Splitting SCI shares: gifting bare ownership to your children

Quick answer. Splitting SCI shares means separating the usufruct (the rental income and management, kept by the parents) from the bare ownership (gifted to the children). You gift a reduced value, calculated according to the usufructuary's age, and on death full ownership passes to the children with no further inheritance tax.

You hold rental property through an SCI and want to pass it on to your children without losing your income or control over management. Splitting the shares answers precisely this need: it lets you plan the transfer ahead, reduce the gift-tax base and organise a gradual handover while keeping the reins during your lifetime. But the articles of association, the valuation and the timing must be consistent, or the arrangement is weakened.

This article explains the mechanism, the valuation under the tax scale, the concrete steps of a split gift and the watch points we see recurring in wealth-planning files. For the general framework of the company, you can rely on our guide to the tax advantages of an SCI.

Ownership of an SCI share can be divided into two distinct rights: the usufruct and the bare ownership. The usufructuary receives the income (distributed rents) and exercises a large share of management rights; the bare owner holds the right to become full owner in due course.

In a family transfer arrangement, the parents keep the usufruct of the shares and gift the bare ownership to their children. In practice, the parents continue to receive the SCI's income and, if they are managers, to steer day-to-day decisions. The children receive a right with no immediate enjoyment value: they receive nothing as long as the usufruct exists.

The advantage over splitting the building directly is real: you transfer company shares, which are easier to divide among several children, and control remains organised through the articles of association and management, rather than through property law alone.

Our view#

Splitting SCI shares is not a tax product, it is a wealth-organisation tool. Its value comes from combining three levers: a reduced gift-tax base, the retention of your income and control, and the extinction of the usufruct on death with no fresh taxation. None of these levers, taken alone, justifies the arrangement; it is their interplay that creates the value.

The tax value of the usufruct and of the bare ownership is set by a statutory scale, provided in article 669 of the French General Tax Code. This scale depends on the usufructuary's age on the day of the gift: the younger the usufructuary, the more the usufruct is worth, and therefore the lower the value of the bare ownership gifted.

The practical consequence is central: if parents aged 55 gift the bare ownership of their shares, they gift, for tax purposes, only 50% of the value of the shares. Gift duties, calculated under the scale of article 777 of the Tax Code, apply only to this bare ownership, not to full ownership. The taxable base is therefore mechanically reduced.

The valuation scale by age band is detailed in our dedicated article on the share-splitting scale, useful for placing your own situation precisely.

On top of the scale-based valuation comes the standard direct-line allowance: 100,000 € per parent and per child, provided in article 779 of the Tax Code, renewable every 15 years. Combined with the base reduction from the split, this allowance often makes it possible to transfer a significant share of the property estate with low or even zero duties on the first transaction.

The second lever, the most powerful, comes into play on the usufructuary's death. At that point, the usufruct lapses and the bare owner automatically becomes full owner, with no further inheritance tax on the value of the reconstituted usufruct. This principle stems from article 1133 of the Tax Code. It is what makes splitting an instrument of transmission, and not merely of gifting.

A common case#

In wealth-planning files, one pattern recurs: parents aged 55 hold a family SCI and gift the bare ownership of the shares to their two children. Under the article 669 scale, the bare ownership is valued at 50% of the value of the shares. Depending on the value retained, each child's share may fall under the double allowance of 100,000 € per parent and per child, leading to a transfer with little or no gift duty. The parents keep the rents and the management; on death, the children receive full ownership with no additional taxation. The exact amounts depend on the share valuation, which must be documented.

A gift of bare ownership of SCI shares follows a precise logic. Here is the usual sequence.

1. Value the SCI and the shares. The valuation of the shares (revalued net assets, possible minority or illiquidity discount as the case may be) drives the tax base. It must be supported and kept on file.
2. Check and adapt the articles of association. The split of voting rights between usufructuary and bare owner and the allocation of profit must be settled before the gift, not after.
3. Decide the timing and the amount. You determine the portion gifted to each child and the timing of the operation, taking into account the age scale and the allowance renewable every 15 years.
4. Draw up the deed of gift. The deed states the object gifted (the bare ownership), the value retained and any reservations. The formalities and the valuation must be handled with care.
5. File and keep the supporting documents. The operation is declared and the file (valuation, articles, deed) archived, because it is what will secure the position should the tax authorities raise a question.

This mechanism is connected to the SCI's accounting and tax engagement; for the legal aspect of the structuring, you can rely on our legal advisory service in Paris and, for the tax analysis, on our tax accountant offering.

The split can apply directly to the building or to the shares of the SCI that holds it. The choice is not neutral.

• Gradual and fractional transfer: shares divide easily among several children, which a single property does not allow simply.
• Retained control: by remaining managers and usufructuaries, the parents keep management and most decisions, within the limits set by the articles.
• Organised planning: you schedule the transfer over time, in successive tranches, using the renewal of the allowance.
• Statutory flexibility: the articles allow each party's rights to be finely arranged, where the direct split of the building leaves less room.

The choice of holding structure depends, however, on your overall objectives. The comparison between vehicles is developed in our guide on holding company or SCI.

The underestimated risk#

The point most often overlooked is not tax-related, it is statutory. If the articles do not clearly settle the split of voting rights between usufructuary and bare owner, nor the allocation of profit, the arrangement can create deadlocks just when you expected the opposite. A successful split gift starts with consistent articles, thought through before the deed and not corrected afterwards. Setting the right level for internal flows, where the SCI leases to a trading company, follows a closely related logic of securing intra-group relations.

Three subjects deserve particular attention in current files.

First, an SCI subject to corporate tax changes things. The treatment of reserves, any quasi-usufruct on distributions and the handling of profits do not follow the same logic as in an SCI taxed on income. The choice between an income-tax and a corporate-tax SCI is a topic in its own right, which we handle case by case, in connection with our analysis of the taxation of holding structures via holding company taxation.

Next, abuse of law remains the main underlying risk. A purely artificial arrangement, a suspect timeline or a clearly undervalued valuation weaken the whole. The rule is simple: the split must answer a genuine, documented wealth objective, and not be a dressing-up exercise.

Finally, do not confuse it with the Dutreil pact. That scheme targets the transfer of operating businesses; a wealth-holding SCI engaged in unfurnished letting is, in principle, not eligible. If you also hold a trading company, that is a different line of reasoning, set out in our complete guide to the Dutreil pact.

Several situations alter the standard reading.

• SCI subject to corporate tax: the treatment of reserves and the question of quasi-usufruct on distributed sums call for a dedicated analysis, distinct from an income-taxed SCI.
• SCI leasing to a trading company: the intra-group rent level must stay consistent to avoid the charge of abnormal management on the rent; it is a steering point in its own right.
• Successive gifts: using the renewal of the allowance every 15 years means planning ahead and tracing each operation.
• Owner-manager selling a business: property transfer questions often dovetail with a business sale, where tax mistakes are costly, as we detail in our article on tax mistakes in a business sale.
• Substantial property estate: managing a rental portfolio held through an SCI overlaps with income-tax and wealth issues, addressed in our article on property portfolio management.

Should you gift the bare ownership early or wait? Both options are legitimate depending on the profile.

Gifting early offers a scale advantage: the younger the usufructuary on the day of the gift, the lower the value of the bare ownership transferred, and so the lower the duties. It also starts the clock on the renewable allowance sooner. Conversely, waiting can be justified when the SCI's value is not stabilised, when the children are too young to hold shares, or when your future income needs are not yet settled. There is no universal answer: the decision depends on your age, the value of the shares, your horizon and the family configuration.