Buying your premises through dismemberment: usufruct to the company, bare ownership to the director

Quick answer. Temporary dismemberment lets the operating company buy the usufruct of the premises (for a set term, often 15 to 20 years) while the director acquires the bare ownership. The company amortises the usufruct and deducts interest, reducing its corporate tax; the director acquires the bare ownership at a reduced cost and recovers full ownership, tax-free, when the usufruct ends. The whole arrangement hinges on a rigorous economic valuation of the usufruct: the trap is applying the tax scale of Article 669 of the French tax code instead of a real valuation, on pain of a reassessment for a hidden gift or abuse of law.

How to house the business comes up at every stage of company life: should you buy or rent your premises, and if you buy, in what form? Direct holding, via a property company (SCI), or through the operating company: each option has tax and wealth consequences, which we compare in our article on holding your business premises via an SCI or directly.

Dismemberment of ownership adds a further, more technical but powerful route: splitting the usufruct (the right to use the asset and collect its income) from the bare ownership (ownership without enjoyment). Applied to business premises, it splits the investment between the company and the director, each with a distinct interest. But you must master the mechanism and its limits, because the tax authority watches these arrangements closely.

The classic arrangement works as follows. The operating company, subject to corporate tax, acquires the temporary usufruct of the premises for a set term. The director, directly or via an SCI, acquires the bare ownership.

• The company has the use of the premises for the usufruct's duration, without paying rent since it is the usufructuary. It finances and operates the asset.
• The director builds a property portfolio at a lower cost, the bare ownership being worth much less than full ownership at acquisition.
• When the usufruct ends, by reaching its term, the bare owner automatically becomes full owner. This reconstitution occurs with no further tax or duty (Article 1133 of the tax code): the director recovers full ownership, and the asset leaves the company's balance sheet.

This scheme answers a frequent need: letting the director eventually own the premises, while the company bears the cost of enjoyment during the operating phase. To understand the economic logic of dismemberment, our article on the principle of dismemberment of ownership lays the groundwork.

For the company: amortisation and deduction#

The temporary usufruct acquired by the company is an amortisable intangible asset over its term. Each year, the company deducts a fraction of the usufruct's value from its taxable profit, reducing its corporate tax. If the acquisition is debt-financed, the interest is also deductible. The company thus optimises the cost of using its premises, where rent paid to a third party would be a dead cost.

For the director: discounted acquisition and tax-free exit#

The director acquires the bare ownership at a reduced value, since it grants neither enjoyment nor income during the usufruct. At the term, they receive full ownership at no further tax cost. Dismemberment thus becomes a wealth-building tool, complementing an overall strategy we address through director's wealth management.

This is where the arrangement's soundness is decided. The value of the temporary usufruct is not a flat percentage.

• The Article 669 trap. The scale of Article 669 of the tax code (which retains, for a fixed-term usufruct, 23 % of the full ownership value per ten-year period) is a tax scale, designed for transfer duties. It does not reflect the real economic value of a usufruct acquired for consideration.
• Economic valuation. The usufruct's value must be set by discounting the benefits it provides over its term (rent saved, expected net flows), using a rigorous, documented method.
• The overvaluation risk. If the usufruct is overvalued, the authority may consider that the company granted a gift to the bare owner (the director paid too little for the bare ownership), treated as a hidden distribution. Such reassessments have been upheld by the case law of the Conseil d'Etat.

The golden rule: have the usufruct valued by a professional, on an economic basis, and keep the documentation. The dismemberment scale is not enough to secure a for-consideration deal between a company and its director.

The usufruct's duration. It must be consistent with the amortisation period and economic reality. A short duration coupled with a high value draws the authority's attention.

Financing. If the company borrows to acquire the usufruct, the financing plan must account for the end of the usufruct, when the company loses the use of the asset.

Early sale of the usufruct. The first sale for consideration of a temporary usufruct is taxed as income, not as a capital gain (Article 13, 5 of the tax code). This mainly concerns the initial seller and must be anticipated.

An interposed SCI. Holding the bare ownership via an SCI can ease the transfer, as our analysis of the temporary sale of usufruct of SCI shares shows, but adds a layer of complexity.

• Economic valuation is non-negotiable. Never use the Article 669 scale alone to set the usufruct's price between the company and the director.
• Abuse of law looms. An arrangement whose purpose is exclusively or mainly tax-driven can be set aside (Article L64 of the tax procedures code). The deal must have real economic substance.
• Duration / amortisation consistency. The authority checks the fit between the usufruct's duration, price and amortisation.
• The exit is final. At the usufruct's end, the company loses the use of the asset: plan a lease or a new arrangement if activity continues there.
• Documentation is paramount. Keep the valuation, assumptions, comparables and deeds: it is your best protection in an audit.

Recently, an SME director consulted us to acquire the premises of his workshop. Drawn to a dismemberment arrangement presented by an intermediary, he was about to value the usufruct using the Article 669 scale, for simplicity. We redid the valuation on an economic basis, discounting the rent saved over the planned term: the usufruct's real value differed appreciably from the scale, and the gap, against him, exposed the deal to a reassessment risk for a hidden gift. Once the valuation was corrected and documented, the arrangement became defensible and kept all its appeal.

Our conviction, as accountants registered with the Ordre, is that dismemberment of business premises is an excellent wealth tool, but to be handled methodically. The tax benefit is real; it is only earned through serious valuation, a consistent duration and unquestionable economic substance. This is exactly the kind of trade-off we handle alongside legal advice and the notary.

Hayot Expertise advice. Before signing, have the usufruct valued on an economic basis, not on the tax scale. Check that the usufruct's duration, price and amortisation are consistent, and that the deal has an economic rationale beyond the tax benefit. Document every assumption. And anticipate the end of the usufruct: what happens for the company on the day it no longer has the use of the premises? A well-built dismemberment is solid; a sloppy one is an audit target.