The impressive tax efficiency of the Monegasque SCI for French real estate structuring has been confirmed by French Supreme Court.
French real estate owned by Monaco residents through an interposed “translucide” Monegasque SCI is not liable to French inheritance tax but exclusively to Monegasque inheritance tax because of article 6 of the Double Tax Treaty signed between France and Monaco on 1 April 1950 for inheritance tax matters.
The above mentioned principle has just been confirmed by French Supreme Court.
1. Reminder.
French Tax Authorities used not to recognize shares of a “translucide” Monegasque SCI as movable assets governed by article 6 of the above mentioned DTA, exclusively subject to the inheritance tax regulation which applies in the event of the demise of the shareholder, but as immovable assets governed by article 2 of such DTA which allows France to levy inheritance tax.
Notwithstanding the above mentioned position, both the French Tribunal de Grande Instance of Nice on 25 March 2010 and the French Administrative Court of Appeal of Aix-En-Provence on 3 May 2011 considered such shares - owned by a Moroccan citizen tax resident of Monaco at his demise – as a movable asset subject to the exclusive inheritance tax competence of Monaco as far as the shareholder was tax resident in Monaco on his demise.
Unexpectedly, on 9 October 2012, the French Cour de cassation assimilated the shares of a “translucide” Monegasque SCI (i.e. traditional SCI whose activity usually consists of renting, managing or keeping the free use of its owned real estate and whose shareholders are not considered as owning the assets of the Company) to the shares of a “transparente” SCI (i.e. specific SCI called “d’attribution” where the shareholders are considered as owning personally the assets of the SCI prorata to their share capital participation in the Company).
In the above mentioned decision, the French Cour de Cassation used the exchange of letters of the Monegasque and French Tax Authorities dated 16 July 1979 to extend the article 2 of the DTA signed on 1950, which covers the shares of “transparentes” SCIs to apply such article also to the shares of “translucides” SCIs and therefore make such shares fall under French inheritance tax.
However, after the renvoi to French Court of Appeal of Aix en Provence, the latter confirmed on 9 January 2014 that the shares of « translucide » SCI are movable assets. It is this principle that the Cour de Cassation has now confirmed on 2 October 2015.
2. The big impacts of French Supreme Court decision dated 2 October 2015.
The French Cour de Cassation confirmed the literal interpretation of the article 6 of the above mentioned DTA signed on 1 April 1950, which leads to consider the following principles:
• Shares of “translucides” Monegasque SCIs are movable assets in the meaning of the article 6 of the DTA signed on 1950 between France and Monaco for inheritance tax matters.
• Such shares transferred by the death of a Monaco tax resident in the meaning of the DTA signed on 1950 (i.e. resident in Monaco since 5 years at the demise) are not subject to French inheritance tax but are exclusively liable to Monegasque inheritance tax.
• The absence for France of the right to levy inheritance tax on such shares applies irrespectively whether or not French tax resident heirs exist.
• Non-French and non-Monegasque citizens can benefit (under certain conditions) from the provisions of the above mentioned DTA, which was initially concluded to cover only French and Monegasque citizens residents of Monaco.
As a result of the level of Monegasque inheritance tax (none between spouses and direct line, maximum of 16% between non relatives), the Monegasque SCI is confirmed by the French Supreme Court itself as an inevitable tool for tax optimization for French real estate for the residents of Monaco, but not only for them…………
For further information on Monaco SCIs please request our publication at http://www.rosemont-int.com/en/publications/scis-france-and-monaco/
For further information on French Real Estate Structuring please request our publication at http://www.rosemont-int.com/en/publications/french-property-french-real-estate-purchase-structuring/
************************************************************************************************************************
Rosemont Consulting SARL provides a full family office service to individuals and their families, and can assist in structuring and administering their assets in a tax efficient fashion complying with international regulations. With partners in strategic locations the company is able to offer an integrated service covering important areas of interest to clients including:
• Tax, estate and business planning
• Real estate ownership and management
• Onshore and offshore corporate and private advisory services
For further information on Rosemont Consulting SARL and services provided please visit www.rosemont.mc
Please do not hesitate to contact Cecile Acolas at c.acolas@rosemont.mc for queries on this topic