LATEST NEWS

 9 June 2018

The FTA comment on the IFI!   

One week before the deadline for filing the tax return for IFI, the French Tax Authorities have now added their comments to the Bofip, (the Official Bulletin of Public Finances-Taxes)...

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FUNDAMENTALS


RENTALS

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gestion

Real estate taxation, investment assets: rentals

> Introduction
>VAT - CRL

> Profits tax
> Local taxation
> Tax audit


ACQUISITION/DISPOSAL

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acquisitions

Tax aspects of acquisitions/disposals of real estate asset

Introduction
> Real estate asset
Real estate investment company
Leasing


DEVELOPMENT

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Taxation of real estate asset, as a part of stock

> Introduction
Development operations

> Acquisition and resale
Profits tax

 


STRUCTURATION

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Tax aspects of the legal methods oh holding investments

Introduction
Unregulated structures 

Regulated structures 


INDIVIDUALS

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Taxation of the real estate assets of private individuals

> Introduction
> Rental income
Capital gains on real estate
Furnished rentals
Real property wealth tax
Gifts / Inheritances
Subdivision


INTERNATIONAL

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Internatial investments: French tax aspects

Introduction
> Institutional investors / Companies
> Private individuals

TAX AUDIT
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Tax audit


Other types of company

Other types of company

 
 
 
 
 
 
 

Joint ventures (« SEP ») 


Another type of company is sometimes encountered in the real estate field: joint ventures [Sociétés en Participation or SEP].

A SEP meets the definition of a company in that it corresponds to a contract entered into by and between several persons in order to carry on an activity; however, it does not have its own legal identity. This means that it cannot own any assets or be liable for debts: the company manager is the person who discharges this role in his/her own name (third parties are usually unaware of the SEP’s existence), but he/she does so on behalf of the shareholders collectively.

This type of company is mainly used in situations where certain shareholders wish to participate in the profits of a real estate operation (for example by financing it) without appearing to be involved.

ðIn tax terms, a SEP is normally translucent (like the SCI / SNC) provided that its existence has been revealed to the tax authorities and that it submits annual declarations of profits. If these requirements are not met, the SEP will have to pay CT.

The SEP may be somewhat complex as regards taxation, linked mainly to:

  • treatment of the ownership of assets (as the SEP has no assets and liabilities, several options are available);
  • VAT, as the SEP's activity constitutes a distinct sector of the Manager's activity. 

Assignment companies ("sociétés d'attribution")

This is a specific form of company that allows shareholders to have a direct right of assignment or enjoyment over an identified portion of the company’s assets.

This type of company is for example the vehicle used for so-called “timeshare” companies, in which each shareholder is entitled to use an apartment (or to receive the rents from it) for a certain period of time over the course of the year.

  • In legal terms, any type of company may be used, though these often take the form of a SCI.

  • In tax terms, the law (Articles 728 and 1655 ter of the FTC) draws the consequences of this particular legal situation and takes the view that the shareholder directly owns the real estate assets (the company is characterised by a genuine transparency, as distinct from the translucent nature of the SCI, for example).

The main consequences are as follows:

  • shares in a company liable for land tax [TPF] / VAT are disposed of as if the asset being sold was the building,
  • income from real estate is taxed at shareholder level,
  • there is no tax charge if ownership of the real estate asset is assigned to the shareholder (as it is already deemed to be the owner of the asset for tax purposes).

In some cases, assignment companies are liable for corporation tax.

In the past (approximately from 1930 to 1960) this form of company was used for constructing buildings that were due to be placed in co-ownership.
This type of company is still being used, for example where several investors wish to come together to construct a building by means of a single legal structure for various reasons (e.g. a single planning permit is granted) with a view to subsequently dividing it up between them.
The advantage offered by an assignment company is that, once the building project is completed, each shareholder can then be assigned the portion of the asset (which is identified from the outset) that they are interested in without incurring any significant taxation (and in particular, any capital gains arising will not be taxed).

 

 

In CONCLUSION, IN TAX TERMS, THERE ARE 2 MAIN OPTIONS FOR THE OWNERSHIP OF REAL ESTATE ASSETS

 

WHERE A PORTFOLIO COMPRISES SEVERAL ASSETS, A SECOND CHOICE CAN BE MADE BETWEEN A SET-UP WITH A SINGLE STRUCTURE OR A STRUCTURE COMPRISING INDIVIDUAL ASSETS:

 

In both cases, it is possible to use either companies that are not liable for corporation tax (SCI / SNC) or companies that are subject to corporation tax (SA / SARL / SAS).