The preparation of annual accounts for a French SCI is required for tax reasons

The question of preparing annual accounts for an SCI (Société Civile Immobilière) appears to be clear under French domestic tax law. Some foreign and French resident clients contacted us wondering whether accounting should be held for a French SCI. These clients have had diferent replies from diferent practitioners. The purpose of this article is to show the necessity for tax purposes to hold annual accounts. Over recent years an increasing number of people have purchased properties in France. Many clients have purchased French real estate through a French SCI. The question that arises is whether the SCI must hold a French accounting and prepare annual returns. If accounts and returns for an SCI are prepared, the Company has substance and questions from the French tax authorities on the SCIs real existence are compromised, whereas if accounts and statutory books are not maintained, this may lead to an audit from the tax authorities who will consider the SCI is non-existent with resulting consequences. The risk would be the application of the abuse of law’s theory (abus de droit), based on section L64 of the French General Tax Code. This article is used to cancel a legal scheme that has been established solely for tax purposes. Under these circumstances, the French tax authorities are entitled to ignore the legal framework of the scheme completely. This also may include any normally allowable expenses. One has to keep in mind that the abuse of law legislation is based on material facts. An SCI can be considered as a sham company under certain circumstances.

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Written by Robert Anthony

Publihsed in “Family Office Magazine” – Spring 2018