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

Since the amending finance law for 2012, the sale price of a temporary usufruct is taxed in the hands of an individual seller as income in the category of the underlying asset, as property income for shares in a real estate SCI, not as a capital gain (article 13-5 of the French tax code). The acquiring corporate tax company then receives the share income for the agreed term, often 10 years; then the usufruct ends and the seller recovers full ownership with no further tax. Without economic substance, the arrangement is exposed to the abuse of law procedure (article L64 of the tax procedure code).

Updated 2 October 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 amending finance law for 2012, 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 a common term#

The Article 669 CGI schedule values a temporary usufruct at 23% of the full-ownership value per 10-year period, with no fraction: 23% up to 10 years, 46% from 11 to 20 years. That scale is used for registration duties. The upfront income tax cost is computed on the price actually paid, that is the economic value of the usufruct, which rises with the term and the expected income. Ten years is a term often chosen in practice, but no statute recommends it: the term must meet a real need of the transferee company.

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, which sets this schedule for the calculation of registration duties and land registration tax (23% per ten-year period, without exceeding the value of a life usufruct).

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 schedule does not, however, set the transfer price: between related parties, the price the IS company pays to the transferor (or records as a current-account balance) must reflect the economic value of the usufruct, assessed by reference to the income expected over its term, failing which it may be challenged. It is this price that forms the transferor's tax base under Article 13-5 CGI.

For the general regime, whatever the asset (property held directly, company shares, SCPI units), our guide to the temporary transfer of usufruct sets out a worked example comparing the scale with the economic value on the same asset, and the position of the transferee company.

A shift from capital gains to income#

Before the amending finance law for 2012 (transfers made since 14 November 2012), 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 article 15 of that law, 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 = a marginal rate of 62.2% on the transfer proceeds, to which the exceptional contribution on high incomes is added (3% then 4% depending on reference taxable income, article 223 sexies of the CGI), almost always due on a price of this size: the marginal rate then reaches 66.2%. Taxed under the progressive scale, the proceeds may, where all conditions are met, qualify for the quotient system for exceptional income (article 163-0 A of the CGI). 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 shares subject to the usufruct are in principle included in the estate of the usufructuary, the acquiring company, at their full-ownership value (Article 968 CGI): the transferor, as bare owner, in principle no longer declares them directly. The real effect on their IFI is therefore measured through the shares they hold in the usufructuary company (see the caveat below). 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: the shares the transferor holds in the acquiring IS company fall within their IFI base for the share of their value representing real-estate assets (article 965, 2° of the CGI). The exclusion for holdings below 10% applies only to companies carrying on an operating activity; a company managing its own real-estate portfolio does not qualify (article 966 of the CGI). The IFI effect of the usufruct transfer may therefore be largely 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 (62.2% at the marginal rate, more with the high-income contribution) 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 accepted it for a life usufruct, provided it is normally foreseeable at acquisition that its beneficial effects will end on a determined date (CE, 24 April 2019, no. 419912); the solution applies a fortiori to a fixed-term usufruct. 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. For acts entered into since 1 January 2020, article L64 A of the LPF also allows it to disregard an act whose main purpose is tax avoidance. 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 a documented economic valuation, where appropriate by an independent appraisal; the Article 669 CGI schedule, designed for the calculation of registration duties, is not sufficient to justify this price.
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 economic value of the usufruct; 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: a sale of the property during the usufruct#

The risk most frequently underestimated in files we review in Paris is a sale of the property during the period. The transferor has already been taxed on the price of the usufruct (Article 13-5 CGI). If the SCI sells the property during the usufruct, the transferee company does not own it: the split of the capital gain between usufructuary and bare owner, and what happens to the sale price, must then be settled, and the deed transferring the usufruct should provide for both. This point significantly changes the analysis if a sale of the underlying asset is contemplated in the 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:

• Usufruct value under the Article 669 CGI schedule (registration duty reference): EUR 10M x 23% = EUR 2,300,000, the actual price having to be justified by the economic value of the usufruct
• Upfront fiscal cost if the price is set at EUR 2.3M (Article 13-5 CGI, 62.2% marginal rate applied to the whole price, before the high-income contribution and the quotient system): approx. EUR 1,430,600
• IFI base: the shares subject to the usufruct in principle fall within the usufructuary holding at their full-ownership value (Article 968 CGI); since the director holds 100% of that holding, the effect on their IFI depends on the valuation of those shares
• Annual IFI saving: to be calculated case by case on the applicable IFI schedule; it may be small or even nil in this configuration
• 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 (amending finance law for 2012, article 15)
• CGI, Article 669: fiscal schedule for temporary usufruct and bare ownership
• LPF, Article L64: abuse-of-law procedure
• BOFiP: BOI-IR-BASE-10-10-30 (taxation of the proceeds of a temporary usufruct transfer) and BOI-ENR-DMTG-10-40-10-50 (fixed-term usufruct)
• 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 2 October 2026.