I was wondering whether any of you owns “shares” in a French SCI structure and could share his/her experience regarding taxation of those in Switzerland. To me it is clear how this would be handled in case the structure is tax transparent (i.e. taxes are paid by the partners directly) but the corporate tax version (i.e. taxes are paid by the structure) is not clear. Although the first case has an equivalent in CH the second one is kind of a chimera here (a person company taxed as a corporation). Does anyone have experience with that topic and be able to share his thoughts ?
Thank you for that, my main questions revolve around taxation of the SCI itself vs taxation of the SCI shareholder.
Here is what I think, I have no legal background so it’s probably full of mistakes:
the SCI is only taxed in France, the same way a company would be
the SCI owns a property and has a mortgage on it, so any fee should be deductible from the revenue it generates
a Swiss shareholder is taxed on the value of the shares owned – but how do you evaluate the SCI?
a Swiss shareholder is taxed on the dividends if any – ideally there should be none
Of course we need to distinguish between the corporate tax version and the transparent one. In that case we talk about the corporate tax version aka SCI à l’IS.
The SCI is taxed on its fiscal revenue at 15% up to 38k ish and 30% ish above (getting lower) and indeed not taxed in CH
Interests are deductible from the SCI revenue as any fees (e.g. accounting, depreciations, etc.)
To be fair I don’t know in that case but they usually apply the practitioner method (https://www.businessbroker.ch/en/business-value/valuation-methods). In that case though the guy told me that if the company holds real estate it should not be taxed at all in CH since it can be taxed in France for the wealth part (called IFI). I will declare it in the security section and I’ll let them correct it as required I guess.
You are taxed on dividend distributions and if you own 10% of the shares you benefit from a reduced tax rate (depend on the canton though)
Owning real estate in France directly exposes you to a 27.5% tax rate below 20k of revenue and increases your overall tax rate in CH as you are taxed on your global revenues. There’s also an impact on deduction that are apportioned based on the location of your wealth. One of the drawback of the SCI is the liquidation that will cost you a lot more compared to owning the real estate directly.
Everyone needs to make calculations to know what scheme fits his goal best ^^.
@HoiZame : Thank you very much for you interesting comments ! Do you personally own share of a French SCI à l’IS ? If yes, could you please explain how you structure it ?
Any update on this topic for 2023 taxation ?
I read that a recent ruling (December 2022) in Vaud canton will change how the SCI shares will have to be declared.
I indeed have a SCI in France with the corporate taxation scheme (i.e. it is no transparent). I only declare the share value of the SCI for the wealth tax in CH and pay the wealth tax even though it is still a fuzzy topic. I do not pay any income tax as I did not distribute any dividend so far (which would be fully taxed in CH). I actually prefer to have the SCI shares taxed in CH because then I don’t do any “Steuerausscheidung” as it would assign part of my mortgage in CH to the French wealth and reduce my interest deductions in CH. In France however I pay the corporate tax.
For the mortgages in France, since those are in the name of the SCI I of course cannot deduce anything in CH but the interests are deducted from the company results that are taxed in France.
Are you leaving in canton of Vaud or another one? It may apply only in Vaud even if it is the federal tribunal that start the ruling.
Are the value of your shares the percentage of the rental property you own or the cash amount you brought to the project?
What happen to the cash amount coming from the rents ? Can you invest it in reit’s shares or SCPI on the behalf of the sci ? It won’t be taxed as well as it is a corporate taxation?
I enquired quotes from a brokerage firm for the mortgage and they told me that the banks are currently risk averse they consider mainly investing as an individual or funding a transparent taxed sci?
If I understand correctly I will pay less fortune tax as I will be able to deduce the mortgage but I will be hammered in tax on the rental revenu by my marginal tax rate.
In Which bank did you manage to have a mortgage?
Any specific relationship with this agency?
CH has a specific rule to value shares of a SPI (société à prédominance immobilière) and it’s basically the value of the real estate minus any debt. In my case it’s simple because the SCI only owns participations in SCPIs whose share values are published yearly by the management company.
It took me several years to make it happen but I was fortunate enough to secure 20 year mortgages below 1% during covid time to invest in those SCPIs. At then end my bank in France (LCL) took the deal provided that I take the SCPIs that they distribute (they fortunately have a good selection and not only the Amundi ones) but I also had the option to do the operation with Palatine. Without residing in France it is not easy to do such a deal through a company and I guess even more now with the credit conditions. Also I had to put a lot of collateral in form of securities as they would not take the SCPIs as securities. You also need to be careful with fees and costs because those are professional accounts that they make a lot of money on, fortunately I could negotiate them to 0 given that I only use the account to pay back the mortgage.
For the tax declaration I just have one line with the value of the shares just like you would declare nestle shares or any ETFs. Since the debt is inside the company and not directly in my name I cannot declare it myself so no deduction of interests in my tax declaration as it’s hidden in the company, however the company can deduct those from its own taxes in France (impôt sur les sociétés). The tax office in ZH just asked me to attach the accounting report at the end of the year to verify the value that I declared for the company.
Also I add the balance sheet of the SCI to the tax declaration just be sure ^^. I was corrected on some things but never on the value of the company so I guess it is more or less correct (that being said it’s not a multi million company so even I make a mistake the impact of my taxes would be in the 50chf range or so lol)
This is a complex subject that may depend on your personal situation and you goals however tax is only a parameter in that decision and this should not be the driving one in my opinion.
I think you should definitely not sign a large debt in chf to vest an investment in euro.
You will create a huge Forex risk, you won’t be able to control.
You may end up selling at the worst exchange rate possible.
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