Estate Planning in France for Non-Resident Foreign Nationals: The Proper Use of the French Société Civile Immobilière (SCI)

The French SCI: an effective structure… provided it is properly managed

The French société civile immobilière (“SCI”) occupies a central position in French real estate holding and estate planning strategies. 

It is valued for its relative simplicity, for the flexibility it offers in organising co-ownership arrangements, and for the advantages it may provide in matters of wealth transmission and succession planning.

Simplicity, however, should not be mistaken for informality.

An SCI remains a fully-fledged legal entity, subject as such to rules governing corporate operation, traceability of financial flows, and internal consistency. The need for rigorous governance becomes even more acute where the shareholders are foreign non-residents or where the structure forms part of a family succession strategy.

In such circumstances, a number of key considerations deserve particular attention.

1. Corporate governance: the first safeguard of legal certainty

The difficulties encountered in connection with an SCI do not necessarily arise from an inappropriate initial structuring choice. More often, they stem from overly informal management practices over time.

The distinction between the company’s assets and the personal assets of its shareholders must, first and foremost, be strictly observed in practice.

The opening of a bank account in the name of the SCI is essential in order to ensure a clear and unequivocal traceability of financial flows and to avoid the type of commingling that may undermine the transparency of the structure, particularly in the context of a tax audit or disputes between shareholders.

Likewise, although the preparation of formal annual accounts is not, strictly speaking, a statutory requirement, maintaining accounting records — even on a simplified basis — remains fundamental. Proper bookkeeping makes it possible to identify financial movements, corporate liabilities, expenses borne by the SCI, and shareholders’ current accounts, which are a frequent source of conflict.

The same degree of rigour should apply where the property is occupied by one of the shareholders or where funding is provided by one of them. 

Arrangements that may appear informal within a family context can, in practice, become a significant source of difficulty where they have not been properly documented.

2. Transfer of shares and valuation issues: a mechanism requiring proper evidentiary support

One of the principal advantages of an SCI lies in the possibility of progressively transferring shares in the company rather than the underlying real estate asset itself.

This method of transmission is often favoured for the flexibility it affords and for the gradual approach it enables in estate planning.

That said, the value of the shares must be capable of being substantiated on a sound and credible basis.

In practice, the valuation of SCI shares depends not only on the composition and value of the company’s assets, but also on the existence of duly evidenced liabilities.

Accordingly, the retention of accounting and banking records becomes particularly important. Shareholder advances, reimbursements and expenses paid on behalf of the company must be capable of proof; failing this, the proposed valuation may be challenged.

In an international context, the issue becomes even more sensitive.

The transfer of SCI shares must therefore be analysed not only under French law, but also in light of the treatment afforded to such rights in the shareholders’ State of residence.

3. Splitting of ownership rights (démembrement): a succession planning tool requiring careful implementation

Among the techniques frequently used in connection with SCI structures is the splitting of ownership rights (démembrement de propriété) applied to company shares.

This mechanism consists in separating the usufruct interest (usufruit), which generally confers the right to enjoy the asset and receive income from it, from the bare ownership interest (nue-propriété), which is intended ultimately to revert into full ownership upon termination of the usufruct.

From an estate planning perspective, this structure often enables parents to transfer the bare ownership of the shares to their children while retaining the usufruct.

In the context of lifetime gifts, one of the principal advantages lies in the fact that gift tax is generally assessed only on the value of the bare ownership interest, as determined under the applicable French tax rules.

This technique nevertheless requires a high degree of precision in its implementation. The allocation of rights between usufructuary and bare owner must be carefully anticipated, particularly in relation to collective decision-making, entitlement to profits, and corporate governance arrangements.

French case law does permit certain bespoke provisions in the articles of association, albeit within limits intended to preserve the essential prerogatives attached to shareholder status.

It is therefore not sufficient merely to split ownership rights in the shares in order to secure the arrangement; the constitutional documents and the company’s operational practices must also remain fully consistent with the chosen structure.

4. Furnished lettings: a seemingly minor change with significant consequences

It is often at the stage of exploitation of the property that the limitations of the SCI become apparent.

This is particularly the case where the shareholders contemplate furnished lettings, even on an occasional or short-term basis.

Under French tax law, furnished letting activity is deemed to constitute a commercial activity.

By its very nature, however, the SCI is a civil law structure.

Accordingly, the carrying on of a commercial activity may result in the SCI becoming automatically subject to French corporation tax.

A change in the letting arrangements applicable to property held by the SCI is therefore far from innocuous.

It may permanently alter the company’s tax regime and trigger consequences extending well beyond the mere taxation of rental income.

Such developments may also affect the occupation of the property by the shareholders themselves. Once the operational logic of the SCI begins to resemble that of an entity subject to corporation tax, certain forms of rent-free occupation become considerably more difficult to justify.

5. The international dimension: an increased need for overall consistency

Where an SCI is used by foreign investors as a real estate wealth structuring vehicle, particular caution is required.

A solution that may appear appropriate under French law can produce very different consequences in the shareholders’ country of residence.

The chosen financing arrangements, the existence of a split ownership structure, the conditions under which the property is occupied, and the transfer of shares must therefore all be assessed as part of a coherent overall strategy.

Only on that basis can the SCI effectively fulfil its intended estate planning function.

Ultimately, the key issue is not merely whether to use an SCI, but whether it is implemented within a legally robust framework, supported by proper tax planning and adequate documentary evidence.

Thierry Ygouf de Varese
Avocat à la Cour (Caen, Paris, Lausanne)

thierry.ygouf@west-avocats.fr
 thierry.ygouf@west-avocats.ch

Sources : 

- BRDA

- FBT, A; Moreau

- Bulletin des arrêts de la Cour de cassation 2025

- Lexis-Nexis