SCI taxation: income tax or corporate tax, the choice that shapes everything

SCI taxation: income tax or corporate tax - the choice that shapes everything

Almost every question about the tax of an SCI (société civile immobilière) comes back to one decision: is the company taxed under the income-tax regime (impôt sur le revenu, IR) or the corporate-tax regime (impôt sur les sociétés, IS)? By default an SCI is "translucent": it pays no tax on its result itself, and each member is taxed on their share of that result as personal income. But an SCI can opt to be taxed as a company, so that the SCI itself pays corporate tax and the members are taxed only on what is distributed to them. The two regimes tax the same rental property in profoundly different ways - different rates, different deductions, and, above all, a mirror-image treatment of holding the property versus selling it. This guide sets out how each regime works, the great trade-off between them, the drawbacks and traps of the corporate-tax option, and why the choice is close to permanent once made.

The subject matters because this is the single most consequential decision a family makes about a French SCI, and it is easy to get wrong in both directions. Choose income tax and a high-earning family may pay a heavy annual charge on rents they are reinvesting; choose corporate tax and the same family may shelter those rents for years, only to face a punishing bill when they sell. The regime that is right for a couple buying a home to hold for thirty years and pass to their children is the opposite of the one that suits an investor sheltering rental cash flow. For an international family holding French property through an SCI, understanding this choice - before it is made, because it is hard to undo - is the foundation of everything else about the company's tax.

The two regimes in one sentence each

The default is fiscal translucency. Civil companies not subject to corporate tax fall, in principle, under the regime of partnerships (sociétés de personnes): although the company has its own patrimony and computes its own result, that result is taxed in the hands of the members, and the company itself pays no tax on its profits (CGI Art. 8). So the members of an SCI taxed under IR are personally taxable on the share of the company's profits corresponding to their rights - either to income tax, where they are individuals holding their shares as part of their private wealth, or to corporate tax, where the member is itself a company subject to IS. The decisive feature, examined below, is that this taxation strikes the member at the close of the financial year on their share of the result, whether or not the profit has actually been paid out to them.

The alternative is corporate tax. An SCI may opt for its subjection to IS (CGI Art. 206, 3.b), and it is then subject to that tax on all the profits it makes, whether or not those profits are distributed. When the company holds its profits - by placing them in reserve, for example - they bear no tax other than the IS itself, and the members are taxed only if and when a distribution reaches them. This is the profound difference from the IR regime: under IS the member is taxed on distributions, not on the company's undistributed result. The same reversal runs through everything that follows - what can be deducted, how a sale is taxed, and when the members feel the tax - so the two regimes are best understood not as two rates but as two entirely different ways of taxing the same building.

How the income-tax regime taxes you

Under the IR regime, the SCI's rental profit is taxed as property income (revenus fonciers) in the members' hands. The company determines its result under the property-income rules - rents received, less the deductible expenses the law allows - and each member includes their share in their own income tax, where it is taxed at their progressive rate together with the social levies (prélèvements sociaux) of 17.2%. For a member in a high income-tax bracket, the combined charge on their share of the rents can therefore be substantial. And the timing is unforgiving: the members present in the company at the close of the financial year are taxed on their share of that year's result, and it does not matter that a member has not actually received their share - the tax strikes the result at the close, not the distribution. A family that leaves its rents in the company to fund works or repay a loan is taxed on those rents all the same.

Two features define the IR regime's deductions. The property-income rules allow the deduction of the running costs of letting - maintenance and repair works, management costs, insurance, the loan interest - but they do not allow the SCI to depreciate the building itself: there is no amortisation of the property under the property-income regime, so the bricks-and-mortar value is not written down against the rent. Where the deductible expenses exceed the rents, the company generates a property deficit (déficit foncier), and each individual member may impute the share corresponding to their rights on their overall income, within an annual ceiling of €10,700 - raised to €21,400 for the fraction arising from energy-renovation works on a property moving out of the poorest energy classes, a doubled ceiling that the 2026 Finance Law has extended through the end of 2027. The portion of a deficit arising from loan interest is not imputable on the overall income in this way, but is carried against future property income. So the IR regime is comparatively heavy on annual holding tax - full progressive rate plus social levies, no shelter from depreciation - but it opens the property-deficit mechanism that can reduce a member's other taxable income, a benefit examined in its own right in our guide to rental losses in an SCI.

IR or IS - which fits your SCI?

The right regime depends on your horizon and your goals. Pick what best describes your plan - the check points to the regime that usually fits.

How the corporate-tax regime taxes you

Under the IS regime the SCI is itself the taxpayer, and its result is computed under rules close to those for business profits (BIC). A small SCI benefits, under conditions, from the reduced rate of 15% on the fraction of its profit not exceeding €42,500, with the normal rate of 25% above that for exercises opened since 1 January 2022 (CGI Art. 219). These rates can be markedly lower than the marginal income-tax rate that would strike the same profit under IR - but the deeper advantage lies elsewhere. The essential feature of a company subject to IS is that the members are not taxed on the sums not distributed: as long as the profits remain within the company - placed in reserve, for instance - they bear no charge beyond the IS itself, and it is only when a distribution reaches a member that a further tax applies. A family can therefore accumulate rental profit inside an IS SCI, taxed only at the corporate rate, without the members' personal income tax being engaged until they take money out.

The IS regime also transforms the deductions. Because the result is computed under business rules, the SCI can deduct or amortise all the financial charges linked to acquiring the property - notary's fees, registration duties, loan interest - and, crucially, it can depreciate the building itself. The property is entered on the balance sheet at its acquisition cost and written down over its useful life, and that annual depreciation is a deductible charge that has no equivalent under the property-income regime. In practice the depreciation of a let building, added to the interest and the other charges, often reduces the SCI's taxable profit to a small figure or to nothing for many years - so the effective tax on the rent during the holding period can be very low. When a distribution is made to an individual member, it is treated as a dividend and, in the ordinary case, taxed at the single flat levy (prélèvement forfaitaire unique, PFU) of 30% - made up of 12.8% income tax and 17.2% social levies - unless the member opts instead for the progressive scale. So the IS regime is light on annual holding tax, thanks to depreciation, and defers the members' personal tax to the moment of distribution - a powerful combination while the property is held, whose cost appears only on the way out.

The great trade-off: holding versus selling

The choice between the two regimes turns, more than on anything else, on a single reversal: the regime that is lighter while you hold the property is heavier when you sell it, and vice versa. Under IS, the depreciation of the building shelters the rent during the holding period - but that shelter is borrowed, not given, and it is recaptured on sale. The disposal of a building held by an IS SCI generates a professional capital gain, and no exemption for the length of ownership applies to a company subject to IS: the holding-period taper that private sellers enjoy is simply unavailable (the relief of CGI Art. 151 septies B does not apply). Worse, because the building has been depreciated year after year, its tax value on the balance sheet has been written down, so the taxable gain on sale is calculated against that reduced value - the accumulated depreciation is effectively added back into the gain. The result is a large taxable capital gain, taxed at the corporate rate, precisely because the rent was sheltered on the way through. And the net sale proceeds, when distributed to the members as a liquidation surplus, are then taxed again as a dividend in their hands.

Under IR the position is the mirror image. The annual holding tax is heavier - full progressive rate plus 17.2% social levies, with no depreciation to shelter the rent - but the sale of the property falls under the regime of private real-estate capital gains, which is far kinder on exit. That regime taxes the gain at 19% income tax plus 17.2% social levies, but grants a taper for the length of ownership that removes the income-tax charge entirely after 22 years and the social levies after 30, so a long-held property can be sold with little or no capital-gains tax at all. And a contribution of property into an IR SCI is registered free of duty, where the same contribution into an IS SCI is taxed. So the decision is really a bet on time and purpose: a family holding for the long term to pass the property on is usually better served by IR, whose exit relief rewards patience; an investor sheltering rental cash flow over a medium horizon may prefer IS, accepting the exit cost in exchange for years of low holding tax. Neither regime is simply "cheaper" - they place the burden at opposite ends of the property's life.

What will trigger tax in your SCI?

Each regime taxes different events. Pick the moment you are asking about - the check explains how each regime treats it.

The drawbacks and traps of the corporate-tax option

The corporate-tax option carries a set of running drawbacks that are easy to overlook when the holding-period saving is in view. Several deserve to be weighed before opting:

• A contribution of real property to an IS SCI is taxed at 5%, where the same contribution to an IR SCI is registered free.
• The IS SCI is taxed on the rents fallen due in the exercise even if they have not been received - where the IR company's property income is, in principle, taxed on rents actually collected.
• A member cannot deduct the interest on a loan taken out to acquire their shares in the IS SCI.
• And the free provision of a dwelling to a member has to be reflected by an accounting entry for a notional rent, so lending the property to a family member is not tax-neutral under IS.

Each of these is a real cost of the regime that a simple comparison of headline rates misses.

The treatment of losses is a further, and often decisive, drawback. In an IS SCI the deficits are carried forward without limit of time, but capped per exercise at €1 million increased by 50% of the profit above that figure - and, importantly, the members cannot impute their share of the company's loss on their own income. This is the reverse of the IR regime, where a property deficit flows up to the members and can reduce their personal taxable income within the ceilings described above. So a family expecting significant deductible works or interest in the early years - the very situation in which a property deficit is most valuable - loses the benefit of it under IS, where the loss is trapped inside the company. Add the obligation to keep full commercial accounts, with annual balance sheets and members' current accounts properly recorded, and the IS regime is not only a different tax but a heavier administrative burden. None of this is a reason against IS; it is a reason to count the full cost, not merely the rate, before choosing it.

The choice is near-permanent - and can be forced on you

Because the two regimes diverge so sharply on exit, the near-permanence of the choice is what makes it so consequential. The option for IS was long strictly irrevocable; since a reform in 2019 it can be renounced, but only up to the fifth exercise following the one for which it took effect (CGI Art. 239). After that fifth-year window closes, the option becomes definitive, and the SCI is locked into corporate tax - with the exit tax that entails - for the rest of its life. A family that opts for IS to shelter its rents therefore has a limited period to change its mind; beyond it, the decision cannot be undone, and a later sale will bear the full professional-gain cost. This is why the option should never be taken on the strength of the holding-period saving alone, without modelling the eventual exit: the moment to weigh the sale is before the option becomes irrevocable, not when the buyer appears.

The regime can also be imposed rather than chosen. An SCI falls into IS by law where it carries on an activity that is commercial by nature. The most common trap is furnished letting: letting habitable premises furnished is, for tax purposes, a commercial activity taxed as business profits (BIC) and not as property income (CGI Art. 35), so an SCI that furnishes its property crosses into the commercial sphere. The tax authorities tolerate a measure of commercial receipts - an SCI is not subjected to IS so long as its commercial receipts do not exceed 10% of its total receipts - but beyond that tolerance the commercial activity subjects the whole company to corporate tax by force of law, irrevocably and without an option ever having been made. So a family that decides, years into an IR SCI's life, to let its apartment furnished for a better yield can unknowingly convert the company to IS and forfeit the private capital-gains taper on a future sale. The lesson is that the IR/IS choice is not only a decision to make carefully at the outset, but a status to protect throughout the company's life - because both opting in and stumbling in are, in practice, one-way doors.

IR versus IS for a rental SCI - at a glance

Frequently Asked Questions

This article is for general information only and states French law and tax rates in force as published in the sources available at the date shown above, including the corporate-tax rates and the property-deficit ceilings applicable for 2026. It does not constitute legal or tax advice. The right regime for a given SCI depends on its members, its property and their plans. Always seek qualified legal and tax advice before choosing or changing an SCI's tax regime.