Thanks for the reply. That is a factor to consider. I have engaged a broker to get a mortgage in euro, but the interest rate is much higher.
Your rent will be in euro, I assume you’ll pay the interests with the euro income.
(Higher interests are expected euro is also expected to lose value against CHF long term.)
Thanks for the reply.
My main goal it to invest in a property and engage my children into this line. They cannot afford to buy in Switzerland and even the mortgage in France is also difficult.
The thought was to use my income as basis for the purchase with a view that they will take over in 10-15 years. Thats why was thing to purchase it with SCI rather in our names.
Plus, reading up it seems that with a company there are more ways to make tax deductions.
How old are the children ? If they are under 18 doing it through a SCI with them at outset with a mortgage might be difficult. I guess you’d have to wait and donate shares of the SCI at a later stage.
They are both over 18. I am on my mid Fifties, so want to make sure they get on the property ladder and don’t have to pay capital gains tax
Did you discuss it with them? RE investment is a totally different kind of deal, esp when being split between siblings.
(I’m not quite sure what property ladder really mean esp in a swiss context which unlike France is not RE focused, why not just use regular liquid investments? There’s no capital gain on those and Switzerland mostly doesn’t tax donation/inheritance to kids)
Personally having to deal with foreign real estate would add all kind of worries/stress, wouldn’t want to have that imposed by family, and then if I have to manage it with my siblings there are tons of ways where it can go very badly (I saw my parents relationship with their siblings deteriorate when dealing with RE that was hard to split where people couldn’t agree)
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Sure there are issues which could arise if they don’t get along. This would also be the case if the property came to them via inheritance.
Giving them money in Switzerland is not going to be enough for them to purchase a property that will provide any return as an investment.
Plus, the son is a heating installer who will help with the renovation and in return will get a share in the property. Daughter will manage the property and look after the day to day affairs.
The idea is to get them involved and then get a return for the efforts. Don’t really want to give them money, probably blow it away on cars and cloths.
The property we have seen is around 300000 euros and needs about 100000 renovation. It has 2 shops and currently 3 apartments which we plan to split into 6.
One of the thing that a SCI is typically used for is to solve potential conflicts between multiple owners of one property: Without a SCI any owner of a property can go to a tribunal and force the sale of the property to exit even if the other owners do not want to sell. With a SCI it is not possible as you can only sell the shares of the company and in that case you need the majority of shares to trigger the sale of the property. Also you can define the shares so that some have more voting power than others to retain decision power. Given the complexity of your situation I would discuss that with a RE lawyer in France so they can advise you and if necessary write the SCI bylaws that fit your needs.
Does anyone know what can be deducted for tax purposes, for both the French and Swiss tax returns.
Like interest payments, management etc
There seems the LMP and LMNP method for furnished apartments. Not sure if this is also a good option to take in case the CSI way does not work out or is too complicated
You can deduce all the item you listed.
I think you should contact a French accountant and he will be able to explain you the differences.
By owning a French property, you will be required to file French taxes every year.
Having a French accountant will made it easier to do.
Try to contact a few, but not many speak English. Plus need one who knows the Swiss tax system aswell.
Maybe someone can suggest someone they have used.
Sidenote: that will be extra challenging to deal with taxes/tenants/etc. if you don’t speak French.
It’s hard for an accountant to invest in this question because there is lots of parameter to take into account (time) and maybe no return.
For French taxe, you will need to simulate them
I like this website if you desire to rent them furnished
Honestly not speaking French and dealing with French taxes, landlord taxation and French tenants look a stretch even for myself.
I have some British colleagues that leave in France and they ask me every year to translate their mails and the French paperwork to be sure the next steps to perform…
For Swiss tax, it will be more easily due as you need to report your expected rents. It will increase your global revenu and therefor increase your tax rate on your Swiss revenu.
You will need to declare your corporation shares of the SCI to be accounted in your fortune.
Keep in mind that for the SCI you also have a choice, either tax transparency or corporate tax. In the latter case it’s easier to handle from a tax point of view as on the one hand you pay the corporate tax in France and on the other hand you only have a limited impact on your taxes in CH as you only have to declare the shares and potential dividends as opposed to declaring properties, rents, interests on mortgages, etc.
Thanks for taking the time to respond. No doubt not speaking French will be an issue. But to be honest I do it intend to manage the day to day affairs. This will be done through a letting agency. This is what I do for my properties in the UK. They take 10%, but it’s well worth it.
Excellent info regarding the corporate option for Swiss taxes. Really don’t want to fill out a lot of paperwork to offset the interest payments against the income recieved. I have to do this for my uk properties and it just alot of hassle and end up paying more in tax.
With the SCI with corporate tax, is there any disadvantages. What is the the tax rate and does my non resident status have any baring. As I believe the tax transparency way, I would have to pay 20% - 30% tax plus 7.5% social levy as non resident.
If you choose the corporate accumulating it will be 15%. It is optimise for the compounding.
However, it will be taxed heavily when taking out the cash from the company.
French will be needed every year and especially when you will have issues with tenant not being faithful or not paying rent. Agency won’t get rid of them and you will need to contact huissier de justice.
Are there other ways to take money out. Like company car, travel expenses, client dinners……
Is rent arrears or complete not payment an issue in France. Maybe you can get insurance to cover such scenarios.
I was looking at videos that suggested for private person (not SCI) for tax optimisation it is better to rent apartments as furnished. There seems to be LMNP (non professional) and LNP (professional)
Does any one use these methods to rent out?