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).