Investing in French real estate from the UK

Investing in French real estate while living in the UK is an attractive prospect for many British individuals and business owners. With a stable market, legal security, and still-attractive borrowing rates, there is no shortage of opportunities. The key lies in choosing the right structure, anticipating tax implications, and building a suitable financing plan. This guide, written by a lawyer, provides best practices for securing your cross-border transactions in the post-Brexit landscape.

‍

Choosing the right ownership structure

‍

Direct ownership: simplicity but tax exposure

‍

• Pros : minimal formalities, no incorporation costs.
• Cons : potentially high real estate wealth tax (IFI), significant inheritance tax, unlimited liability.

‍

SCI (Real Estate Civil Company): flexibility and succession planning

‍

• Collective management, customizable bylaws.
• Option for corporate tax: the SCI pays the tax, and the partner avoids the real estate wealth tax (IFI) on the property value.
• Mandatory annual accounting, increased formal requirements.

‍

English company (LTD): flexibility, post-Brexit vigilance

‍

• Enhanced corporate governance and confidentiality.
• Double taxation risks: an essential analysis of tax treaties.
• Enhanced transparency through the register of beneficial owners.

‍

Advice : have your wealth management objectives audited before choosing a hybrid structure (e.g., an SCI held by an LTD).

‍

Real Estate Wealth Tax (IFI): obligations for UK residents

‍

• Threshold : net real estate assets in France > €1.3M.
• Valuation : as of January 1st of the tax year.

‍

Reducing the taxable base

‍

1. Strategic debt : borrowing reduces the net taxable value.
2. SCI subject to corporate tax : the asset is held by the company, not the shareholder.
3. Luxembourg life insurance : holding SCI shares to optimize estate planning.

‍

Real estate capital gains: anticipating the tax bill upon resale

‍

Holding periodIncome tax (19%)Social charges (17.2%)0-5 years100%100%6-21 yearsProgressive allowancesProgressive allowances≥ 22 yearsExempt9% still due≥ 30 yearsExemptExempt

Key takeaways

• Primary residence: exemption does not apply to UK residents.
• €150,000 allowance: reserved for former French tax residents (≥ 2 years).
• Planning your exit strategy at the time of purchase helps avoid unpleasant surprises.

‍

Cross-border financing: optimizing rates and currency

‍

Borrowing in France

‍

• Fixed rates are often lower than in the UK.
• Local mortgage required.
• Interest is deductible from French rental income.

‍

Borrowing in the UK

‍

• Easier access to private banks.
• GBP/EUR exchange rate risk on rents and capital.
• Interest not tax-deductible in France without a permanent establishment.

‍

Hybrid structures to consider

‍

• Corporate real estate company (SCI) subject to corporate tax, financed by an LTD : intra-group dividend distribution.
• Currency hedging : securing the total cost over the loan term.

‍

Conclusion

‍

Investing in French real estate from the UK remains a sound strategy, provided you:

1. Select the ownership structure best suited to your wealth management goals.
2. Manage real estate wealth tax (IFI) and capital gains taxation effectively.
3. Structure financing that aligns with your cash flow and exchange rate risk.

Personalized legal and tax advice remains the key to protecting your assets and securing every stage of your investment.

‍

This guide provides general information and does not constitute personalized legal advice.

‍