Temporary Transfer of Usufruct in France: Tax Guide 2026

A temporary transfer of usufruct (cession temporaire d'usufruit) means selling, for a fixed term, the right to use an asset and collect its income, while keeping the bare ownership. The transferor receives capital immediately; at the end of the term, they recover full ownership with no formality and no tax. The price of the first transfer is taxed as income, not as a capital gain (article 13, 5 of the French Tax Code, CGI).

It is also called a temporary usufruct or a temporary dismemberment of ownership. The transferee is most often a company subject to corporate income tax, sometimes the transferor's own holding or operating company. The table below summarises each party's position; the detail and references follow.

French law splits ownership into two separate rights:

• Usufruct: the right to use the asset and collect its income (rent, dividends).
• Bare ownership: the right to dispose of the asset. The bare owner may sell the bare ownership without the usufructuary's consent, whose right is left untouched (article 621 of the Civil Code); they cannot sell full ownership alone, since they do not hold the usufruct.

In a temporary transfer, the owner transfers the usufruct for a fixed term. That term cannot exceed thirty years where the usufructuary is a legal entity (article 619 of the Civil Code). Where the usufructuary is an individual, the usufruct ends at the agreed term, or on their death if that comes first (article 617 of the Civil Code). The transaction can bear on an investment property, company shares, SCPI units or shares in an SCI.

Economically, the price is the present value of the net income the asset should produce over the term of the usufruct. At the end of the term, the usufruct lapses by operation of law and the bare owner recovers full ownership with no deed or formality (article 617 of the Civil Code).

Income, not a capital gain (article 13, 5 of the CGI)#

Article 13, 5 of the CGI, introduced by law no. 2012-1510 of 29 December 2012, applies to transfers made since 14 November 2012. It targets the first transfer for consideration of a temporary usufruct. The proceeds of the transfer, or the market value of the usufruct if that is higher, are taxed in the transferor's name in the category of income the asset produces:

• property income for an unfurnished let, including where the transfer bears on shares in an SCI not subject to corporate income tax;
• business profits (BIC) for a furnished let;
• investment income for shares in companies subject to corporate income tax.

Where the asset produces no income, the text sets a default category: property income for real estate or shares in real-estate-rich companies, investment income for securities, non-commercial profits (BNC) in other cases. The regime covers neither life usufructs, nor subsequent transfers of the same usufruct, nor gratuitous transfers, nor transferors subject to corporate income tax.

How the tax is charged#

• The proceeds are taxed for the year in which the price is received. Taxed under the progressive scale, they may, where all conditions are met, qualify for the quotient system for exceptional income (article 163-0 A of the CGI; BOI-IR-BASE-10-10-30, § 220).
• They also bear social levies and, where relevant, the exceptional contribution on high incomes (same BOFiP, § 230 and § 240).
• Where the proceeds from transferring the usufruct of shares are a distributed income, the 40% dividend allowance does not apply (same BOFiP, § 210).
• Throughout the term, the asset's income is no longer received by the transferor, who is therefore no longer taxed on it.

What the courts have clarified#

The Conseil d'État (France's supreme administrative court) held that an agreement the parties called an extension, following an earlier transfer of usufruct over the same asset, is a new first transfer within article 13, 5 (CE, 9 October 2024, no. 490685). It later held that these rules also apply where the transfer is paid for by the allotment of shares, as in a contribution to a company (CE, 30 March 2026, no. 502243).

What the transferor gains#

The transferor turns future income into immediate capital, which can fund a personal or business project, and knows they will recover full ownership at the end of the term. For IFI purposes, a dismembered asset is taxed at its full-ownership value in the usufructuary's estate (article 968 of the CGI): the transferor, now bare owner, no longer reports it. That effect is secured only where the usufructuary is outside their own estate. Where the usufruct is sold to a company they own, holding or operating company, article 965, 2° of the CGI brings back into their base the share of the value of their shares representing real-estate assets held directly or indirectly by that company.

The tax scale of article 669 of the CGI#

A usufruct granted for a fixed term is valued at 23% of the full-ownership value per ten-year period, with no fraction and regardless of the usufructuary's age (article 669, II of the CGI). Any period started counts as a whole one: fifteen years give 46%, not 34.5%. The resulting value may not exceed that of a life usufruct for the same usufructuary (BOI-ENR-DMTG-10-40-10-50, § 70).

For a legal entity, since the term is capped at thirty years, the tax value of the usufruct therefore never exceeds 69%. This scale is used to compute registration duties and land registration tax (article 669, I of the CGI): it sets neither the market price nor the income tax base. Our article on the dismemberment scale also covers life usufructs.

The economic value#

The economic value is obtained by discounting the net income expected over the term of the usufruct (rent less charges, or the real distribution capacity of the shares) at a rate consistent with the asset's risk. That is the figure closest to a market price, built with the same tools as business valuation methods.

Worked example (illustrative case)#

An investment property valued at €1,000,000 produces €40,000 of rent net of charges a year. Its owner considers transferring the usufruct for 10 years to a company.

The gap of about €94,400 has two consequences. Selling at the scale value does not reduce the transferor's tax, since article 13, 5 uses the market value where it exceeds the price. Conversely, a company paying more than the economic value for the usufruct would be granting an advantage to its shareholder, which exposes it to the abnormal management act doctrine. In this example, if the property is let unfurnished and held directly or through an SCI subject to income tax, about €324,400 is added to the transferor's property income in the year the price is received. The 4% rate and the rent level are illustrative assumptions: each case is modelled on its own figures.

A use of cash whose return depends on the asset and the price paid#

The company uses its available cash to acquire a temporary usufruct, then collects over the term the income the asset actually produces (rent or dividends). The return depends entirely on the asset and on the price paid; no arrangement secures it in advance.

Amortisation of the usufruct#

The company records the usufruct as an asset on its balance sheet and amortises it over the term of the dismemberment. That amortisation is not automatic: an intangible asset may only be amortised where it is normally foreseeable, at the time of acquisition, that its beneficial effects will end on a determined date (Conseil d'État, 24 April 2019, no. 419912, decided on a life usufruct, the solution applying a fortiori to a fixed-term usufruct). The amortisation schedule follows the term of the usufruct and reflects the rate at which the expected economic benefits are consumed, the straight-line method applying in the absence of a better-suited method (French general accounting plan, articles 214-1 and 214-13).

The charge reduces, and may cancel out, the taxable profit generated by the asset's income. One point has to be weighed against it where the usufruct bears on shares: the parent-subsidiary regime requires the participating interests to be held in full ownership or in bare ownership (article 145, 1, b of the CGI). A company acquiring only the temporary usufruct of shares falls outside that regime and is taxed in full on the dividends it collects.

A tax-free end of the dismemberment#

At the end of the term, the usufruct lapses by operation of law (article 617 of the Civil Code) and its net book value in the company's accounts is nil. The reunion of the usufruct with the bare ownership on expiry of the agreed term triggers no tax or duty (article 1133 of the CGI): the bare owner recovers full ownership without any deed of resale.

Abuse of law, in two forms#

The tax administration reviews temporary transfers of usufruct that lack economic substance, with two tools.

• Article L. 64 of the LPF (French tax procedure code) targets sham acts and acts whose sole aim is to avoid tax. It carries an 80% surcharge, reduced to 40% where it is not established that the taxpayer took the main initiative in the acts or was their main beneficiary (article 1729, b of the CGI).
• Article L. 64 A of the LPF, for acts entered into since 1 January 2020 and assessments notified since 1 January 2021, allows the administration to disregard an act whose main purpose is tax avoidance, a broader notion. It does not automatically trigger the 80% surcharge of article 1729, b, which refers only to article L. 64: only the ordinary surcharges apply where they are justified. It applies subject to article 205 A of the CGI.

In case of disagreement, either the taxpayer or the administration may refer the case to the tax abuse-of-law committee (article L. 64 of the LPF). Its opinion is advisory and, for assessments notified since 1 January 2019, the burden of proof lies with the administration whatever that opinion says (article L. 192 of the LPF). The position can be secured beforehand under article L. 64 B of the LPF (see the FAQ).

Warning signs#

1. No economic rationale for the company: it pays a high price, or borrows, for an asset whose income does not cover the price.
2. Circular flows: the price paid by the company comes back to it in another form, for instance as a current-account advance from the transferor.
3. Overvaluation of the usufruct compared with its economic value.
4. A term chosen to cover a tax window rather than a real need of the company.

Defending the transaction rests on proving its substance: being able to show that the company invested its cash for a real return, and how the price was built.

A temporary transfer of usufruct has to be prepared, because its weak point is evidential rather than legal: what will be challenged is the economic rationale of the arrangement.

What the engagement covers:

• Financial simulations: compare the flat valuation of article 669 of the CGI with a discounted economic value, in order to document how the price was arrived at. No price puts a transaction beyond challenge: what matters is being able to explain how it was built.
• Validation of the tax arrangement: check whether the transaction is economically justified for the company subject to corporate income tax, and document that rationale against the abnormal management act and abuse-of-law tests.
• Tax returns: reporting in the transferor's income tax return and IFI return and in the company's tax return, and setting up the usufruct amortisation schedule in its accounts.
• Coordination with your notary for the drafting of the deed's clauses, in particular the split between major repairs and maintenance charges (articles 605 and 606 of the Civil Code).

A temporary transfer of usufruct is costed before it is decided: the value of the usufruct, the return expected by the transferee, the registration duties, and above all a defensible economic rationale. Those four elements are modelled on the actual figures of the asset.