SCI vs SARL de Famille in France

Choosing the Right Legal Structure for Your French Property Investment

Whether you are purchasing a ski chalet in the French Alps, a villa on the French Riviera, or building a multi-property portfolio, the legal structure through which you hold real estate in France has profound consequences on your tax position, on your ability to pass wealth to future generations, and on how you manage rental income. Two structures stand out for international investors: the SCI (Société Civile Immobilière) and the SARL de Famille (Limited Company). Both are popular, both offer compelling advantages but they serve fundamentally different objectives. This guide explains how each works, how they are taxed, and how to decide which is right for your situation.

What Is an SCI (Société Civile Immobilière)?

An SCI is a civil real estate company, a flexible non-commercial legal entity specifically designed to hold, manage, and transfer real property. It is one of the most widely used holding structures in France and is particularly suited to families and couples who want to structure ownership, simplify inheritance, or manage several properties as a single entity.

How an SCI Works

The SCI is formed by a minimum of two partners (associés), who each hold shares proportional to their capital contribution. The company owns the property, and the partners own shares in the company. Key features include:

• No minimum share capital required, it can be as little as €1

• Partners may be individuals, companies, or non-residents

• A gérant (manager) is appointed to handle day-to-day management

• Statutes (bylaws) are drafted to define governance, transfer rules, and succession wishes

• Shares can be transferred to heirs progressively, taking advantage of French gift allowances

What the SCI Is Designed For

The SCI is a civil vehicle meaning it is not legally permitted to carry out commercial activities, such as furnished holiday rental (meublé) on a regular, para-hotel basis. Its primary purposes are:

• Holding bare or furnished property for long-term rental (unfurnished)

• Structuring family ownership and facilitating succession planning

• Separating property assets from personal liability

• Holding a principal residence or secondary residence collectively

• Progressive transfer of wealth using démembrement de propriété (usufruct splitting)

What Is a SARL de Famille?

A SARL de Famille is a limited liability company (société à responsabilité limitée) formed exclusively between family members connected by direct lineage or marriage, parents, children, siblings or spouses. It is a commercial entity legally authorised to carry out furnished rental activities, making it particularly relevant for investors in Alpine chalets, Riviera villas, and other properties operated as short-term or seasonal furnished lets.

Who Can Form a SARL de Famille?

The family requirement is strict under French law. Eligible partners are:

• Spouses or PACS partners

• Parents and children (any generation)

• Siblings

Importantly, friends, cousins, or unrelated business partners cannot form a SARL de Famille. They would use a standard SARL instead, losing the specific tax option described below.

What the SARL de Famille Is Designed For

• Furnished rental activity including LMNP (Loueur Meublé Non Professionnel) and LMP (Loueur Meublé Professionnel) status

• Short-term seasonal lets of chalets, villas, or apartments

• Para-hotel services (cleaning, linen, reception) where VAT applies

• Exploiting the amortissement (depreciation) mechanism to reduce taxable income

• Pooling family capital to invest collectively in rental property

Tax Implications: SCI vs SARL de Famille

Default Tax Regimes

Both structures are by default transparent for tax purposes, meaning income and losses flow through to the individual partners who declare them on their personal income tax returns. However, each can elect to be taxed under corporate tax (IS - impôt sur les sociétés), and the implications of this election differ significantly.

Taxation Under IR (Income Tax) - Default

Under the IR regime:

• Rental income is declared by each partner in proportion to their shareholding

• SCI income (unfurnished): taxed under revenus fonciers (Property Income), deductions limited to actual expenses

• SARL de Famille income (furnished): taxed under BIC (Bénéfices Industriels et Commerciaux) depreciation of buildings and furniture allowed

• Deficits from the SARL de Famille can be offset against other income (LMP) or carried forward (LMNP)

• For non-residents, income is taxed at a minimum of 20% plus social charges (subject to tax treaties)

Option for Corporate Tax (IS)

Both the SCI and the SARL de Famille can opt for IS. Under IS:

• The company pays corporate tax on net profit: 15% up to €42,500, then 25%

• Buildings, fittings, and furniture can be fully amortised (depreciated) dramatically reducing the taxable base

• Profits retained in the company are not taxed at personal level until distributed

• Capital gains on disposal are calculated on the net book value (not original price) meaning heavy depreciation inflates the eventual gain

• The IS election is irrevocable for both structures

VAT and Para-Hotel Services

A SARL de Famille offering para-hotel services (breakfast, regular cleaning, reception, linen) will be subject to TVA (VAT) at 10%. This requires formal VAT registration but also enables the recovery of VAT on acquisition costs, a significant advantage when purchasing new-build properties under VEFA. The SCI, being a civil entity, cannot provide para-hotel services.

Capital Gains (Plus-Values)

Under the IR regime, capital gains on disposal are subject to the standard French capital gains tax on property (19% plus social charges at 17.2%), with taper relief (abattement) applying from year 6 onwards and full exemption after 22 years (30 years for social charges). Under IS, the depreciation already claimed increases the taxable gain, a critical planning consideration for long-term holds.

Inheritance and Succession

The SCI is widely regarded as the gold standard for succession planning in France. By progressively gifting shares to children (using the €100,000 per child per 15-year allowance), parents can systematically transfer property wealth while retaining management control through the gérant role. The démembrement mechanism, splitting usufruit (right to use) from nue-propriété (bare ownership) further multiplies the efficiency of each gift. The SARL de Famille offers less flexibility in this regard, as its commercial status and accounting requirements make share transfers more complex.

Side-by-Side Comparison

How to Choose Between an SCI and a SARL de Famille

The right structure depends entirely on how you intend to use the property and what your long-term objectives are. Here is a practical framework:

Choose an SCI if…

• You intend to rent the property unfurnished (long-term tenancy)

• Your primary objective is succession planning and progressive wealth transfer to children

• You want to hold a principal or secondary residence collectively with your partner or family

• You want maximum flexibility in governance and share transfer rules

• The property will not be subject to regular furnished or seasonal rental activity

Choose a SARL de Famille if…

• You plan to let the property furnished seasonally, as a holiday rental, or via an operator

• You want to benefit from the LMNP or LMP tax regime, including amortissement

• The property is an Alpine chalet or Riviera villa operated commercially as a furnished let

• You want to pool family capital and share rental income in a limited liability structure

• You may wish to offer para-hotel services and recover VAT on acquisition costs

Mixed-Use or Undecided?

If you are considering a property that could serve multiple purposes, part primary use, part rental or if your plans are likely to evolve, it is worth engaging a notaire before committing to a structure. Each election and registration carries legal and tax consequences that are difficult or costly to reverse.

Setting Up Your Structure: Key Steps

SCI - Formation Overview

• Draft the statuts (bylaws) typically by a notaire or solicitor

• Appoint a gérant and agree on capital allocation between partners

• Register at the greffe du tribunal de commerce (commercial court registry)

• Publish a notice of formation in a legal journal (JAL)

• Obtain your SIRET number, the company's official tax number identifier

• No minimum capital required; shares can be cash or property contributions

SARL de Famille - Formation Overview

• Same formation steps as a standard SARL (statuts, registration, SIRET)

• Confirm that all associés meet the family relationship criteria

• If opting for IR transparency, file the election with the tax authority (Direction des Impôts)

• Register for BIC (Bénéfices Industriels et Commerciaux) taxation

• If para-hotel services planned: register for TVA

• A certified accountant (expert-comptable) is required to prepare annual accounts

Ongoing Obligations

• Both structures must hold an annual general assembly (AGM) and maintain a register of decisions

• Accounts must be filed annually (more rigorous for SARL de Famille)

• Changes to statuts, gérant, or capital require formal legal process

• Annual CET (Cotisation Économique Territoriale) may apply depending on activity level

Halle International works with international buyers acquiring new-build and off-plan properties across the French Alps and French Riviera. We regularly coordinate with our network of notaires and tax advisors to ensure buyers select the most appropriate ownership structure before signature. If you are considering a purchase and want guidance on the right structure for your situation, contact our team.

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