News on Société Civile Immobilière

• IFI – Principal residences held by SCIs can benefit from a discount

CA Montpellier, 7 November 2023, no. 23/01048 Article 973 of the CGI recognises the application of a 30% allowance on the real market value of the ‘property’ to be declared when it is occupied as the owner’s principal residence. The French Constitutional Council ruled that the law should make a distinction depending on whether the taxpayer holds his or her principal residence directly or through a company. When the principal residence is held via a SCI, the 30% allowance for principal residence is inapplicable (decision n°2019-820 QPC 17 January 2020). In the absence of the aforementioned allowance, can owners of SCIs holding their principal residence claim other discounts? In a recent decision, the Montpellier Court of Appeal answered in the affirmative. In the facts of the case, a property, held via a split-ownership SCI (bare-owner children and usufructuary parents), was occupied as a principal residence by the usufructuary parents. The said usufructuaries, who were liable for wealth tax (ISF), had declared their principal residence, applying a 30% allowance. The tax authorities challenged this deduction and reassessed the taxpayers. The Nîmes Court of Appeal followed the administration’s position, noting in particular that the holding of shares in SCIs that had been stripped out did not entitle the taxpayer to any deduction. The Court of Cassation overturned the ruling and allowed a discount to be applied, based not on the fact that the property qualified as a principal residence, but on the fact that it was occupied and that the articles of association included an approval clause in the event of disposal. The Montpellier Court of Appeal, ruling on referral, therefore followed the position of the Court of Cassation and, in this particular case, accepted two discounts that could be applied to the market value of the property: – 10% for the actual occupation of the property as an element of capital loss; – 10% linked to the specific holding arrangements (joint ownership by the bare-owner children with an approval clause in the SCI’s articles of association). This decision, which confirms the accumulation of discounts and the impact of a situation of joint ownership between bare owners, is applicable to the IFI.  

• SCI and the Articles of Association: free occupation must be provided for

Cour de cassation, 3rd Civil Division, 2 May 2024 no. 22-24.503 The articles of association of a société civile immobilière (‘SCI’) must expressly mention in the corporate object the option of making a property owned by it available to the partners free of charge. This option cannot be decided by the manager alone and must be authorised by the general meeting of partners, ruling under the conditions laid down for amending the articles of association. In this case, in 2001, an SCI was set up between Mrs [F], who owned ninety-nine shares, and Mr [I] [J], who owned one share. The SCI owns a two-storey building, the ground floor of which has been leased on a commercial basis since 2002 to a company of which Mr [I] [J] is the manager. On 15 September 2013, after the couple separated, the SCI, represented by Mr [I] [J], granted Mr [I] [J] a loan for use (equivalent to making the property available free of charge) of the first and second floors of the building. On 16 June 2014, at an extraordinary general meeting convened by a court-appointed agent, it was decided to remove Mr [I] [J] from his position as manager and to appoint Ms [F] as manager.

2013. [I] [J] sued the SCI for repayment of its partner’s current account and the SCI made counterclaims, in particular for annulment of the loan agreement entered into on 15 September 2013.

The Court of Appeal rightly stated that, where the articles of association of a non-trading property company (SCI) do not include in the corporate object the option of making a property owned by the company available to the shareholders free of charge, the decision to make the property available free of charge cannot be taken by the manager alone and must be authorised by the shareholders’ general meeting, acting in accordance with the conditions laid down for amending the articles of association. Having noted that the corporate object did not expressly state that the property of the SCI could be made available to the partners free of charge, the court of appeal, which was not required to carry out an irrelevant search, legally justified its decision.