Légifiscal Sale

By fashionlifeshopping 14/06/2022 1009 Views

Definition ¶

A sale to oneself is also called OBO (Owner Buy Out). It consists of creating a company that will buy the property by financing it with a loan.

This allows the owner of a property to obtain cash, with the sale of this property to a company that he has incorporated himself.

He thus develops his heritage.

In the context of a rental property ¶

The loan that the company has contracted is repaid by the rents it collects.

The seller receives the price of the transfer.

The company is the owner of the property (but the partners hold the shares). Loan interest is subtracted from the rents collected.

The cash generated by the sale, if invested, generates a financial return.

A sale at the right price ¶

Selling at market value avoids any dispute.

A clarification: for the seller, it is prudent to ensure the value of the property in advance by having an expert appraisal of the property sold appended to the deed of sale.

The risk of an overvaluation of the value of the property sold: the tax authorities may consider that it is an indirect donation.

A reduction in the sale price: by reducing the amount of the transfer costs, the administration can notify a reassessment.

Before such an operation, it is necessary to determine its heritage objective.

Possible tax risks ¶

The procedure for repressing the abuse of rights (art. L 64 of the CGI (General Tax Code).

It makes it possible to question a transaction carried out either because it is fictitious or it is carried out for an exclusively tax purpose.

The company acquiring the property must have a real and legal existence, with all the steps taken: registration, specific bank account, general meeting organized, accounts kept (if required)... It must be demonstrated that the company is not not fictitious and that it was not constituted for purely fiscal purposes.

Zoom on the IFI ¶

Self-selling LegiFiscal

Concerning the IFI (Impôt sur la Fortune Immobilière), the legislator has provided that loans contracted by a company controlled by the transferor to acquire property belonging to him are not deductible and do not reduce the tax base. IFI (art. 973-II-1° of the CGI General Tax Code).

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A sale like any other ¶

Selling to oneself is first of all a sale with its rules. The property is subject to pre-emption rights. The seller sees the risk of having to sell the property to the municipality or to Safer (Land Development and Rural Establishment Companies) in the event of pre-emption.

Similarly, the sale will give rise to notary fees.

A acquiring company ¶

It is common for the company acquiring the property to be an SCI (Société Civile Immobilière) subject to income tax.

This type of company is qualified as fiscally transparent. Company income is not taxed in the name of the company, but directly in the hands of the partners.

The owner of a property sells it to a company that he has previously set up either for the operation, or that already existed.

The seller is the majority shareholder of the company. The company takes out a bank loan for an amount equivalent to the sale price of the property.

A heritage reality

The realization of such an operation must demonstrate that it is part of a real heritage strategy; For example: the purpose of the operation is to avoid joint ownership for his heirs, if the children of the transferor are also partners of the acquiring company.

Its proven economic reality will avoid tax requalification. The anticipation of a transmission is a concrete example of the merits of a sale to a company whose partner is the seller.

With a view to preparing the succession, the dismemberment of company shares is an option to consider.

The object of the sale to oneself

The property sold can then be rented out so that the rents collected can be used to meet the loan repayment deadlines.

It is a way of rebalancing a heritage made up mainly of real estate. In doing so, this generates cash that can be reused elsewhere (financing of works, overheads, etc.)

We are in the case of asset diversification.

Advantages and disadvantages ¶

Cash generator

The sale makes it possible to obtain cash to carry out a project.

Selling a property is alienating it, even if this technique allows the seller to indirectly retain ownership of the property sold (through the holding of shares).

To carry out this operation, the company formed by the owner-seller must be able to obtain a loan to finance the acquisition of the property, without certainty of the granting of the loan.