French SCI: Corporate Tax vs Personal Tax 2026 — The Structuring Choice You Cannot Afford to Miss

Up to date as of 15 May 2026.

French SCI: Corporate Tax vs Personal Tax 2026 — The Structuring Choice You Cannot Afford to Miss#

A French Société Civile Immobilière (SCI) is, by default, a transparent entity for tax purposes. Its income passes through to the partners and is taxed at their individual income tax (IR) rate. Yet an irrevocable option exists to elect corporate tax (IS) treatment — and this single decision reshapes the entire fiscal, financial, and succession landscape of the structure. Since the 2018 Finance Act (LFI 2018, art. 50), this option becomes irrevocable after five years. Choosing wrongly can cost tens of thousands of euros at disposal, block family succession, or generate years of avoidable tax friction. Hayot Expertise, chartered accountants in Paris, has guided property owners through this decision for many years. Here is our comparative analysis.

Under Article 8 of the French General Tax Code (CGI), a civil SCI is fiscally transparent. The company itself pays no tax. Each partner reports their share of income in their personal tax return.

Rental income classification: If the SCI lets properties unfurnished, income is classified as revenus fonciers (property income). If the SCI lets furnished properties on a regular basis, it automatically falls into corporate tax as of right (furnished letting is a commercial activity). Running furnished lets through an IR SCI is a common structural mistake.

Taxation of partners: Each partner's share of net property income is added to their other income and taxed at the progressive IR rate (up to 45% for the top bracket), plus social charges (prélèvements sociaux) of 17.2%. For a partner at the 41% marginal rate, the combined effective rate can reach 58.2% on annual rental income.

Deductible expenses: Mortgage interest, insurance, property tax (taxe foncière), property management fees, repair and maintenance work. Building depreciation is not deductible under the property income regime.

Property income deficit: If deductible expenses exceed rental income, a deficit arises. Up to 10,700 euros per year can be offset against the partner's total income (CGI art. 156, I-3°). Any surplus carries forward against property income for up to ten years. This can be advantageous in early ownership years (high interest payments, renovation works).

The IS election transforms the SCI into a standalone taxable entity. The election is made by formal written notification to the business tax authority (service des impôts des entreprises) before the close of the first accounting year to which it applies.

Tax rates: The SCI qualifies for the SME reduced rate of 15% on profits up to 42,500 euros (subject to conditions on paid-up capital and shareholding structure — to be verified), then 25% above that threshold (CGI art. 219).

Depreciation: the flagship tax benefit of IS SCI. The SCI records the property as a fixed asset and depreciates the building value (excluding land) over its useful life, typically 30 to 50 years. On a 600,000-euro property where land represents 20%, the depreciable base is 480,000 euros, generating an annual depreciation charge of 9,600 to 16,000 euros. This charge reduces taxable profit, often to near zero during the holding period — enabling rental income to accumulate almost tax-free inside the company.

Interest deductibility: Loan interest remains deductible, subject to thin-capitalisation rules where applicable.

Dividend distributions: When the IS SCI distributes profits, dividends are subject to the flat tax (PFU) of 30% (12.8% income tax + 17.2% social charges). Combined IS and PFU can exceed 47% in certain scenarios. However, if profits are retained and reinvested, tax at 15% or 25% inside the company is far more efficient than transparent IR taxation for high-bracket partners.

Under IR: The capital gain follows the individual real estate capital gains regime (CGI art. 150 U). Progressive tapering reliefs apply: full exemption from IR after 22 years of ownership, full exemption from social charges after 30 years. For a property acquired in 2026 and sold in 2048, the gain is almost entirely exempt from IR. This is a decisive advantage for long-term holdings.

Under IS: The gain is a business capital gain (CGI art. 39 duodecies), calculated as the difference between the sale price and the net book value — i.e., the acquisition cost reduced by all accumulated depreciation. After 20 years at 10,000 euros/year of depreciation, the taxable base is 200,000 euros higher than under IR. No tapering relief for holding period applies. The inflated gain is taxed at the IS rate, and distributing the net proceeds then triggers PFU at 30%.

Our view: Depreciation under IS creates annual tax savings during the holding period but creates a heavier taxable gain at disposal. The trade-off depends on the intended holding period, the partners' marginal tax rates, and the probability of an eventual sale. For holdings exceeding 20 years with no sale intended, IS can be highly efficient. For a 10 to 15-year horizon with an eventual sale planned, IR with tapering relief is often more effective — provided the partners' marginal rates are not excessively high.

Before 2018, the IS election could be revoked at any time. This is no longer the case. Article 50 of the 2018 Finance Act introduced an irrevocability rule: the election cannot be reversed after 5 years from its effective date. In practice, an SCI electing IS in 2026 may still revoke the election before the close of its fifth financial year (by the end of 2030 in practice). Beyond that deadline, reversing the election triggers a deemed cessation of activity, with:

• Immediate taxation of latent capital gains on all assets;
• Taxation of reserves not yet distributed to partners;
• Loss of future depreciation deductions.

In economic terms, reverting to IR is almost always prohibitive once the five-year window has passed. This decision requires the support of a chartered accountant and, where asset values are significant, a specialist tax adviser.

Background: Two partners (married couple), marginal tax rate 30%, acquiring an unfurnished rental apartment for 600,000 euros. Intended holding: 25 years. Main objective: retirement income supplement and transfer to children.

Analysis:

• Under IR, net rental income taxed at 30 + 17.2 = 47.2%.
• Under IS at 15%, the apparent annual tax saving looks attractive.
• However, after 25 years, the capital gain would be largely exempt under IR (tapering relief almost complete after 22 years).
• Succession objective: IR SCI allows progressive dismemberment of shares (donating bare ownership to children while retaining usufruct and income), reducing IFI base and preparing inheritance efficiently.
• IS accounting costs represent an additional annual expense not present under IR.

Hayot Expertise conclusion: IR SCI recommended. The IS advantage on annual income does not compensate for capital gains taxation at disposal or the reduced flexibility for succession planning.

Background: Business owner, marginal tax rate 45%, acquiring a full residential building for 3,000,000 euros (land: 600,000 euros, building: 2,400,000 euros). Annual gross rents: 120,000 euros. 70% bank financing. Intended holding: 30 years. No sale anticipated.

Analysis:

• Depreciable base: 2,400,000 euros over 40 years = 60,000 euros/year.
• Net income before depreciation (rents net of charges): approximately 55,000 euros/year.
• After depreciation: taxable profit near zero for 15 to 20 years. IS virtually nil.
• Under IR at 45 + 17.2 = 62.2%, the 55,000 euros of net income would generate approximately 34,000 euros of annual tax.
• Succession: with no sale planned, the main concern is not capital gains but the growing book value of shares as reserves accumulate. This needs proactive management through share dismemberment and statutory provisions.

Hayot Expertise conclusion: IS SCI strongly appropriate here. The IS saving from depreciation is substantial over a long holding period. The capital gains issue does not arise if no sale is contemplated. Succession structuring must be addressed separately and continuously.

Share dismemberment: Partners may donate the bare ownership (nue-propriété) of their SCI shares to their children while retaining the usufruct (and therefore the income). The fiscal value of bare ownership is reduced according to the age-based scales in CGI art. 669. Under an IR SCI, income continues to be taxed in the hands of the usufructuary. Under an IS SCI, the share value depends on the net asset value — which grows as reserves accumulate. A detailed article on SCI share dismemberment and temporary usufruit transfer covers the mechanics.

Dutreil relief (CGI art. 787 B): The 75% exemption from transfer duties under the Dutreil pact is reserved for companies conducting an operational activity (industrial, commercial, artisanal, agricultural, or professional). A pure property-holding SCI does not qualify. Transfers of SCI shares are therefore subject to standard gift or succession duties.

An underestimated risk: Many business owners believe that accumulating reserves in an IS SCI at 15% efficiently prepares succession. In reality, those reserves increase the book value of shares and therefore the taxable base for succession duties — without benefiting from Dutreil. An IR SCI with progressive share dismemberment is often more effective for multigenerational wealth transfer.

The real estate SAS (or holding SAS) is an alternative to the IS SCI. It offers greater flexibility — limited liability, freely organised governance, easier admission of external investors. However, it lacks the civil transparency of the SCI. Our comparative analysis in SAS immobilière vs SCI IS sets out the respective use cases in detail.

The IFI applies to all SCI structures regardless of tax regime. The value of shares held by a partner is included in their IFI base in proportion to the SCI's taxable real estate assets. Neither the IR SCI nor the IS SCI provides any IFI shelter. The only effective method to reduce the IFI base is to demonstrate that the acquisition debt is properly recorded as a liability of the SCI and qualifies as deductible under CGI art. 973.

Three recurring errors appear in files handled by Hayot Expertise:

1. Electing IS too early, without modelling a disposal scenario. Some SCI founders elect IS at acquisition, attracted by depreciation and the 15% SME rate. They overlook that the capital gain at disposal will be fully taxable under IS (with no tapering), and that if the property has appreciated significantly, the additional tax versus IR can represent tens of thousands of euros.

2. Poor VAT structuring. Certain properties are subject to a VAT election (professional lets). If the IS SCI makes this election without prior analysis, it must then manage VAT recapture on change of use, disposal, or end of election. Real estate VAT is a specialised area requiring ongoing attention.

3. Failing to record depreciation. Under IS, if the SCI keeps approximate accounts and does not book depreciation each year, that tax benefit is permanently lost — depreciation not charged in a given year cannot be recovered retroactively. Proper accounting (depreciation schedule, land/building split, component accounting if required) is mandatory from the year of IS election.

The IS / IR choice is not a question of which regime is "better" in the abstract. It depends on holding horizon, partner profile, and patrimonial objective. Hayot Expertise applies a four-question framework:

1. What is each partner's marginal tax rate? A rate of 41% or 45% argues more strongly for IS; a rate of 11% or 30% makes IR more competitive.
2. Is a sale planned, and when? The expected disposal date determines the tapering relief under IR — and the absence of any tapering under IS.
3. What is the family succession strategy? Where succession is the primary goal, an IR SCI with progressive share dismemberment is generally more flexible.
4. What is the financing horizon and appetite for retention? If financing is long-term and partners do not need immediate liquidity, IS enables value accumulation with minimal annual tax friction.

In practice: Hayot Expertise always prepares a comparative projection over 10, 20, and 30 years, incorporating rental income assumptions, charges, refinancing, sale values, and partner tax profiles. This quantified analysis is the only sound basis for a decision that cannot be undone.

To discuss your own situation, contact Hayot Expertise — our team is available for an initial no-commitment conversation.

Sources: CGI art. 8, 206-3, 239, 219, 150 U, 39 duodecies, 787 B; LFI 2018 art. 50; BOFiP. Written by Samuel Hayot, chartered accountant in Paris. Up to date as of 15 May 2026. This article is for information purposes only and does not replace a personalised analysis of your situation.