For residents of the United Arab Emirates, acquiring property in France requires careful structuring. Beyond French domestic tax rules, the France–UAE double tax treaty contains specific provisions regarding French real estate wealth tax (IFI) that can significantly affect exposure.

The optimal ownership structure will depend on:

  • The financing method (cash or loan)

  • Whether the property is for personal use or rental

  • Long-term estate planning objectives

  • The interaction between French domestic law and the France–UAE tax treaty

1. Direct Ownership (Personal Name)

Direct ownership is the simplest option.

It may be appropriate when:

  • The property is mainly for personal use

  • Financing is straightforward

  • The investor wishes to avoid corporate reporting constraints

However, for high-net-worth UAE residents, IFI exposure must be carefully reviewed in light of treaty provisions (see below).

2. Société Civile Immobilière (SCI)

The French SCI is frequently used by international families.

Advantages:

  • Flexible co-ownership structure

  • Facilitates intergenerational transfer (transfer of shares rather than property)

  • Organizes governance between family members

However:

  • If the SCI carries out furnished rental, corporate income tax consequences may arise

  • SCI shares representing French real estate remain, in principle, within the scope of IFI

  • To avoid the annual 3% tax (see below), full transparency toward the French tax authorities is required

The SCI does not automatically shield UAE residents from IFI — treaty conditions must be analyzed.

French Real Estate Wealth Tax (IFI) and the France–UAE Treaty

Under French domestic law, non-residents are subject to IFI if the net fair market value of their French real estate exceeds €1.3 million.

However, the double tax treaties concluded between France and Gulf States — including the United Arab Emirates — contain specific provisions regarding wealth tax on French real estate.

Treaty Mechanism (Special Gulf Clause)

Under the France–UAE treaty (interpreted consistently with similar provisions applicable to Saudi Arabia, Bahrain, Kuwait and Qatar):

French real estate held by UAE residents — including shares in non-listed real estate companies holding French property — is taxable in France under IFI only if:

The gross value of the French real estate assets exceeds the global value of certain qualifying financial assets held by the same UAE resident.

Qualifying Financial Assets (Eligible Portfolio)

These typically include:

  • Listed shares within the EU

  • Approved EU investment funds

  • Claims against EU States

  • Claims against EU public entities or companies

If, on January 1 of the relevant year:

  • The value of the qualifying financial portfolio exceeds the gross value of the French real estate,

then the treaty exemption applies and IFI is not due in France, provided an additional holding condition is met.

Holding Period Requirement

The qualifying financial assets must have been held for more than 8 months (or 183 days, depending on interpretation) during the previous calendar year.

This permanence requirement is crucial.

Practical Example: UAE Resident Holding French Property via an SCI

For a UAE resident owning French property through an SCI:

  • The property (or SCI shares) falls within the theoretical scope of IFI as French real estate

  • The France–UAE treaty may exempt it from IFI

  • The exemption applies only if the financial portfolio test is satisfied

Even when exemption applies, the UAE resident must:

  • File an IFI return in France

  • Provide detailed valuation of French real estate

  • Document the qualifying financial assets and holding duration

If conditions are not met — for example, if the wealth is primarily French real estate without a sufficient eligible financial portfolio — IFI becomes payable under standard French rules.

The Annual 3% Tax (Article 990 D CGI)

When French real estate is held by a legal entity (French or foreign), the annual 3% tax may apply.

This tax is levied on the gross fair market value of the French property held directly or indirectly by a company.

UAE residents essentially face three strategic options:

1️⃣ Direct Ownership (Individual)

  • No 3% tax

  • Potential IFI exposure (subject to treaty protection)

2️⃣ Ownership via Non-Qualifying Foreign Entity

  • Possible exposure to the 3% annual tax

  • Unless a treaty-based exemption or disclosure mechanism applies

3️⃣ Ownership via French Entity (e.g., SCI) or Treaty-Compatible Structure

  • 3% tax avoided if shareholders disclose identity and ownership breakdown

  • Full transparency required

  • IFI, capital gains tax, and inheritance tax remain applicable

The use of an SCI therefore has a dual effect:

  • It facilitates governance and estate planning

  • It does not prevent IFI if treaty conditions are not satisfied

  • It requires transparency to avoid the 3% tax

Other Taxes to Consider

Income Tax

  • Unfurnished rental: taxed as real estate income

  • Furnished rental: treated as a commercial activity

  • Personal use by shareholders of a company may trigger deemed rental income

Gift and Inheritance Tax

French real estate is subject to French inheritance and gift tax, even between non-residents.

Estate planning strategies (including share transfers in an SCI) may mitigate exposure but must be coordinated with UAE and international considerations.

Cross-Border Coordination Is Essential

Although the UAE does not levy personal income or wealth tax in the traditional sense, French taxation applies based on the location of the property.

The interaction between:

  • French domestic law

  • The France–UAE double tax treaty

  • Entity structuring rules

  • Estate planning objectives

requires an integrated approach.

A structure that optimizes IFI exposure may not be optimal for capital gains or succession purposes.

Conclusion: Strategic Structuring Is Critical for UAE Residents

For UAE residents investing in French real estate, treaty protection can offer substantial IFI relief — but only if carefully structured and properly documented.

Ownership through an SCI or other entity may facilitate family governance and succession planning, yet it does not automatically eliminate French wealth tax exposure.

Advance structuring, valuation analysis, and treaty qualification review are essential before acquisition.

We assist UAE residents in:

  • Structuring French real estate investments

  • Analyzing IFI treaty protection

  • Organizing estate planning strategies

  • Preparing annual French tax returns (including IFI declarations)

A tailored legal and tax review before acquisition ensures both compliance and optimization.