Fractional Ownership in France

We are in the process of changing most of the information on our sites due to the owners requesting a structure for ownership we are not accepting. The changes will be completed in the next few days, some of the offers will be removed and some new properties will be added.

We have “made haste slowly” with our Fractional Ownership sales in France as I have been very concerned about the correct legal structure relating to how shares in a French property can be allocated or resold. This has delayed our marketing some of the offers.

My concern has been over the responsibilities for taxation. All the people we know currently selling shares in French property on the basis of Fractional Ownership are doing this through a device such as an American LLC, Homeowners Association or a trust set up to hold the shares of the French entity which is a SCI (Société Civile Immobilière ) . It is claimed by the people and companies selling property for Fractional Ownership in France that this will avoid taxes on the transfer of shares, capital gains tax, inheritance tax, wealth tax, property tax or any tax on the income derived from the property.

In fact we believe the opposite is true. By creating an entity “offshore” in the USA, UK or any other country, the French tax authorities will regard this as a way of evading legal taxation and will consider any property as a commercial undertaking and this will then attract an extra annual taxation in addition to all the taxes which were though to be avoided, plus a penalty if this is something that is considered as deliberate evasion.

It is most important that any property which has shared ownership is correctly structured in an SCI and that the SCI is absolutely transparent in that the owners are correctly registered . It is also most important that the SCI is not a commercial company and that it does not directly take money or rentals.

If the property is structured in this way then it is a much simpler procedure, as are all French real-estate transactions, and the French SCI is designed for exactly the correct purpose for Fractional Ownership.

There is no silver bullet to avoid taxes due, or derived from, a property in France. Any attempts to restructure ownership through companies, charities or trusts will be considered by the French authorities are evasion and can attract severe penalties.

However, investing in property in France is an excellent plan. France continues to be the most popular destination for travellers and there is a steady growth in demand for good real-estate, especially in the south of France. Fractional Ownership opens up many more options for investors and visitors to France

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