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The main types of leases in France for real estate rentals


The empty rental lease

A property is considered empty when it is not sufficiently equipped “to allow the tenant to sleep, eat and live properly in the light of the demands of everyday life.” This essentially means that the property is unfurnished. 

The rental period of an unfurnished property is set six years. However, when the owner is an individual or a family SCI, the lease term is three years. The lease may be shorter (minimum 12 months) in the following instances: 

  • The tenant is a student
  • The tenant has temporarily relocated due to work changes
  • The tenant has retired
  • The tenant is scheduled to depart

The security deposit protects the owner against any damage to the property caused by the tenant and the amount should not exceed one months’ rent (excluding charges). The deposit must be returned to the tenant within a month of them leaving the property if the inventory is in order or within two months if there are any inconsistencies.

The furnished rental lease

As explained above, in the eyes of the law, a furnished apartment is a dwelling that is sufficiently equipped “to allow the tenant to sleep, eat and live properly in the light of the requirements of everyday life”.

The lease term of a furnished apartment must be included in the contract and these properties have a lower minimum rental term of one year. However, if the tenant is a student, the term can be reduced to nine months. 

The deposit for a furnished apartment cannot exceed the value of two months’ rent (excluding charges). Aside from these key difference, a furnished rental lease works the same way as an empty rental lease (see above).

The seasonal rental lease

The seasonal rental of a furnished property, villa, house or apartment, is a short-term rental not exceeding 6 months. The legislation surrounding a furnished vacation rental is significantly more flexible than the laws regarding main residences.

The key difference is that the amount of rent and its terms of payment can be decided freely by both parties. For seasonal rentals, the rent may vary depending on the rental period (high or low tourist season), days of occupation (week or weekend), the duration of the rental and number of tenants.

The owner can request the tenant to pay a deposit (usually 20% of the rent) to cover their losses if the tenant damages the property or does not comply. 

The mobility lease

New for 2019, this type of lease was designed for people looking for temporary accommodation. This might be for a number of reasons such as a change of profession, graduate studies or beginning an internship.It is a good compromise for places where obtaining a seasonal lease is difficult (Paris comes to mind…). For this occasion, we have created a mobility lease blog post in partnership with

Latest transaction: €659,400 Loan for a property in Courchevel.

courchevel 942,000

The profile

Buying in: Courchevel, Alps
Property price:
Mortgage amount: €659,400
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 1.80% fixed
Loan-to-value: 70%

The background

This client wanted to buy a new-build property in Courchevel which was part of a Residence de Tourisme development. Financing a Residence de Tourisme can be harder than a normal freehold property as some banks refuse to finance this type of property due to the enforced rental obligation.

The client originally wanted an interest-only mortgage so the rent could cover the mortgage repayment. However, interest-only mortgages are not always available for Residence de Tourisme developments, which was the case here. In addition, the client wanted to buy the property through a company to maximise his tax efficiency.

Our approach

The client had to choose between an LTV of 70% over 20 years or 80% over 15 years. As he originally wanted as small a cost a month so the rent could cover the payments and the interest rates were identical, it was a no-brainer to pick the 70% LTV over 20 years option.

Le bail mobilité ou la solution pour louer son appartement de 1 à 10 mois en toute légalité!

Cet article est présenté par

Short term

Lors de sa promulgation en novembre 2018, la loi ELAN a introduit un nouveau type de contrat de location destiné à faciliter l’accès des personnes en mobilité professionnelle : le bail mobilité.

Quelles sont les spécificités? Comment le mettre en place? Nous allons tout vous expliquer.

La loi définit le bail de mobilité comme un contrat de location à court terme pour une location meublée accordée à un locataire qui, à la date de prise d’effet du bail, se trouve dans l’une des situations suivantes: être en formation professionnelle, aux études supérieures, à un contrat d’apprentissage , stage, engagement volontaire dans le cadre d’un service civique, mutation professionnelle ou affectation temporaire dans le cadre de son activité professionnelle.

Quelles sont les caractéristiques du bail de mobilité ? 

Durée: Il peut être conclu pour une durée de 1 à 10 mois. C’est non renouvelable. Il ne peut être modifié qu’une seule fois par un amendement si la durée totale de la location ne dépasse pas 10 mois.

Résiliation: le locataire peut quitter le logement prématurément en respectant un préavis d’un mois. Ce n’est pas le cas pour le propriétaire qui ne peut donner congé au locataire avant la fin du contrat.

Garantie: Aucun dépôt ne peut être demandé au locataire. Le bailleur a toutefois le droit de demander une garantie.

Loyer et frais: le loyer prévu au bail ne peut être révisé et les frais de location doivent être fixés. Ils seront payés simultanément au loyer et ne pourront faire l’objet d’une régularisation en fin de contrat.

Comme vous l’avez peut-être deviné, l’un des objectifs du bail de mobilité est de restituer les logements locatifs précédemment utilisés pour des locations à court terme et qui sont restés vacants dans les grandes zones urbaines où la réglementation a tendance à se resserrer.

En effet, le contrat ne rentrant pas dans la catégorie des locations touristiques meublées nécessitant des formalités longues et onéreuses, le bailleur bénéficie de divers avantages tels que permettre de louer à un client de passage sur des périodes de 1 ou 2 mois sans avoir l’obligation de changer d’utilisation ou de s’inscrire auprès de la mairie.

Attention, la loi prévoit également que le contrat de mobilité respecte un certain formalisme dans sa rédaction (notice légale, motif justifiant le bénéfice du bail à mobilité à préciser) et dans sa mise en œuvre. Nous vous conseillons vivement d’obtenir un modèle de bail certifié ou de vous adresser à un administrateur de biens si vous souhaitez le mettre en œuvre sereinement.

The Mobility Lease or the Solution to rent his apartment from 1 to 10 months in all legality!

This article is presented by

Short term

When it was promulgated on November 2018, the ELAN law introduced a new type of lease to facilitate access for people on professional mobility: The Mobility Lease.

What are the specificities? How to set it up? We will explain everything to you.

The law defined the mobility lease as a short-term rental contract for a furnished rental granted to a lessee who, on the date the lease took effect, is in one of the following situations: to be in professional training, graduate studies, apprenticeship contract, internship, voluntary engagement in the context of a civic service, professional change or temporary assignment in the context of his professional activity.

What are the characteristics of the Mobility Lease?

Duration: It can be concluded for a duration between 1 to 10 months. It is non-renewable. It can be modified only once by an amendment only if the total duration of the rental is not more than 10 months.

Termination: The tenant can leave the accommodation prematurely by respecting one month’s notice. This is not the case for the owner who can not give leave to the tenant before the end of the contract.

Guarantee: No deposit can be requested from the tenant. The lessor is however entitled to apply for a guarantee.

Rent and Expenses: The rent provided in the lease can not be revised and rental charges must be fixed. They will be paid simultaneously to the rent and can not be the subject of regularization at the end of the contract.

As you may have guessed, one of the objectives of the mobility lease is to return rental housing formerly used for short term rentals that have remained vacant in major urban areas where regulations tend to tighten.

Indeed, since the contract does not fall into the category of tourist furnished rentals requiring to carry out lengthy and expensive formalities, the lessor owner enjoys various advantages such as to allow to rent to a customer of passage over periods of 1 or 2 months without having the obligation to make a change of use or to register with the Town Hall.

Attention, the law also provides that the mobility contract respects a certain formalism in its drafting (legal notice, reason justifying the benefit of the mobility lease to specify) and its implementation. We strongly advise you to obtain a certified lease model or to approach a property manager if you wish to implement it serenely.

Rent legally on Airbnb in Paris: How can you take advantage of the short-term rental market?

short term rental

With more than 40,000 ads published to date on Airbnb, Paris is definitely the world capital of peer-to-peer rentals. Paris is ranked the #1 city on Airbnb. This is mainly because renting out Parisian property is very lucrative. With some landlords abusing the system, the public authorities have, for more than a year now, decided to put restrictions on how property is rented in the French capital. So, how do you go about renting your property via Airbnb in Paris now?

Paris, an alarming situation and a housing shortage

Last year Paris witnessed more than 47 million visitors. Its popularity with tourists coupled with the huge number of people living in the capital is creating a serious housing shortage.

Tourism had the perverse effect of increasing the number of listings of Paris rentals on Airbnb and other similar sites.  People would purchase entire buildings, renovate them and list them entirely on Airbnb. This reduces the rental stock for Parisians looking for a place to live in the city. To put this into perspective, since the beginning of 2019 Paris has lost between 20,000 and 30,000 properties from the ‘main residence’ market. By resurrecting the article L631-7 of the Construction and Housing Code, the government has made it difficult to rent accommodation in Paris on Airbnb. Properties can only be rented on a short-term basis is certain criteria are met.

How do you rent your property in Paris on Airbnb?

An authorisation from the City of Paris is necessary to rent your property on Airbnb. To obtain this authorisation, two conditions must be met:

  • You must submit an application to change the use of your home so that it becomes administratively a commercial space.
  • The French government has placed restrictions on how many commercial properties can be in one area in Paris. This can make it challenging for property owners wishing to change their residential building into a commercial one.

If you buy a residential property and you want to rent it out short-term, you can apply for a commercial title when you make your application. This will allow you to turn an office building into housing, for example. Do note that the sale of commercial titles is usually between €1,500 and €2,000 per square metre.

Financement : Propriété d’une valeur de 1 470 000€ dans les Alpes.

Megeve 940,800

Le profil

Lieu d’achat : Megève, Alpes

Prix de la propriété : 1 470 000 €

Montant du prêt : 940 800 €

Durée du prêt : 12 ans

Type de prêt : In Fine

Taux d’intérêt : 2,65% fixe

Quotité de financement : 64%


Le contexte

Un client, travaillant au cœur de la City, rêvait d’acquérir une propriété dans les Alpes. Il cherchait  depuis un moment et a finalement trouvé un appartement rénové de 4 chambres à Megève.

Le client était intéressé principalement par des prêts In Fine, ce qui lui permettrait de limiter le montant des mensualités. Idéalement, le paiement à la fin de la période de 12 ans serait réalisé grâce en partie à la vente de ses actions ainsi qu’une partie de son capital retraite (exemptée d’impôt jusqu’à 25%) à l’âge de 55 ans.

Dans le même temps, le client souhaitait refinancer son prêt sur sa résidence principale en Royaume-Uni avec une banque britannique pour laquelle il disposait également d’un emprunt In Fine en prenant une avance supplémentaire. Cela augmentait cependant considérablement le taux d’endettement.

Notre approche

Nous avons étudié le dossier et déterminé que le client avait un très bon profil pour cette acquisition puisque le ratio d’endettement ne dépassait pas la limite de 40% et qu’il possédait une bonne combinaison d’actifs nets d’investissements et de biens tels que de l’art et du vin. Il est nécessaire de montrer avec quel capital et quelle stratégie le pret In Fine sera remboursé. Il est donc très important de présenter le dossier de la meilleure des manières dès le début afin que les préteurs le regardent sous le bon angle.

Si la quotité de financement ne dépasse pas 60% dans un prêt In Fine, il est également possible de ne pas souscrire à une assurance vie. Cependant, la limite de quotité de financement à l’époque était de 68%. Nous avons donc négocié pour que les deux parties se rencontrent à mi-chemin. La banque a accepté de renoncer à l’assurance vie pour une quotité de financement égale à 64%.

Enfin, le client souhaitant acheter la propriété par l’intermédiaire d’un fond commun de créances (FCC), nous l’avons présenté à un notaire pouvant l’aider à créer une SARL.

Latest transaction: €188,500 property in Joannas, Ardeche


The profile

Buying in: Joannas, Ardeche
Property price:
Mortgage amount: €100,000
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.40% fixed
Loan-to-value: 53%

The context

A small British business owner of Isreali descent was interested in acquiring a property in the Ardeche mountains as a summer retreat for him and his family. They’ve visited the area on a number of occasions and found the right property at last. 

They were keen to buy the property using a mortgage and originally considered borrowing money from the bank back in the UK. However, they were concerned about the poor exchange rates and looked for alternatives for finance in France. 

Our approach

French lenders will carry out some extra checks to make sure that the company is financially healthy. At French Private Finance (FPF), we take a look at the last 3 years of accounts and tax returns to ensure that the borrower can afford the mortgage.

Oftentimes, the business owners will pay themselves a small income and a large dividend. Sometimes this can be problematic, especially if the dividends are fluctuating or are decreasing each year. The key here is to keep the dividends steady or increasing year-on-year. 

With that in mind, FPF was capable to show the lenders that the client could afford the mortgage and prove that the company is financially healthy. 

“Your home may be repossessed if you do not keep up repayments on your mortgage”  

“French private Finance Ltd is authorised and regulated by the Financial Conduct Authority”

Latest transaction: €285,000 Loan for a property in Cannes.


The profile

Buying in: Cannes, Alpes-Maritimes
Property price:
Mortgage amount: €285,000
Mortgage type: Fixed Interest Only
Mortgage term: 7 years
Interest rate: 2.55% fixed
Loan-to-value: 60%

The context

This retired private equity investor was concerned about his ability to secure a mortgage with a French bank. As he had multiple income streams, including remuneration as a board member of 3 different companies, he was concerned about how strict French banks can be on borrowers with complex financial affairs. 

Our approach

FPF went the extra mile to ensure the file was presented in the simplest manner to the lender. This meant a lot of back and forth with the client to ensure his financial situation was easy to understand for a foreign bank. The analyst had no questions on the applicationa dream come true for any broker in the world of French credit risk assessment. The client was delighted with the speed of the process once we had the application in order.

Furthermore, the property agent was impressed by our level of service as we kept him updated throughout. He went on to sign a partnership agreement with French Private Finance.

Latest transaction: €164,800 Loan for a property in Salies de Bearn.


The profile

Buying in: Salies de Bearn, Pyrénées-Atlantiques
Property price:
Mortgage amount: €164,800
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.00% fixed
Loan-to-value: 80%

The context

A Spanish-British couple wanted to purchase a holiday home close to the popular and historic 

seaside resort of Biarritz in the SW of France, a few miles from the Spanish border. They had struggled to obtain a mortgage because they were currently living in the USA where, despite being on temporary expat contracts, the US Revenue and Customs required them to fill in tax forms on their global assets. This created a number of reporting issues for several European lenders that they applied to, and the couple were soon snowed under with paperwork. Because of these complications, the number of banks left that the couple could still try and get a mortgage from was greatly reduced. 

Our approach

French Private Finance (FPF) was required to provide both UK and US tax returns to the lender – US tax returns being a lot more comprehensive than their UK counterparts. The bank was aware of the complex US Federal and State tax system, and were able to pick up the key elements in order to put the application through the bank’s compliance department.

Upon receiving the signed compromis de vente, it transpired that the property needed some small but urgent works. The lender agreed to finance these; however, they asked for a quote from a local contractor. In order to facilitate this, French Private Finance used their local knowledge to source several quotes, which proved satisfactory to the lender. 

Lastly, the clients needed to take out a life insurance policy, which is a requirement for most banks in France when taking out a mortgage. FPF used a specialist French insurance broker for this, because not all insurance companies in France are able to insure US residents. 

“Your home may be repossessed if you do not keep up repayments on your mortgage”  

“French private Finance Ltd is authorised and regulated by the Financial Conduct Authority”

Latest transaction: €390,000 property in the Var


The profile

Buying in: Cotignac, Var
Property price:
Mortgage amount: €331,500
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.40% fixed
Loan-to-value: 85%

The context

A couple from London was looking to buy a property in the South of France as a holiday retreat for the whole family. They had previously missed out on several properties as they were not able to secure a mortgage quickly enough, or they had lost out to cash buyers.

Eventually, they found a property in the small village of Cotignac. Although it was a little further away from the sea than they had originally anticipated, the property was still within an hour’s drive of the international airport at Marseille – as well as the beaches of Sainte Maxime and Saint Tropez. 

Our approach

The clients wanted to put down the smallest deposit they could, and also wanted to be sure that the mortgage would be fully paid off by the end of the term. They were keen on securing a mortgage as fast as possible – ideally before the school holidays. 

French Private Finance (FPF) initially investigated the possibility of a 25-year repayment mortgage. However, upon analysing the couple’s situation more closely, FPF recommended that the client reduce the duration to 20 years. Although the monthly instalments increased, the clients would ultimately save a considerable amount of interest over the duration of the mortgage. 

French Private Finance were able to do several things to ease the couple through the purchase, including helping them open a French bank account without them having to fly over to France. FPF were also able to help them find an alternative to the traditional way that French lenders operate. The banks usually require separate life insurance cover to be taken out with them or an approved partner, but in this case FPF used a UK-based insurance broker – and without the need for the couple to have to undergo medical examinations, a solution that was accepted by the lender. Another plus: UK insurance premiums are generally lower than in France.  

“Your home may be repossessed if you do not keep up repayments on your mortgage”  

“French private Finance Ltd is authorised and regulated by the Financial Conduct Authority”

Buying a property: cash vs. mortgage


From a young age, many of us are taught that debt is something to be avoided.  However, is purchasing a property in cash always a better option than borrowing the money from a bank? We take a look at the pros and cons of each in our latest blog post.

Pros for buying in cash

One of the biggest advantages of buying a property in cash is that the transaction process is much faster as there is no need to apply for a loan or mortgage. In addition, the purchase costs will be lower as you will not need to pay arrangement fees or mortgage registration tax.

Buying in cash doesn’t affect your monthly affordability and there is no risk of your property being repossessed if you run into cash flow problems down the line.

Pros for paying with a mortgage:

The most obvious disadvantage of buying in cash is that it leaves you with a massive hole in your pocket. This can affect your liquidity as a sizeable chunk of your savings will be locked up in brick and mortar. While equity release is an option in other parts of the world if you need to improve your cash flow, it’s very difficult to release equity in France. Taking out a mortgage will allow you to keep some money aside for rainy days and emergencies.

Contrary to popular belief, taking out a mortgage can also help you save money. For example, if the property is rented out, it is possible to offset the interest paid against any rental income. In addition, with private banks offering mortgages of up to 100% LTV, you may also be able to completely avoid paying any property wealth tax if the amount of money you personally put forward is less than 1.3m.

While one of the biggest drawbacks of a mortgage is that you will have to pay additional costs on top of the value of the property (like interest and arrangement fees), low interest rates in France mean that these costs can often be cancelled out by investing money into a financial portfolio. Indeed, many ‘safe’ products have a return which can beat the cost of the mortgage. When investing, always seek advice from a Financial Adviser.

The monthly mortgage repayment will stay the same if you choose a fixed rate. However, inflation means the real value of the mortgage repayment in 10 years will be lower than was at the start. 

Finally, a mortgage allows you to put some money aside for rainy days! 

Everything you need to know about “notaires”


Without a true UK equivalent, it can be difficult to understand the role of the notaire. In our latest blog post, we take a look at what they do and demystify the costs involved.

What is a notaire and do I really need one?

When selling or buying property in France there needs to be an intermediary present who authenticates the transfer of ownership and reports it to the state. This is where the notaire steps in.

The notaire is not only a key player in the transaction process, they are a legal requirement. As a representative of the state, they are non-bias and their duty is to the transaction. Think of them as the referee. They are simply there to make sure that the transaction complies with French property law and ensure that any taxes are collected.

Notaires aren’t strictly limited to French property law, they are also necessary for a number of other transactions in France such as donations and inheritance.

The role of the notaire

Signature of the “Compromis de Vente’’ (the sales contract)

In France, the sales contract is signed at the beginning of the process once an offer has been accepted by the seller. Technically, you do not need to have a notaire at this stage, but it is a good idea to have one as they can help with legal and financial matters such as mortgage clauses.

During the sales process

Before the signature of the deed happens, the notaire will have to collect the seller’s “Titre de propriété”, a legal document proving that he owns the property. Then, he will ask for 5% to 10% of the property price as a warranty (called “depot de garantie’’ in Moliere’s language).

Between signing the sales contract and final deed, the notaire will carry out a number of searches which can take up to three months. 

This includes, but is not limited to the following:

– Identifying the buyer and seller by checking birth and marriage certificates

– Checking that the mortgage is not higher than the value of the property

– Verifying that the property is usable

In order to complete these checks, the notaire may ask you for further documents.


If there is a mortgage, the notaire will ask the bank to release the money a few days before the deed is signed.

The money from the mortgage and any personal funds never enter the notaire’s hands, they are sent to an escrow account instead. So there is no need to worry about the notaire running off with the money! The money will be transferred to the seller after the deed (called an “acte de vente’’) is signed. Once this is completed, the notaire will give the buyer a certificate of ownership.


Notary fees do not depend on the notaire you choose, but rather on the value and the condition of the property (newbuild or existing). For a new-build property, the fees are around 2-3% of the property price whilst existing properties have a higher rate of a higher fee of 7-8%.

Though they are called “notary fees’’, 85% is paid to the state and the notaire receives the remaining 15% as payment.

Table (guideline):
Screenshot 2019-07-10 at 11.54.23 AM

Good news for US buyers of French property as 70% loan now available at 1.4% fixed for 20 years creating significant savings.


Thanks to two new partnerships French Private Finance can now offer up to 70% for US tax residents buying in France.

Since the closure of Credit Foncier de France in January, loans for US taxpayers in France had been limited to 60%, with competing for offers few and far between. The reason for this is that many French banks struggle with the FATCA reporting – Foreign Account Tax Compliance Act –  where banks have to declare everything about each individual US account to the US Tax service.

Thankfully, French Private Finance’s new partners can offer up to 70% LTV on a repayment basis (capital + interest paid every month) with a 20 year fixed rate of 1.40%. These loans will also require a savings account to be opened with circa 15% of the loan amount, though these savings are accessible and not blocked. In addition, this offer is also available to Russian or Brazilian residents as well and limited to employees of listed companies for the time being.

The other good news is that versus the old Credit Foncier deal at 2% fixed for 20 years, people borrowing 1M€ will save close to 70k over the life of the loan.

SARL: Is it viable for your real estate project in France?


An SARL is a limited liability company and one of the most common types of business in France and very popular with Foreign residents buying in France.

This type of company must be composed of two or more partners or you can create an EURL (single-member company with limited liability) if you want to set up a company by yourself. There is also a Family SARL which allows you to make an SARL with direct family members. This is strictly limited to children, parents, grandparents, siblings and spouses. For example, it would be impossible for a niece and uncle to make a family SARL together. In this case they would need to create a SCI (Civil Society for Real Estate).


Limited liability

The liability of the partners is limited according to how much capital they have invested in the business. However, it is important to remember that it will be difficult to get a mortgage with a small amount of capital. This means that you will need to act as guarantor for the SARL or increase your capital contribution.


There are three major types of SARL, the “classic” SARL, the family SARL, and the SARL Unipersonal (or EURL) which is for those who want to create a business alone. With EURLs, you can always later switch to a different type of SARL if you want to start working with a partner.

Furnished rentals and social contributions

Unlike an SCI, family SARL and EURL businesses can take advantage of the French “rented-out, non-professional, furnished properties” scheme (LMNP). If this is something that you would be interested in pursuing, it is important to get advice on this as your income may be taxed. In addition, if you are trading alone (EURL), you will not need to pay social security contributions if you make €23,000 or less per year. In the case of a family SARL, this limit is multiplied by the number of family members in the company. For example, if your business has four partners, this threshold is increased to €92,000!

Capital gains

Real estate gains in an SARAL are part of the professional tax regime in France because the company’s business is commercial. However, after five years, long-term real estate capital gains benefit from a 10% reduction per year. In other words, you would be totally exempt from paying capital gains tax after 15 years. If you were operating as an SCI, it would take 22 years to reach total exemption from capital gains tax and 30 years to be exempt from the social security part.

Transmission of shares

In France a family SARL allows the dismemberment or separation of shares with the possibility of separating usufruct (use, rent or ability to live in the property) and bare ownership of the property (the ability to sell it once the usufruct has expired). If you keep the usufruct (you continue to collect rent) and you give your children the bare ownership, the amount of inheritance tax will generally be very low. One can see a certain advantage of passing on one’s shares when the company is in debt.

Example: Let’s assume we have client associated in a “SARL familiale” owning an apartment worth 1M euros financed by a mortgage. This client owns 50% of the shares, and there is still 600,000€ to repay. The value of the client’s shares is 200,000€ (400,000€ x 50%). If he transmits the bare ownership to his child worth 80,000€ (200 000 x 40%), the taxable base becomes 0€ thanks to the tax rebate of 100,000€.

Reclaim VAT

When an LMNP investment is subject to VAT (20%), it can be recovered 6 months after the acquisition of the property. In order to benefit from this scheme, your property must fall into one of the following categories:

  • Accommodation services provided in classified tourist hotels
  • Accommodation services provided in classified or approved holiday villages
  • Accommodation provided in classified tourist homes which are intended to accommodate tourists and are rented by a contract for a period of at least 9 years to an operator who has subscribed to a tourism promotion commitment

Whether free or for a fee, you must also offer 3 of these services:

  • Breakfast
  • Daily cleaning of the premises
  • Linen supply
  • Concierge

In addition, you must own the property for at least 20 years to realise the full benefit of the reimbursement. If you do decide to sell before 20 years, the VAT will have to be refunded to the State pro rata. If you have a commercial lease, it will then be necessary to sell your property with the latter to avoid being liable.


Set up costs

You will need to write up the statutes of the company for the clerk’s office at the Commercial Court and advertise the incorporation of the company in the newspaper. This will cost between €1,000 and €2,000.


The company is managed by one or more managers appointed from among the partners or it can be someone external. However, a manager must be natural person – not a legal entity. The powers of a manager are defined in the statutes of the family SARL. The partners meet at least once a year in an ordinary general meeting. Decisions leading to a modification of the statute would be made at an extraordinary general meeting. If taking out a loan from a retail bank then the guarantor should be the manager.

Change of regime

If you choose to pay corporation tax, you cannot change your mind and opt for income tax. However, it would be possible to switch to corporation tax if you were originally paying income tax.

If you choose the income tax

The SARL, since it carries out economic operations for a fee, is a taxable person and, as such, is liable for VAT. When you recover the VAT on the amount of the property, you will have to pay VAT of 20% on rental income. For LMNP property in a senior, student, business or tourism residence, a rate of 10% applies. Property that falls into the leaseback LHPE residence type, the VAT is 5.5%.

If you choose the corporation tax (IS).

For companies with a turnover of less than 7,63m, corporation tax varies according to which profit bracket your business falls in:

ProfitCorporation Tax Rate
0 to 38,12015%
38,120 to 75,000 28%

For companies with a turnover turnover between
7.63m and 50m, corporation tax is broken down into two brackets:

ProfitCorporation Tax Rate
0 to 75,00028%

Companies with a turnover in excess of
50m will pay a flat rate of 33.33%, regardless of profit.


The territorial economic contribution

Like those who are self-employed, the SARL will need to pay territorial economic contribution (formerly business tax). New businesses will not need to pay this tax during the year of their creation.


A real estate company in the form of an SARL has more advantages for less inconvenience than SCI. However, you will need to be very mindful of the requirements of a family SARL if you want to make the most of the furnished rental. As this is a complex issue it is best to involve your mortgage broker and tax adviser at an early stage to ensure all works well.

Published in June 2019. This article is for informational purpose only as an initial guide to the main points and does not constitute tax advice. Please seek independent tax advice before committing to any purchase to ensure the have the correct set up for your personal situation.

Why creating a SCI, and why not…


An SCI, or “Société Civil Immobilière”, is a company that allows a number of individuals to share one or more real estate entities. The partners of the SCI can make contributions ‘in kind’; movable or immovable property that they already possess. These contributions, most often in kind or in cash, give entitlement to shares in the SCI  based on the total capital to partners share accordingly the profits and losses of the company. The SCI can be administered by one or more managers who are chosen by the partners. The managers may be physical or moral persons, for example, a company.

Pros of an SCI

Legal Protection

One of the advantages of an SCI is that it can protect the assets of the partners. Registered in the Trade and Companies Register, it has a legal personality and a heritage that differs from that of an individual. The SCI is the sole owner of the property. Therefore, in case of a dispute, creditors will first turn against the company. If their action proves to be unsuccessful, they can then bring an action against the partners. Only the shares can be seized by the creditors. In addition, it is difficult for creditors to sell the shares of another SCI associate or to know the extent of their wealth. In fact, the partners have an indefinite responsibility according to their participation in the share capital of the SCI, but not in solidarity. This implies that the creditors must act independently against each partner, to engage their responsibility.


SCI also gives parents the possibility to pass on their property to their children while maintaining the management of the property. They simply bring the property to the SCI and distribute the shares of the company to their children. They are the managers of SCI and thus retain control of the property. When parents and children of the same family are associated with an SCI, we are talking about creating a family SCI.


The SCI makes it possible to have advantageous taxation. The transfer of a property is normally subject to capital gains tax, with a tax deduction depending on the length of ownership, and a total exemption from tax after 22 years. For the sale of the shares of SCI, the holding period is calculated from the date of subscription of the units and not from the date of entry of the property into the SCI. In addition, the transfer of shares is simpler than the sale of a building that must go through an authentic notarial act.


the SCI makes it possible to realize several real estate investments by gathering means, which can facilitate the obtaining of financing. It may indeed be intended, for example, to rent.


if you are a business owner, you may also want to use the SCI to acquire the real estate necessary for your business. SCI will collect rents while deducting rental expenses. This arrangement also allows you to allocate shares of SCI to your children without being in your company. In addition, the creditors of your company will not be able to attack the SCI, so real estate is protected.

Cons of an SCI


The biggest disadvantage with the SCI is its creation. You must complete certain formalities to create it, in particular:

  • the drafting of the statutes,
  • registration of statutes in the tax department,
  • the publication of the constitution of the SCI in a Journal of Legal Announcements (JAL),
  • the registration of SCI with the Registry of the Commercial Court,
  • the declaration of the beneficial owners of the SCI.

These operations have a cost especially if you go through a lawyer to write the statutes. As for the legal announcement, it takes about 200 €.


You must comply with the operating rules of the SCI such as holding an annual general meeting of partners or the keeping of accounts. Accounting is more rigorous if you have made the choice to submit the SCI corporation tax. The accounts should be handed over to the registry every year.


You must also take into account the fact that as an associate of an SCI, you have an indefinite responsibility regarding the debts of this one. You commit your personal wealth in proportion to your shares in SCI.

Sell of shares

The sale of shares of an SCI can be complicated if a clause of approval is provided for in the statutes. Indeed, if you want to sell, it will require the agreement of other partners.

Our Suggestions

Creating an SCI is a good option if you are planning to simplify transmission and protect real estate assets, it permits to be flexible in the choice of the tax system and it adds the possibility to sell shares easily with the agreement of the shareholders. But the procedure may seem complex, you must be rigorous regarding the law concerning the organization of the general assembly and the accounting.