SCI under corporate tax
An SCI under corporate tax (IS) is a real-estate civil company that has irrevocably elected corporate income tax or is subject to it by law. It computes its result under accounting rules (including property depreciation), pays corporate tax at the standard rate (25%, reduced rate of 15% up to €42,500 of profit for eligible SMEs), and its shareholders are taxed only upon dividend distribution.
Key points
- Corporate-tax election is irrevocable: impossible to revert to tax-transparent (income tax) status.
- Property depreciation is deductible, reducing the company's taxable income.
- Capital gain at disposal is computed on net book value (after accumulated depreciation) — potentially significant tax exposure.
- Dividend distributions subject to the 30% PFU flat tax (or progressive scale plus social levies).
- Interest on shareholder current-account loans is deductible up to the regulatory cap rate.
Frequently asked questions
Why choose an IS-taxed SCI over an income-tax-transparent SCI?
An IS-taxed SCI is preferred for large portfolios generating substantial rental income, as the corporate tax rate may be lower than the shareholders' marginal income-tax rate. It also allows dividend distribution to be timed according to cash needs, and profits can be retained in the company at a favorable tax rate.
What is the main tax drawback when selling a property held by an IS-taxed SCI?
The capital gain is computed as the difference between the sale price and the net book value — i.e., the original cost minus all accumulated depreciation. After years of depreciation, the taxable base can be very large, and the gain is subject to corporate tax with no holding-period allowances available to private individuals.
How is property acquisition through an IS-taxed SCI typically financed?
The SCI takes out the loan in its own name. Banks assess the company's debt-service capacity — rents net of expenses and corporate tax — rather than the shareholders' personal income, though personal guarantees are often required. Loan interest is fully deductible from the SCI's taxable income.
In practice
Two partners hold an IS-taxed SCI that owns a rental building acquired for €600,000. Thanks to annual depreciation (€15,000) and loan interest (€12,000), corporate taxable income is limited to €8,000, taxed at 15% (SME rate). They defer dividend distribution until retirement to optimize their personal tax position.
Official sources
- Option for corporate income tax (BOI-IS-CHAMP-40) · BOFiP — impots.gouv.fr
- Real-estate civil company (SCI) · impots.gouv.fr
- Housing and financing information · ANIL