Property investment in Israel adapted for French SCIs.
The real estate market has always been an attractive long-term investment.
So why not think about buying an apartment in Israel with a French SCI?
When a company buys an apartment for investment purposes, it is important to take into account several tax considerations that are not related to property tax, but rather to income tax and VAT.
Several tax system considerations
Buying real estate has always been an attractive long-term investment. The debate on the appropriateness of this type of investment is still ongoing, despite some turmoil in the real estate market. The question arises particularly in cases where private companies accumulate funds which they can invest before they are distributed as dividends to shareholders, thus obliging them to pay income tax.
Owners of SCIs in FRANCE who are subject to corporate income tax in France are particularly targeted by this tax arrangement.
If a shareholder wishes to distribute dividends to himself in France via his holding company, he must pay 30% tax on distributed dividend (Flat Tax).
Nevertheless, it is possible to invest in Israel without paying yourself a dividend, as we will see later in this article.
Use of the apartment
It's important to consider how the apartment will be used.
This article proposes a support solution for people wishing to buy an apartment for investment (long-term rental or Airbnb).
If the owner of the shares or one of his relatives uses the apartment for private purposes, the purchase value of the apartment will be treated as if it were distributed as a dividend to the shareholder, and taxed accordingly.
But if the purpose is to rent the apartment to a third party, then there's no need to worry.
You can buy an apartment in Israel with a French SCI without any worries. The advantage will also be the financing solution (up to 82% of financing possible in certain cases) on your acquisition.
What about VAT?
As far as VAT is concerned, there is the potential for unforeseen taxation if the file is not put together correctly.
To understand the complexity of the issue, it's worth remembering that generally speaking, when a private individual buys an apartment from another private individual, the transaction is not subject to VAT.
On the other hand, when a private individual buys an apartment from a property developer, the transaction is subject to VAT (which the developer will pass on).
When a company buys an apartment, the transaction is subject to VAT, but there are ways of either avoiding VAT or reclaiming it at the time of purchase.
In some cases, the purchase is self-declared (self-liquidation/invoicing). If the apartment is used for residential rental, the position of the tax authorities is that it is not possible to deduct VAT at the time of purchase.
How can I avoid VAT when buying an apartment in Israel with a French SCI?
The question is whether every time a company buys an apartment from a private individual, the transaction is subject to VAT. According to the tax authority, when the company is registered as a VAT payer, any activity it carries out, including the purchase of an apartment from a private individual, is subject to VAT and the company cannot avoid it.
On the other hand, if the company's activity consists solely of apartment rentals for residential purposes, all its income is exempt from VAT and it is not required to register for VAT.
In this case, the purchase of the apartment by the company will not be subject to VAT.
This arrangement must be made before purchasing the apartment in Israel with a French SCI.
If you are concerned by this type of installation, please do not hesitate to contact us.
Tax package - setting up a subsidiary to buy an apartment in Israel with a French SCI
The arrangement is for the French SCi to create an Israeli subsidiary of the hevra Baam type, which would be an "Israeli SCI" for a certain amount of capital. (please contact us to find out what minimum holding percentage is allowed by the French tax authorities to avoid an ABS (misuse of corporate assets)).
In this way, the French SCI could lend the contribution to the Israeli SCI in return for a current account remunerated at the legal rate in France.
Do you have a question?
Interest-bearing shareholder current account
If one of the shareholders is a natural person rather than a legal entity, the current account contribution may be remunerated as follows.
The remunerated shareholder current account is a financial tool that enables a company's shareholders to lend money to the company in exchange for a fee. This type of account is often used to finance short-term investments or specific projects.
The remunerated shareholder current account is a way for shareholders to play a greater role in the management of the company and receive additional income from their investments.
By lending money to the company, shareholders can help finance projects that could increase the company's value and, consequently, their return on investment.
The terms and conditions of interest-bearing shareholder current accounts are set by the Israeli tax authorities. Interest rates may vary depending on inflation rate in Israel during the year.
It is important to note that interest-bearing shareholder current accounts are not taxable in Israel.
As with any investment, there is a risk of capital loss in the event of company bankruptcy or financial difficulties. It is therefore important for shareholders to understand the risks before lending money to the company.
However, if the terms of the remunerated shareholder current account are well defined and the company is in good financial health, this option can be an attractive way for shareholders to receive additional income from their investments.
In conclusion, the remunerated shareholder current account is a financial tool that enables a company's shareholders to lend money to the company in exchange for a fixed rate of interest. non-taxable.
This option can be an interesting way for shareholders to become more involved in the management of the company and receive additional income from their investments. It is therefore important for shareholders to understand the advantages of this interest-bearing current account.
Creating a subsidiary of your French SCI in Israel - What are the advantages of doing so?
Let's summarize the advantages of setting up a subsidiary of your French SCI in Israel:
- Pay no tax on dividends in France
- Don't pay VAT in Israel (or you can reclaim it).
- Earn interest on your current account while being exempt from tax on distributed interest.
- The interest paid on the shareholder's current account is a recognized expense (tax charge) for the company, and therefore a tax saving in the event of rental or resale of the asset.
It is possible to optimize investment in residential apartments by purchasing them through a company, but as always, you need to think carefully before acting.
Our firm specializes in international tax arrangements to optimize your wealth while paying the least amount of tax.taxes legally.
Do you have a question?
Your questions - our advice
- Is there optimal tax optimization for an Ole Hadash?
- If I've already bought a residential property and I want to give it to my company in Israel, is that possible?
- But what happens when the apartment is resold to calculate the capital gain? Will I have to pay taxes in France or Israel?
- We have talked about creating a subsidiary in Israel, but can we create a branch in Israel of our French SCI? Which is more advantageous?