Loan and SCI: the tax leverage to buy your premises

Quick answer. Buying your business premises on credit through an SCI creates leverage: the rents repay the loan, the interest is deductible, and depreciation comes on top if the SCI is at corporate tax. With a limited down payment, you build an estate financed largely by rents and the bank, while reducing tax during ownership.

Financing your premises on credit rather than from your cash is not just a cash question: it is a wealth-leverage choice. Well used, a loan lets you acquire a large asset with a reduced down payment, deduct the interest and, under corporate tax, depreciate the building. But leverage is never free: it must be judged over the whole cycle, from signing to resale, and it depends as much on rental yield as on the chosen tax regime. Let us see how it is calculated, what it really costs, what changes between an SCI at income tax and an SCI at corporate tax, and what happens when the rent stops.

Leverage means using the bank's money to acquire an asset that partly repays itself.

In an SCI that buys let premises, the rents collected serve to repay the loan. On premises financed to the tune of 400,000 euros over 20 years, with a down payment of only 40,000 euros, it is the tenant who finances most of the acquisition, month after month. At the end of the loan, the SCI holds a debt-free asset, built largely from rents and not from your savings. The return on the funds actually invested, here 40,000 euros, becomes incomparable with that of a cash purchase that would have tied up ten times more.

Leverage works all the better when the credit rate stays below the net rental yield. It is the basic condition of a successful credit arrangement, to assess before signing. If the net rent yields 6% and the loan costs 4%, the gap works for you; if the ratio reverses, leverage turns negative and erodes the SCI at every instalment. This trade-off extends the ownership-structure choice developed in our comparison SCI or direct ownership of business premises.

Taxation reinforces the leverage by making loan interest deductible.

In an SCI at income tax, interest is deducted from property income (Tax Code art. 31), which reduces the tax on rents, or even creates a property deficit carried forward against property income for the following ten years. In an SCI at corporate tax, interest is a financial charge deductible from the result (Tax Code art. 39). The precise rules of this deductibility, arrangement fees and guarantees included, are detailed in our article on deductible real-estate loan interest in 2026.

On a loan of 400,000 euros, the first year's interest can represent several thousand euros, fully deductible. This deduction lightens the tax bill at the moment when interest is heaviest, that is the early years of the loan, when the capital repaid is still small and the interest share high. It is the exact opposite of a cash purchase, which opens no deduction since there is no financial charge to deduct.

The cost of a loan is not just the headline interest rate. Three items, often underestimated, weigh on the real return of the arrangement and must enter the leverage calculation before signing.

• Arrangement and guarantee fees. When the loan is set up, the bank charges arrangement fees, most often around 1 to 2% of the capital borrowed (to be verified per offer), plus the cost of the guarantee (a surety, mortgage or lender's lien). On 400,000 euros, these upfront fees can represent several thousand euros, to be funded on top of the down payment. They are deductible, but they do leave the cash at the start.
• Borrower's insurance. It generally costs around 0.3 to 0.5% of the capital per year (to be verified by age and profile), a recurring charge that adds to the interest. On an initial capital of 400,000 euros, that is several hundred to more than a thousand euros per year. This premium eats into the net return and must therefore appear in the comparison with rental yield.
• Annual percentage rate. It is the APR, not the nominal rate alone, that measures the true cost of credit, fees and insurance included. That is what must be compared with the net rental yield to know whether leverage works for you or against you.

Our reflex in any simulation: never set the net rental yield against the nominal rate alone, but against the full cost of credit (interest, insurance, fees), so as not to overstate the leverage.

The SCI at corporate tax adds a second tier of tax leverage through depreciation.

Under corporate tax, the building is depreciated over its useful life, for example over 30 to 40 years for the structure, the land never being depreciable. On a built property valued at 350,000 euros depreciated over 35 years, the annual depreciation is around 10,000 euros, which adds to the interest to reduce taxable profit. Combined, interest and depreciation can neutralise much of the profit for 15 to 20 years, a period when the SCI pays little or no corporate tax.

The residual profit is taxed at corporate tax of 15% up to 42,500 euros of profit, then 25% beyond (Tax Code art. 219), subject to the conditions for the reduced rate (paid-up capital, turnover, ownership). The trade-off is known and structuring: the depreciation deducted each year lowers the net book value of the building. On resale, the professional capital gain is calculated as the difference between the sale price and that net book value, in other words the acquisition price less the depreciation actually claimed. Mechanically, the more you have depreciated during ownership, the lower the net basis and the higher the taxable gain on exit. What corporate tax gives during ownership, it partly takes back on resale. This effect must be built into the overall arbitrage and the initial choice between the two regimes, covered in our comparison SCI at income tax or corporate tax.

Take premises at 400,000 euros financed over 20 years, a down payment of 40,000 euros (a loan of 360,000 euros), an annual net rent of 30,000 euros, an annual instalment of about 28,000 euros (capital plus interest). The table below illustrates the mechanism over the first five years, in rounded and purely indicative figures: the exact profile depends on the rate, the insurance and the value of the depreciable structure.

Reading the cash: each year, the SCI collects 30,000 euros and pays out about 28,000 euros of instalment, a balance of around 2,000 euros before tax, to keep for maintenance and contingencies. It is deliberately tight: a credit arrangement releases little current cash, most of the gain is built in the capital repaid by the tenant.

Under income tax, the reasoning is simpler: there is no depreciation, so the taxable property income is the rents less interest (and fees) only, that is, in the first year, 30,000 minus 14,000, about 16,000 euros taxed at your marginal band plus 17.2% of social levies. Under corporate tax, the structure's depreciation (around 10,000 euros) adds to the interest to bring the tax result between 6,000 and 10,000 euros over these early years, taxed at 15%, hence corporate tax of around 1,000 to 1,500 euros. In both cases, you have acquired a 400,000 euro asset by tying up only 40,000 euros (plus the set-up fees): that is leverage.

Leverage only works as long as the rent comes in. The loan instalment, however, never stops. This is the most underestimated risk of buying premises on credit.

Let us take the typical case again. If the rent falls by 20%, it drops from 30,000 to 24,000 euros, while the instalment stays at 28,000 euros. The cash balance shifts from a surplus of around 2,000 euros to a deficit of around 4,000 euros per year: the SCI must then make up the difference from its reserve or through a contribution from the partners. In case of full vacancy of the premises, it is the entire instalment, about 28,000 euros over the year, that the SCI must meet with no income against it.

This is why we systematically size a cash reserve covering several months of instalments, rather than the minimum down payment required by the bank. Leverage amplifies the return when all goes well; it also amplifies fragility when the rent stops. An SCI with no reserve that loses its tenant finds itself under immediate strain, where a safety cushion absorbs the shock until the premises are re-let.

When the SCI lets the premises to your own operating company, the rent amount is not a mere management choice: it is a point the tax authorities can examine. A clearly excessive rent (to inflate the deductible charge of the operating company and the SCI's income) or, conversely, a token rent (to artificially understate a result) exposes you to a challenge.

Our recommendation is simple: set a market rent and document it from the outset. In practice, this means gathering, before signing the lease, references of rents for comparable premises in the same area (listings, neighbouring leases, valuation opinions), and keeping these in the SCI's permanent file. A written, dated commercial lease, with a floor area, a use and a rent consistent with the local market, is the best protection. If the rent departs from the market, an objective reason must be able to explain it (condition of the asset, works borne by the tenant, length of commitment). In case of an audit, it is this traceability, and not a justification reconstructed after the fact, that secures the deduction on the operating side as well as the income on the SCI side.

A loan in an SCI is a powerful lever, provided you do not confuse the tax relief during ownership with a definitive gain. Corporate tax maximises the current leverage, interest and depreciation combined, but defers the charge to the exit gain, with no holding-period allowance. Income tax offers more moderate leverage, with no depreciation, but keeps the individual capital-gains regime, with income-tax exemption after 22 years of ownership and social-levy exemption after 30 years.

Our method is to cost the arrangement over its whole life: tax saving during ownership on one side, the full cost of credit and exit taxation on the other. For an owner who will hold long and transmit the asset rather than sell it, corporate tax is often relevant, since the latent capital gain disappears on transfer. For one who will sell in the medium term, income tax keeps the edge. Leverage is never judged on the first year alone, but on the whole cycle, in line with the owner's wealth strategy.

An owner wanted to buy his premises in cash to avoid paying interest. The simulation compared two scenarios: a cash purchase at 400,000 euros, and a credit purchase with a 40,000 euro down payment over 20 years. On credit, the rents repaid most of the loan, the interest was deductible, and the cash kept (around 360,000 euros) could finance the development of the business or an investment. Under corporate tax, depreciation further reduced the tax for around fifteen years.

The credit leverage proved far more effective than the cash purchase, which tied up all the cash for no tax gain. The one point of attention: the SCI had to keep a cash reserve to absorb a rental vacancy or a refit, because the loan does not stop if the rent stops. We therefore sized the down payment not at the minimum required by the bank, but at the level that leaves the SCI a safety margin.

In practice: securing a credit purchase of premises in an SCI#

• Check that the net rental yield exceeds the full cost of credit (rate, insurance, fees, guarantees) before signing the preliminary agreement, comparing against the APR and not the nominal rate alone.
• Decide the income-tax or corporate-tax regime before the acquisition: the corporate-tax option is in principle irrevocable, the choice commits the whole cycle.
• Build a cash reserve in the SCI covering several months of instalments to absorb a rent fall or a vacancy.
• Have a clear commercial lease drawn up between the SCI and the operating company, at a market rent documented from the outset.
• Keep all supporting documents for loan costs (interest, insurance, arrangement fees, guarantee) to secure the deduction.
• Cost the exit taxation from the outset, especially under corporate tax, so as not to discover the professional capital gain at the time of sale.

• Leverage assumes the net rental yield exceeds the full cost of credit: if the rate, insurance and fees weigh more than the net rent, it turns negative and weighs on the SCI's cash.
• The set-up fees (arrangement, guarantee, around 1 to 2% of the capital, to be verified) and the borrower's insurance (around 0.3 to 0.5% per year, to be verified) must enter the calculation: they leave the cash and reduce the real return.
• Under corporate tax, the depreciation deducted during ownership lowers the net book value and therefore inflates the professional capital gain on resale: the current tax gain is not definitive.
• The rent between the SCI and the operating company must stay a market rent, documented from the signing of the lease: a clearly excessive or token rent exposes you to a challenge risk.
• Getting cash out of an SCI at corporate tax to the partner requires a dividend or remuneration, hence an extra layer of taxation absent under income tax.
• In an SCI at income tax, the property deficit from interest does not offset overall income: it carries forward only against property income of the following years.
• As the corporate-tax option is in principle irrevocable, changing strategy mid-course is costly: the right time to arbitrate is before the acquisition.