How an SCI's rental income is taxed

How an SCI's rental income is taxed

When an SCI (société civile immobilière) that has not opted for corporate tax lets a property, the rent it collects is taxed as property income (revenus fonciers). The company itself pays no tax: it computes a single net property result - the rents it received, less the expenses the law allows it to deduct - and allocates that result to its members, who each include their share in their own income tax at their progressive rate plus the social levies of 17.2%. Understanding exactly what goes into that computation - which receipts are taxable, which charges are deductible, how loan interest is treated, and what happens when a member is housed for free - is what lets a family predict and manage the annual tax on its rents. This guide sets out how an income-tax SCI's rental income is built up and taxed, from the gross receipts through the deductible charges to the net result that reaches the members.

The subject matters because the property-income rules are precise and full of traps that cost families money. Rent is taxed on a cash basis whether or not it funds anything useful; a charge left off the return is tax paid needlessly; a property lent to a family member for free, or let to one at a token rent, can lose the deduction of its charges entirely; and the gérant's remuneration, which many assume is a company cost, is not deductible at all. For an international family holding French property through an SCI, getting the annual property-income computation right is the difference between paying the tax the law intends and paying more than it does.

What is taxed: the gross property income

The starting point is the rent actually received. The net taxable property income of an SCI whose capital is held by individuals is its gross income less its deductible charges, and the receipts to retain are those effectively collected during the year of taxation - the regime works on a cash basis, so a rent that falls due but is not paid is not taxed until it comes in, and a rent paid in advance is taxed in the year of receipt. The taxable receipts are the income from the letting (CGI Art. 29), which includes not only the ordinary rents but a range of accessory income the property produces:

• the rents from letting the premises themselves;
• the income from advertising hoardings, panels and display sites;
• the income from roof space for mobile-telephone antennas;
• the income from hunting and fishing rights - except the income the hunting right would have produced where the company reserves its enjoyment or provides it free to a member (CGI Art. 30).

Beyond the ordinary rents, certain exceptional receipts are also taxable - among them entry fees and key money (pas-de-porte) paid by a tenant of commercial premises in addition to the rent, which are in principle treated as advance supplements of rent, insurance indemnities, and indemnities paid by a tenant such as one intended to cover the cost of restoring premises the lease put in the tenant's charge. One further category is easy to miss: the expenses that are by nature deductible and normally fall on the company, but which are put on the tenants by agreement, must be included in the taxable property income - so where the lease shifts, say, certain non-rental repairs or certain taxes onto the tenant, the amount is added back into the company's taxable income. The gross figure, in short, is not merely the headline rent but the whole economic benefit the letting produces.

What can be deducted

Against the gross income the SCI deducts the expenses it has borne and paid during the year of taxation, whatever the date the underlying work was carried out. To be deductible, an expense must, generally, have been incurred with a view to acquiring or conserving the income (CGI Art. 13), and the deduction is taken for the real amount actually paid - provisions for future expenses, and expenses relating to premises that are exempt, are not deductible. The principal deductible charges of a letting SCI (CGI Arts. 13 and 31) are:

• the expenses of repair, maintenance and, for dwellings, improvement, actually paid in the year;
• the administration and management costs of the letting;
• the insurance premiums covering the property;
• for a property in co-ownership, the total of the charge provisions paid to the syndic during the year - a deduction that is mandatory, and then regularised the following year against the syndic's actual breakdown, so that only the genuinely deductible owner's charges remain deducted;
• recoverable charges that were not in fact recovered on a tenant's departure;
• the interest on the loans the company has taken out, examined separately below.

One item that families routinely, and wrongly, expect to deduct is the gérant's remuneration. The remuneration allocated to the managing members of an SCI not subject to corporate tax cannot be regarded as a real charge of the company and therefore has, itself, the character of property income - so paying the gérant does not reduce the company's taxable rent, and the sum paid is in turn taxable. This is a direct consequence of the translucent regime: because the company is not a separate taxpayer that "employs" its manager, a payment to a managing member is treated as a distribution of the property income, not as a deductible cost. Where a family wants the manager's work to be a genuine deductible expense, that is one of the features the corporate-tax regime offers and the income-tax regime does not.

What's in your SCI's taxable rental income?

Some receipts are taxed, some uses cost you a deduction. Pick what applies - the check explains how it is treated.

The free-use and low-rent traps

Two related situations can quietly cost a family its deductions, and both turn on the same idea. Where the SCI puts habitable premises at the free disposal of its members or of third parties, without being bound to do so by a letting contract, the company is deemed to reserve to itself the enjoyment of those premises. The consequence is symmetrical: there is no taxable rent, because none is received, but there is also no deduction of the charges relating to those premises, because they are not incurred to produce a taxable income. So a family that houses a member in the SCI's apartment free of charge cannot deduct that apartment's repairs, insurance or interest against the rest of the company's income - the premises simply drop out of the taxable computation on both sides.

The low-rent variant reaches the same result by a different door. Some companies charge a member a rent precisely in order to deduct the charges relating to the dwelling - but the courts have held that where an SCI lets a property to one of its members at an abnormally low rent, the member must be regarded as being, in substance, in the position of an occupant by favour, so that the company is treated as reserving the enjoyment of the premises. The token rent, in other words, does not buy back the deductions: a rent set well below the market to accommodate a relative is treated like a free provision, and the charges become non-deductible. The practical lesson is that letting to a family member is only tax-effective if the rent is genuine and close to the market - a real lease at a real rent preserves the deductions, while a nominal or generous family arrangement forfeits them.

Loan interest: the company's and your own

Interest is often the largest deduction, and it comes in two layers - the company's loans and the members' personal loans. At the company level, an SCI may deduct from its gross income the interest on the loans it has contracted (CGI Art. 31), where the borrowing was taken out either to acquire, construct, repair or improve its buildings - including the fraction of the interest relating to the sums used to pay the transfer duties on the acquisition - or to conserve those properties. Alongside the interest itself, the company may also deduct the loan's file-arrangement fees and the costs of the mortgage registration. Interest on sums borrowed for another purpose is not, in principle, deductible, so the borrowing has to be tied to the property to open the deduction.

The second layer is personal, and it is one members frequently overlook. Deductible from the share of the property income coming to a member are the interest on loans that member has taken out personally for certain purposes connected with their shares:

• to buy back all or part of the shares corresponding to another member's rights;
• to make their contribution to the company or to acquire their shares in it;
• to pay the succession duties on the transmission by death of the shares, including the interest paid to the Treasury where the duties are paid in instalments (CGI Art. 1717).

So a member who borrowed to buy into the SCI, to buy out a co-member, or to pay the inheritance tax on shares they received does not lose that interest: it is deducted from their own share of the company's property income, reducing the tax on the rent that reaches them. This member-level deduction sits on top of the company's own interest deduction, and mapping both correctly is one of the more valuable pieces of an SCI's annual tax work - the company's interest reduces the shared result, and each member's personal borrowing reduces their slice of it.

Which charges can your SCI deduct?

Some costs reduce the taxable rent and some do not. Pick the one you are asking about - the check explains its treatment.

How the result reaches the members

Once the company has computed its net property result, that result is allocated to the members and taxed on them - and the timing rule is strict. The members present in the company at the close of the financial year are those liable for the tax on that year's result, and it does not matter that a member has not actually appropriated their share of the profit: the tax strikes the result at the close, regardless of distribution. A consequence is that where a member transfers their shares during the year, the beneficial or loss-making result appearing at the close of the exercise is attributed to the member in place at the close, not apportioned between the outgoing and incoming members by time - so the buyer of shares mid-year can bear the tax on the whole year's result, a point the transfer terms should address between the parties.

Two allocation rules complete the picture. Where the ownership of shares is dismembered between a usufructuary and a bare owner, the usufructuary is subject to income tax on the share of the profits corresponding to the rights their usufruct confers, and correspondingly the bare owner is not taxed on that share - the person who receives the income is the person taxed on it. And the death of a member does not, in principle, trigger the immediate taxation of the company's results, since where the articles provide that a member's death does not dissolve the company and the activity continues, the social results continue to be taxed under the ordinary rule. So the property result flows to whoever holds the income rights at the close - the member in place, the usufructuary of dismembered shares - and it is that allocation, not the actual movement of cash, that fixes who pays the tax.

When the result is a loss: the property deficit

Where the deductible charges exceed the rents, the company produces a property deficit (déficit foncier), and the deficit is a benefit rather than a mere absence of tax. The deficit is calculated by the company and shared between the members in proportion to their rights in the company's profits, and each member may impute on their overall income, within an annual ceiling of €10,700, the share of the deficit corresponding to their rights - for the fraction that does not arise from loan interest. The interest-related fraction of the deficit is not imputable on the overall income in this way but is carried against the member's property income of the following years. So a deficit driven by works reduces the member's other taxable income up to the ceiling now, while a deficit driven by interest waits to be used against future rents.

The ceiling is higher for energy-renovation works. The €10,700 limit is raised to €21,400 for the fraction of the deficit arising from energy-renovation works that take a property out of the poorest energy classes, a doubled ceiling that the 2026 Finance Law has extended through the end of 2027. This makes a well-timed programme of qualifying works especially efficient for a member with significant other income to shelter. The property-deficit mechanism is valuable enough, and detailed enough, to be worth its own treatment - our guide to rental losses in an SCI sets out the ceilings, the carry-forwards and the conditions in full - but the essential point here is that an income-tax SCI's loss is not wasted: it flows up to the members and reduces their personal tax, which is one of the regime's real strengths and one that the corporate-tax regime does not share.

An SCI's rental income tax - at a glance

Frequently Asked Questions

This article is for general information only and states French law and tax rules in force as published in the sources available at the date shown above, including the property-deficit ceilings applicable for 2026. It does not constitute legal or tax advice. The tax of a given SCI's rental income depends on its lettings, its charges and its members. Always seek qualified legal and tax advice before acting.