Temporary Usufruct Transfer of SCI Shares in France: Tax Mechanics and Risks (2026)

Updated 12 May 2026. The temporary transfer of usufruct over SCI (societe civile immobiliere) shares is a wealth-planning technique attracting growing interest among Paris-based property owners subject to the IFI (impot sur la fortune immobiliere -- French real-estate wealth tax). It consists of transferring, for a contractually defined period, the right to receive the SCI's income to a corporate-taxed entity (IS company) that the transferor controls, while retaining the bare ownership (nue-propriete). The dual objective is to reduce the IFI tax base and to tax rental income at the IS rate rather than at the progressive personal income-tax (IR) schedule. However, Article 13-5 of the French Tax Code (CGI), introduced by the 2013 Finance Act, has substantially altered the fiscal balance of this transaction. Before implementing such an arrangement, a rigorous analysis of the valuation, abuse-of-law risk, and overall economic coherence is indispensable. This analysis sets out the key points.

The components of split ownership#

Ownership of an asset -- or a company share -- can be decomposed into two distinct rights: bare ownership (nue-propriete -- the right to dispose and transfer) and usufruct (the right to use the asset and collect its income). The French Civil Code organises this split at Articles 578 and following. When both rights are held by the same person, this constitutes full ownership (pleine propriete).

Life usufruct vs temporary usufruct: two distinct regimes#

A life usufruct (usufruit viager) ends at the usufructuary's death. A temporary usufruct ends at a contractually defined date (Article 617 of the Civil Code). It is this second form that underpins the technique described here: the SCI shareholder transfers, for a defined period -- most commonly 10 years -- the right to collect rents and proceeds of the SCI to another entity, then automatically recovers full ownership at expiry, without any new transfer or additional taxation on that return.

Legal usufruct vs conventional usufruct#

A legal usufruct arises by operation of law (for example in favour of a surviving spouse in certain successions). A conventional usufruct -- of which the temporary transfer is an instance -- arises from a contractual act between parties. A written deed, typically registered with the tax authorities, transfers the temporary usufruct to the acquiring entity on agreed terms. Article 595 of the Civil Code governs the usufructuary's rights over SCI shares during the transfer period.

Standard structure: individual bare owner, corporate-taxed acquirer#

The typical structure works as follows: an individual (the transferor) holds SCI shares in full ownership. They transfer the temporary usufruct -- usually for 10 years -- to a SARL or SAS subject to IS that they control directly or indirectly. The SCI distributes rental income to its usufructuary shareholder (the IS company) throughout the transfer period. The transferor retains bare ownership and recovers full ownership at expiry.

Why 10 years is the pivot duration#

The Article 669 CGI schedule values temporary usufruct at 23% of the full-ownership value per 10-year tranche. In practice, 10 years maximises the ratio between the fiscal benefit obtained (IFI base reduction, IS taxation of income) and the fiscal cost borne at the time of transfer (income tax at the marginal IR rate and social contributions under Article 13-5 CGI). Shorter durations maintain the 23% valuation but reduce the benefit period. Longer durations increase the valuation (46% for 20 years) but raise the upfront fiscal cost proportionally.

Interaction with a patrimonial holding company#

Where the director already holds a patrimonial holding company subject to IS, transferring the temporary usufruct of SCI shares to that holding is the most common configuration observed at Hayot Expertise. The holding collects rents, includes them in its IS taxable result, and can allocate them to its own investments or capitalise them. This configuration must be carefully distinguished from the animating holding (holding animatrice), whose fiscal treatment -- particularly for IFI and the Dutreil exemption -- follows specific rules analysed in our article on the animating holding.

Usufruct and bare-ownership values#

Source: Article 669 CGI. Verify current tranches and rates on legifrance.gouv.fr.

Numerical application#

Consider a Paris SCI whose real-estate assets are valued at EUR 10 million in full ownership. The value of the temporary usufruct for 10 years is: EUR 10M x 23% = EUR 2,300,000. This is the price the IS company must pay to the transferor (or record as a current-account balance) to acquire the usufruct. This amount forms the transferor's tax base under Article 13-5 CGI.

A shift from capital gains to income#

Before the 2013 Finance Act, some practitioners treated the temporary usufruct transfer as a disposal of real-property rights potentially eligible for the capital-gains regime. Article 13-5 CGI, introduced by the 2013 Finance Act, ended this reading: the proceeds of a temporary usufruct transfer are now taxed as ordinary income in the relevant category -- rental income (revenus fonciers) where the underlying asset is real property -- not as a capital gain.

Practical consequence: marginal IR rate plus social contributions#

For an individual transferor subject to the 45% marginal income-tax rate -- common for large Paris-based estates -- the taxation of the usufruct transfer price works out as: 45% IR + 17.2% social contributions = an effective marginal rate of approximately 62.2% on the transfer proceeds. This is the upfront fiscal cost of entering the arrangement. The trade-off is favourable only if future savings (IS taxation of rents over 10 years, annual IFI base reduction) exceed this initial cost.

What Article 13-5 CGI does not cover#

Article 13-5 concerns the individual transferor. It does not alter the fiscal treatment of the acquiring IS company, which includes rental income in its IS taxable result, deducts allowable charges (including usufruct depreciation if accounting conditions permit), and is taxed at the standard IS rate (25% in 2026 for profits above the reduced-rate threshold; 15% for qualifying SMEs -- to verify for the current exercise).

Reduction of the IFI tax base#

The IFI taxes the value of real-property rights held by the liable individual. After transferring the temporary usufruct, the transferor declares in their IFI base only the bare-ownership value (77% of full ownership for a 10-year usufruct per the Article 669 CGI schedule). On a EUR 10M SCI estate, the IFI base falls from EUR 10M to EUR 7.7M. The annual IFI saving depends on the applicable marginal rate within the IFI schedule (0.5% to 1.5% across brackets -- to verify against the current schedule).

Important caveat: if the transferor holds more than 10% of the acquiring IS company, that company's shares may themselves fall within their IFI base to the extent it holds real-estate assets. The IFI effect of the usufruct transfer may therefore be partially offset. The analysis must encompass the director's entire estate, including participations in IS structures holding property.

Taxation of income at the IS rate#

Rents received by the IS company are included in its result and taxed at IS: 15% up to EUR 42,500 in taxable profit (reduced SME rate subject to conditions, to verify for 2026), 25% above. The gap relative to the IR schedule plus social contributions (up to 62.2%) is substantial for significant rental income. Over 10 years of net rental income, the saving can exceed the initial transfer tax cost where rental yields are high and stable.

Depreciation of the usufruct within the IS company#

The acquiring company may, under certain conditions, record the temporary usufruct as an intangible asset and depreciate it over the contractual duration. The Conseil d'Etat has admitted this possibility in its case law (exact reference to confirm on BOFiP or legifrance.gouv.fr). Where depreciation is accepted, the annual deductible charge further reduces IS taxation of rental income, improving the arrangement's net saving.

Short-term liquidity for the transferor#

The usufruct transfer price (EUR 2.3M in the example) may be paid by the IS company to the transferor in cash, providing a liquidity source -- subject to the Article 13-5 CGI tax at the marginal rate. Alternatively, the price may be recorded as a current-account balance in the acquiring company, creating a receivable repayable at a later date.

Abuse-of-law risk (Article L64 LPF)#

The tax administration may challenge the transaction under Article L64 of the LPF if the arrangement is found to be exclusively motivated by a tax advantage, without genuine economic substance. Risk indicators include: a company created specifically for the transaction with no independent activity, a transfer price below market value, absence of actual flows between the SCI and the IS company, or lack of effective management of the usufruct by the acquirer.

The five security conditions examined at Hayot Expertise#

In files reviewed at Hayot Expertise in Paris, the security conditions examined systematically are:

1. Expert and documented pricing: the transfer price must correspond to the market value of the temporary usufruct, determined by reference to the Article 669 CGI schedule or an independent appraisal for atypical assets.
2. Documented independent patrimonial interest: the decision to transfer must rest on an identifiable wealth objective -- reinvestment, diversification, project financing -- not solely on IFI base reduction or the IR/IS differential.
3. Substance of the acquiring company: the IS company must have its own existence, regular accounting, effective management, and must not be a shell created only for the transaction.
4. Consistent accounting entries: the usufruct must be recorded as an intangible fixed asset in the acquirer's balance sheet with a justified amortisation schedule. Rents must actually transit through the IS company's accounts.
5. Written deed and registration: the transfer must be formalised in a legal act, typically drawn up by a notaire or a lawyer, and registered with the relevant tax authorities.

What the administration examines in an audit#

The tax administration primarily scrutinises: the consistency between the price paid and the usufruct value per the schedule; the reality of financial flows (actual payment or coherent current-account entry); the capacity and reality of usufruct management by the acquiring company; and the absence of confusion between the transferor's and the company's assets. An arrangement put in place immediately before a disposal of the underlying property is particularly scrutinised.

The trade-off as we conduct it in practice#

The temporary usufruct transfer of SCI shares is a legitimate but demanding wealth-planning instrument. At Hayot Expertise, we systematically conduct a 10-year comparative calculation integrating: the upfront fiscal cost (Article 13-5 CGI at the marginal rate), the annual IFI saving, the income-taxation saving (IS vs IR+PS gap), the usufruct depreciation capacity, and implementation costs (notarial deed or legal fees, registration, accountancy). This calculation favours the arrangement only when four conditions are met simultaneously: a significant SCI estate (generally above EUR 3M to 5M), a high marginal IR rate, substantial and regular rental income, and an existing IS company with genuine economic substance.

The underestimated risk: double taxation on exit#

The risk most frequently underestimated in files we review in Paris is the potential double taxation in the event of a property disposal during the period. On one hand, the transferor was taxed at their marginal IR and social contributions rate on entry (Article 13-5 CGI). On the other hand, if the IS company sells the underlying property during the usufruct period, the capital gain will be taxed at IS, without the benefit of holding-period allowances available to individuals. This materially alters the analysis where a disposal of the underlying asset is contemplated in the short or medium term.

Our recommendation#

At Hayot Expertise, we advise against implementing this arrangement without a 10-year numerical simulation, a global analysis of the director's IFI position, and formal legal advice on the substance of the acquiring company. The technique is pertinent in certain Paris-area wealth configurations -- particularly for owners of Parisian rental property with a significant annual IFI liability -- but it is not a standard planning tool applicable without personalised analysis.

To discuss your situation, our tax advisory team in Paris is available for an initial review. You may also consult our guide on transferring shares to a holding company to integrate this technique into a broader wealth strategy.

Director X holds, through a transparent-taxed SCI (SCI a l'IR), a Parisian rental property valued at EUR 10M. He is the sole SCI shareholder and holds a single-shareholder IS company (SASU). His marginal IR rate is 45%; he is subject to the IFI.

Position after transferring the 10-year temporary usufruct to the IS holding:

• Transfer price (Article 669 CGI schedule): EUR 10M x 23% = EUR 2,300,000
• Upfront fiscal cost (Article 13-5 CGI, effective rate 62.2%): approx. EUR 1,430,600
• IFI base reduced from EUR 10M to EUR 7.7M (bare ownership 77%)
• Estimated annual IFI saving: EUR 23,000 to EUR 46,000 depending on bracket (to be recalculated on the applicable IFI schedule)
• Annual net rental income: EUR 200,000; IS vs IR+PS saving (approx. 37-percentage-point gap): approx. EUR 74,000/year, EUR 740,000 over 10 years
• Approximate net gain over 10 years (excluding implementation costs and usufruct depreciation): IFI saving + income saving - upfront cost -- variable depending on the actual situation

This calculation is strictly illustrative. Cabinet Hayot Expertise produces this simulation as part of a documented wealth advisory engagement.

At contractual expiry, the usufruct ends automatically by operation of law under Article 617 of the Civil Code. The bare owner recovers full ownership of the SCI shares without any new transfer, additional taxation, or specific formality (other than any required update to the SCI's share register). The acquiring IS company removes the usufruct from its balance sheet. Where it had depreciated the usufruct, the net book value should be nil or regularised at expiry.

• Civil Code, Article 595: powers of the usufructuary over company shares
• Civil Code, Article 617: extinction of usufruct at term
• CGI, Article 13-5: income-tax treatment of temporary usufruct transfers (2013 Finance Act)
• CGI, Article 669: fiscal schedule for temporary usufruct and bare ownership
• LPF, Article L64: abuse-of-law procedure
• BOFiP: administrative doctrine on IFI and split ownership (verify exact references on bofip.impots.gouv.fr)
• Conseil d'Etat, case law on usufruct depreciation in IS entities (exact reference to be confirmed on legifrance.gouv.fr)

This article is published for information purposes by Cabinet Hayot Expertise (Paris). It does not constitute personalised tax or wealth advice. Each situation requires a specific analysis of documents, wealth structure, and the law applicable at the time of the decision. Updated 12 May 2026.