Real estate holding: owning the manager's business premises

Quick answer. Holding operating real estate in a corporate-tax SCI owned by a holding makes sense when you seek leverage, lightly taxed rent upstreaming (parent-subsidiary regime) and reuse of cash for other projects. A standalone, directly held SCI is simpler but ring-fences the estate less effectively.

You run an operating company and you are considering buying your business premises. The question is not merely "SCI or no SCI", but: should this property sit in a directly held SCI, or in a subsidiary SCI placed under a holding? This nuance changes how rents are taxed, your borrowing capacity and the transfer of the asset. It is a wealth and tax trade-off, not a mere formality.

The typical structure combines three entities. A corporate-tax holding owns the shares of the operating company (the opco) and the units of a corporate-tax SCI. The SCI buys the premises and leases them to the opco, which pays a rent deductible from its result. The SCI collects these rents, pays corporate tax on its property income, then distributes the balance to the holding.

The core benefit lies in upstreaming liquidity. Where the holding owns at least 5 % of the corporate-tax SCI's capital and keeps the units for at least two years, the upstreamed dividends qualify for the parent-subsidiary regime (French Tax Code, articles 145 and 216): they are 95 % exempt, with only a 5 % share of costs and charges remaining subject to corporate tax at the holding level. Rents thus flow up to the holding while being only lightly re-taxed.

This is what we explain in detail in our holding versus SCI comparison guide: a holding does not remove tax, it reorganises when and at what level it applies.

The standalone SCI appeals by its simplicity. The holding structure takes the lead as soon as you think at the scale of a growing professional estate, with several assets or regular reinvestment. For the pure mechanics of a corporate-tax SCI versus an income-tax SCI, see also our analysis SCI under corporate tax or income tax.

When the holding or the corporate-tax SCI borrows to acquire the premises, or to buy the SCI's units, the loan interest is deducted from the result subject to corporate tax. This deductibility is assessed under the general cap on financial charges (French Tax Code, article 212 bis): the net deduction of financial charges is limited to 30 % of tax EBITDA, or to 3 million euros if that amount is higher. For most manager files, the 3 million threshold is not reached and the deduction remains full.

The leverage gain also comes from the corporate-tax rate. The structure pays 15 % up to 42,500 euros of profit, then 25 % beyond (French Tax Code, article 219 I-b). Repaying a property loan with income lightly taxed at corporate level, rather than with personal property income hit by the income-tax scale and social levies, clearly changes repayment capacity.

A word on tax consolidation (French Tax Code, article 223 A): it requires at least 95 % ownership of the subsidiary and allows group results to be offset and loan interest to be absorbed more easily. But in the case of a buy-out from oneself, the Charasse amendment (French Tax Code, article 223 B) may add back part of the financial charges. This point must be framed upfront.

Many managers believe their business property is exempt from the real estate wealth tax (IFI). That is incorrect in this structure. The IFI (French Tax Code, articles 964 and following) applies to net real estate wealth above 1.3 million euros. Holding and SCI units are taxable up to the underlying real estate they represent (French Tax Code, article 965), regardless of the interposed companies.

Property allocated to the operating activity may be exempt as a professional asset (French Tax Code, article 975). But this is precisely where the structure becomes tricky: property owned by an SCI and leased to the operating company remains in principle taxable for IFI. Placing the premises in a separate SCI, to ring-fence the risk, may therefore take those premises out of the exempt professional-asset perimeter. This is a genuine watch point: the legal benefit is sometimes paid for in IFI exposure.

In the manager files we support, the reflex "I'll put everything under a holding" is not always the right one. The holding plus corporate-tax subsidiary SCI structure is powerful when three conditions meet: a significant loan to carry, a wish to reinvest the cash generated, and a transfer horizon. Conversely, for a manager who simply wants to own the premises and draw additional income, the direct SCI often remains clearer and cheaper to administer.

Our firm's advice: never fix the structure before costing the three scenarios (direct ownership, standalone SCI, SCI under holding) over the actual loan term, including projected IFI. The right vehicle is the one that holds up over a ten-year projection, not the one that optimises only the first year.

1. Frame the objective: additional income, reinvestment, transfer or risk ring-fencing. The objective dictates the vehicle.
2. Cost the scenarios: direct ownership, standalone SCI and subsidiary SCI under holding, over the loan term, including corporate tax and IFI.
3. Define the holding's perimeter: opco shares, SCI units, target ownership level (5 % for parent-subsidiary, 95 % for consolidation).
4. Set the financing: decide at which level to borrow (holding or SCI) and check the cap on financial charges.
5. Formalise the commercial lease between the SCI and the opco: a market rent, justified, to secure deductibility on the opco side.
6. Document the economic substance of the structure and keep the supporting evidence (rent valuation, financing, flows).

A manager owns their business through a holding and wishes to buy the operating premises, financed by a loan. Direct ownership would have generated heavily taxed property income. By placing the premises in a corporate-tax SCI owned by the holding, the opco pays a deductible rent, the SCI repays the loan with corporate-tax income, and the balance flows up to the holding under the parent-subsidiary regime. The point raised in the meeting concerned IFI: since these premises leased to the opco remain in principle taxable, the plan was calibrated to stay below the threshold and to trace every flow.

• The rent charged to the opco must reflect the market: an excessive or token rent weakens deductibility and may be reclassified.
• The parent-subsidiary regime requires at least 5 % ownership and a two-year holding period: any breach loses the 95 % exemption.
• The cap on financial charges (Tax Code art. 212 bis) must be checked as soon as debt is substantial.
• IFI on property leased to the opco is rarely neutralised: to include in the wealth projection.
• In a buy-out from oneself, the Charasse amendment (Tax Code art. 223 B) may add back interest.
• On exit, the sale of units in a real-estate-dominant SCI bears 5 % registration duties (Tax Code art. 726 I 2°).

The trade-off turns on purpose. If your priority is to lodge net rental income in your private estate, a direct SCI, or even an income-tax SCI, may be enough. If you think in group logic, with cash reuse and an organised transfer, the holding comes into its own. Our dedicated piece, holding business premises in an SCI or via the operating company, details the cases where interposition adds nothing and where it changes everything. For the manager's overall strategy, see also the personal holding and long-term remuneration.

The teams at Hayot Expertise, registered with the Order of Chartered Accountants of Île-de-France, structure these set-ups by combining holding taxation and the manager's wealth management. Our holding taxation support in Paris and our management of the manager's wealth take over once the trade-off is settled.