthiness of consumers according to common EU standards.
- Common quality standards and business conduct principles for all EU lenders.
- The right for consumers to repay credit earlier than determined in a contract.
- An EU passport scheme that allows credit intermediaries authorised to operate in any EU country to deliver services across the EU.
The significance of the SCI in this context is that the purchase would be by a company, not an individual, thus the bank can apply lending rules differently.
Obtaining SCI Mortgages
Because the SCI is a limited liability company, many French retail banks do not offer SCI mortgages.
Generally, to be able to obtain an SCI mortgage it will be necessary to prove:
- That each shareholder in the SCI is of sufficient financial standing for the bank to consider them suitable, jointly and severally, as a mortgage clients.
- The articles and memorandum of association of the SCI must meet the standards set by the French bank providing the mortgage.
- The French property meets the collateral standards set by the French bank providing the mortgage.
We offer SCI mortgages as part of our full range of French Mortgage Products.