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

Cannes

The profile

Buying in: Cannes, Alpes-Maritimes
Property price:
€450,000
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.


Acheter comptant : Est-ce toujours une bonne idée ?

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Dès le plus jeune âge, beaucoup d’entre nous ont appris qu’il fallait minimiser sa dette au maximum. Cependant, l’achat d’une propriété comptant est-il toujours la meilleure option ? Nous  examinerons les avantages et les inconvénients dans cet article.

Avantages d’acheter comptant

L’un des principaux avantages de l’achat d’une propriété comptant est que le processus de transaction est beaucoup plus rapide car il n’est pas nécessaire de demander un prêt ou une hypothèque. De plus, les coûts d’achat seront moins élevés car il n’y a pas à payer de frais de dossier ou d’intérêts. L’assurance-vie (qui assure l’emprunteur en cas de décès) n’est pas non plus requise.

Acheter comptant n’affecte pas votre capacité financière mensuelle et il n’existe également aucun risque de possession de votre propriété si vous rencontrez des problèmes de trésorerie à l’avenir (sauf pour les entrepreneurs qui ont un statuts ou les actifs personnels et le professionnels sont mélangés).

Avantages d’acheter via un prêt immobilier

L’inconvénient le plus évident de l’achat en espèces est la diminution importante des avoirs liquides. Si la libération de capital est une option dans d’autres parties du monde si vous devez améliorer votre trésorerie, il est très difficile de le faire en France. Le fait de contracter un prêt permet de garder de l’argent de côté pour les mauvais jours.

Contrairement à la croyance populaire, souscrire à un prêt immobilier peut également vous aider à économiser de l’argent. Par exemple, si la propriété est louée, il est possible de compenser les intérêts versés avec tout revenu de location. En outre, avec les banques privées proposant des prêts allant jusqu’à 100% de quotité de financement, vous pouvez également éviter de payer tout impôt sur le patrimoine immobilier si le montant de votre capital dans la propriété est inférieur à 1,3 M €.

Si l’un des principaux inconvénients d’un prêt immobilier est de payer des coûts supplémentaires (tels que les intérêts et les frais de dossier et d’hypotheque), les faibles taux d’intérêt en France permettent d’annuler ces coûts en investissant l’argent dans un portefeuille financier. En effet, de nombreux produits «sûrs» ont un rendement qui peut dépasser le coût du crédit. Lorsque vous investissez, demandez toujours conseil à un conseiller financier.

Le remboursement mensuel restera le même si vous choisissez un taux fixe. Cependant, l’inflation signifie que la valeur réelle du remboursement du prêt dans 10 ans sera inférieure à celle du début.


Financement d’une propriété à Salies de Bearn, Pyrénées-Atlantiques

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Le profil

Lieu d’achat : Salies de Bearn, Pyrénées-Atlantiques

Prix de la propriété : 204 785 €

Montant du prêt : 164 800 €

Durée du prêt : 20 ans

Type de prêt : Amortissable

Taux d’intérêt : 2,00% fixe

Quotité de financement : 80%

 

Le contexte

Un couple hispano-britannique souhaitait acheter une maison de vacances proche de Biarritz et de la frontière espagnole. Les clients avaient du mal à obtenir un prêt immobilier car ils résident actuellement aux États-Unis. Même s’ils étaient sous contrat d’expatrié temporaire, le “US Revenue and Customs” leur a demandé de remplir des formulaires fiscaux sur leurs actifs globaux.

Cela crée un certain nombre de problèmes de reporting pour les prêteurs européens, les obligeant à fournir un certain nombre de documents. En conséquence, nous avons pu proposer un nombre très limité de banques.

Notre approche

French Private Finance («FPF») était tenue de fournir des déclarations fiscales britanniques et américaines, cela était beaucoup plus familier aux pour les résidents britaniques. La banque était consciente de la complexité du système fiscal et fédéral des États-Unis. Ensemble, elles ont pu collecter les éléments clés afin de soumettre la demande au département de la conformité.

À la réception du compromis de vente signé, il était certain que la propriété nécessitait des travaux mineurs mais urgents. Le prêteur a accepté de financer la partie “travaux”, cependant, ils ont demandé un devis à un entrepreneur local. Pour ce faire, French Private Finance a collaboré avec les fournisseurs en utilisant leurs compétences pour obtenir quelques devis satisfaisants pour le prêteur.

Enfin, les clients devaient souscrire une assurance-vie obligatoire. La FPF a eu recours à un courtier d’assurance français, car toutes les sociétés d’assurance en France ne peuvent assurer les résidents américains. 


Financement d’une propriété à Cotignac, dans le Var.

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Le profil

Lieu d’achat : Cotignac, Var 

Prix de la propriété : 390 000€

Montant du prêt : 331 500€

Durée du prêt : 20 ans

Type de prêt : Amortissable

Taux d’intérêt : 2,40% fixe

Quotité de financement : 85%

 

Le contexte

Un couple de Londres cherchait à acheter une propriété dans le sud de la France afin de se réunir en famille durant les vacances. Ils avaient déjà manqué quelques propriétés car ils n’étaient pas en mesure d’obtenir l’emprunt immobilier assez rapidement ou étaient défavorisés par rapport aux acheteurs comptant.

Ils ont enfin trouvé une propriété dans un petit village de Cotignac. Bien qu’ils se soient éloignés de la mer comme ils le voulaient au départ, la propriété est toujours à une heure de route de l’aéroport de Marseille ainsi que des plages de Sainte Maxime et de Saint Tropez.

Notre approche

Les clients cherchaient une option de financement avec une contribution personnelle la plus petite possible. Ils voulaient être sûrs que leur prêt immobilier serait remboursé d’ici la fin du terme. Ils souhaitaient obtenir le prêt avant les vacances scolaires.

French Private Finance («FPF») a tout d’abord étudié la possibilité d’un emprunt à amortissement constant sur 25 ans. Cependant, après avoir analysé le dossier, FPF a recommandé au client de réduire la durée à 20 ans. Bien que les mensualités aient augmenté, les clients économisent une quantité considérable d’intérêts sur la durée de l’emprunt.

French Private Finance a rendu possible l’ouverture d’un compte bancaire français sans qu’il ne soit nécessaire de se rendre en France. De plus, la plupart des banques françaises demandent que les clients souscrivent une assurance-vie distincte en cas de décès. Dans ce cas, FPF a pu faire appel à un courtier d’assurance établi au Royaume-Uni sans devoir procéder à des examens médicaux satisfaisant le prêteur. La prime d’assurance britannique est également généralement inférieure à celle de la contrepartie française.


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

salies

The profile

Buying in: Salies de Bearn, Pyrénées-Atlantiques
Property price:
€204,785
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

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The profile

Buying in: Cotignac, Var
Property price:
€390,000
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

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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”

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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.

Completion

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.

Cost

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):
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Sainte Maxime : financement d’une propriété d’une valeur de 1,25 million €

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Le profil

Lieu d’achat : Sainte Maxime

Prix de la propriété : 1 250 000 €

Montant du prêt : 700 000 €

Durée du prêt : 7 ans

Type de prêt : In Fine

Taux d’intérêt : 2,45% fixe pour la durée

Quotité de financement : 56%

 

Le contexte

Le client désirait acheter une fabuleuse propriété dans le sud de la France, à Sainte Maxime, à quelques kilomètres de Saint Tropez. Il avait quelques requêtes au sujet du financement de son bien et French Private Finance a pu l’assister dans chacunes d’entres elles.

  • Tout d’abord il cherchait à sécuriser un prêt In Fine, permettant à l’emprunteur de ne rembourser que les intérêts pendant toute la durée du prêt. Le capital est quant à lui remboursé d’un seul coup, à la dernière mensualité.
  • De plus, FPF lui a trouvé un taux d’intérêt fixe
  • Enfin, l’obligation de souscrire à une assurance décès a été levée alors qu’elle est normalement sollicitée par la banque surtout pour les prêts In Fine.

Notre approche

Ce fut une application extrêmement rapide et de ce fait le record chez French Private Finance: seulement 23 jours entre le premier contact et l’obtention du prêt immobilier avec la banque alors que généralement la moyenne est de 100 jours.


Mougins : Obtention d’un prêt de 556 000€

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Le profil

Lieu d’achat : Mougins

Prix de la propriété : 695 000 €

Montant du prêt : 556 000€

Durée du prêt : 20 ans

Type de prêt : amortissable

Taux d’intérêt : 2,45% fixe

Quotité de financement : 80%

 

Le contexte

Les résidents de Singapour peuvent généralement obtenir une quotité de financement de 60% maximum. Cependant, pour ce client, partenaire d’un cabinet d’avocats prestigieux, nous avons réussi à augmenter cette quotité en présentant son expérience en tant qu’expatrié d’une société en nom collectif à responsabilité limitée britannique.

Notre approche

L’achat d’une propriété depuis l’étranger peut être un processus long et fastidieux, en particulier pour des professionnels très occupés. Grâce à son réseau, French Private Finance facilite considérablement la tâche de ses clients. Il est en effet possible de tout organiser à distance, depuis la demande d’emprunt jusqu’à la création d’un compte bancaire et la mise en place d’une assurance vie (avec tests médicaux à Singapour). French Private Finance s’occupe de tout.

Le client fut ravi de la facilité avec laquelle nous avons présenté son dossier et obtenu l’emprunt avec la banque. De ce fait, il nous a recommandé à plusieurs de ses amis et collègues que nous accompagnons aujourd’hui dans leur achat immobilier.


How to Finance: €1.25 Million property in Sainte Maxime

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The profile

Buying in: Sainte Maxime
Property price:
€1,250,000
Mortgage amount: €700,000
Mortgage type: Interest Only
Mortgage term: 20 years
Interest rate: 2.45% fixed for the duration
Loan-to-value: 56%

The context

The client was buying a fabulous property in the south of France, near Ste Maxime. He had a few requests and FPF delivered:

  • Interest Only: check
  • Fixed rate for security: check
  • No life insurance: check (which is amazing on an interest only mortgage as the bank’s risk does not decrease over time)
  • Quick process: check

Our approach

From the first call to receiving the mortgage offer, it took only 23 days which is FPF’s absolute record (the average is about 100 days). The client was brilliant, the bank was efficient, and everyone pitched in and did the work!


How to Finance: €556,000 Mortgage in Mougins

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The profile

Buying in: Mougins
Property price:
€695,000
Amount: €556,000
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.45% fixed
Loan-to-value: 80%

The context

Singapore residents can generally obtain a max LTV of 60%. For this Partner of a top tier law firm, we increased the debt to purchase price ratio by showcasing his track record as an expat of a bespoke UK based LLP.

Our approach

Buying a property from abroad can seem lengthy and tiresome, particularly for busy professionals holding high level positions. However, our network can make it easy for you. It’s possible to do everything remotely, from applying for a loan to setting up a bank account and arranging a life insurance policy; FPF looks after everything until completion.

The client was very pleased with the ease of the process and introduced several friends and colleagues to FPF for advice.


Bonne nouvelle pour les acheteurs américains en France : quotité de financement de 70% désormais disponible à un taux fixe de 1,4% pour une durée de 20 ans.

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Grâce à deux nouveaux partenariats, French Private Finance peut désormais offrir jusqu’à 70% aux résidents fiscaux américains qui achètent en France.

Depuis la fermeture du Crédit Foncier en Janvier, les prêts accordés aux résidents américains en France ne dépassent pas 60% de quotité de financement… et les offres concurrentes sont rares. La charge administrative afin de réaliser la déclaration FATCA (Foreign Account Tax Compliance Act) est souvent un frein pour les banques françaises. Celle-ci oblige les banques à déclarer chaque compte américain au service des impôts des États-Unis.

Heureusement, nous avons de nouveaux partenaires qui peuvent offrir une quotité de financement jusqu’à 70% (capital et intérêts payés tous les mois) avec un taux fixe de 1,40% sur 20 ans. Ces prêts nécessitent également l’ouverture d’un compte d’épargne représentant environ 15% du montant du prêt, bien que ces économies soient accessibles et non bloquées. Cette offre est également disponible pour les résidents russes ou brésiliens et est limitée aux employés des sociétés cotées en bourse pour le moment.

L’autre bonne nouvelle est que, comparé à l’ancien contrat Crédit Foncier à 2% fixe pour 20 ans, les clients économisent environ US$ 75,000 d’intérêts sur la durée pour un emprunt à hauteur d’un million d’euros.

Besoin de plus d’information ? Visitez frenchprivatefinance.com ou contactez info@frenchprivatefinance.com


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

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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?

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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).

Advantages:

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.

Flexibility

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.

Disadvantages:

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.

Direction

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%
75,000+33.33%


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%
75,000+33.33%


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

Source: https://www.impots.gouv.fr/portail/professionnel/imposition-des-resultats

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.

Conclusion:

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.