Arsene Taxand - Real Estate

New amendment on 'SIIC-3'

The Senator Philippe Marini introduced an amendment to the modified Finance Act for 2006 providing for an extension of the favourable tax regime of Article 210 E of the French tax code, so-called « SIIC 3 », until December 31, 2008 (the original regime was to be terminated on December 31 2007). The amendment was adopted by the Senate.

SIIC companies have already been benefiting from this regime since January 1st, 2005. Nevertheless, SPPICAVs (which tax regime was provided by the modified Finance Act for 2005), which may only be incorporated as from the first semester of 2007 were in a rather delicate situation since they could only benefit from this regime over a quite short period of time. The extension of the “SIIC 3” regime until December 31, 2008 will allow these new investment vehicles to become a genuine alternative to SIIC companies on the real estate market with respect to real estate asset externalisations.

It is worth reminding that this tax regime allows companies subject to corporate income tax to limit their capital gains tax liability to 16.5% upon the sale or contribution of real estate assets to SCPI, SIICs or SPPICAVs (or to their subsidiaries subject to an identical tax regime) carrying out a real estate rental activity provided that the real estate assets be kept by these entities for at least 5 years.