US Tax of SCPI in France
US Tax of SCPI in France (Société Civile de Placement Immobilier): Each foreign country has their own different type of investment schemes — and if you are a US Person, then the Internal Revenue Service wants to know about it when it comes time to both file your US Tax Returns and all necessary international information reporting forms. One of the most common types of investments in France is the SCPI (Société Civile de Placement Immobilier). While this type of investment closely mimics an REIT (Real Estate Investment Trust), there are some distinctions which are important. Despite the underlying distinctions, a key concern becomes whether or not an SCPI is taxed in the United States — and how is it reported on forms such as FATCA, PFIC and FBAR. Let’s work through the basics of a France SCPI (Société Civile de Placement Immobilier) for US tax purposes:
What is an SCPI (Société Civile de Placement Immobilier)?
The main purpose behind the SCPI is to allow taxpayers to invest in private companies that specialize in acquiring and overseeing real estate investments. This is similar to a REIT in the sense that there are investments involving real estate, which are designed to generate passive income — and the individual does not own the actual real estate — but instead has a stake in the investment. One key distinction though, is that it is not technically a fund and therefore not something you would purchase by logging into your vanguard account.
Are All SCPIs the Same?
No. SCPIs vary on size and scope — along with how aggressive they manage and oversee the properties in terms of generating income both within France and even abroad outside of France. As with any type of passive investment fund, the investor does not oversee any of the properties personally — rather, the investor invests the money into the SCPI — which then manages the property. Depending on a person’s tax status and whether they are high income earner or not, there are other ways to acquire the SCPI which does not involve a direct stake in the ownership — for example, sometimes it can be a part of an Assurance Vie.
US Tax of SCPI
The income that is generated from the SCPI is presumably taxable in the United States, because it is simply investment income which is being distributed to the owner of the investment — there is no specific exception for SCPI. Where it does become more complicated is the US reporting requirement(s).
SCPI and IRS Forms 8938/8621
Form 8938 is used to report Specified Foreign Financial Assets (aka FATCA). Form 8621 is used to report Passive Foreign Investment Companies (aka PFIC). In general, a Form 8621 is much more complicated to file than the Form 8938 – especially in years in which there is an excess distribution. Under most circumstances, the IRS could take the position that the SCPI it an 8621 PFIC situation — but since not all SCPIs are the same — a Taxpayer may want to dive into the investment itself (if the information is available) to assess the income and asset information. But, when boiled down to its barest form, the SCPI is:
- a foreign passive asset;
- held as a foreign company;
- comprised of foreign passive assets developed to generate passive income; and
- the form 8621 requirement may be hard to get around.
Otherwise (or in addition to), the Taxpayer files a Form 8938 for that particular asset instead (which is typically easier to report).
FBAR and SCPI
Depending on how the SCPI is structured along with the acquisition of the SCPI will impact whether it is reportable on the FBAR. While technically, the SCPI may not be considered a Foreign Financial Account per se — many taxpayers will still take the position that they prefer to report it on the FBAR anyway, if they are already reporting other investments and accounts they have in France or abroad.
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