LMNP or SCI: which structure to choose for your rental investment in 2026?

LMNP or SCI: this is the question most frequently asked by investors who have moved beyond their first property, or who wish to bring a family member or partner into their project. Both structures are lawful, well-established, and fiscally very different. The right choice depends on your tax profile, your intended holding period, your family situation — and the type of letting you have in mind.

Across the thousands of simulations run on RentValo, investors using the LMNP actual-expenses regime (LMNP réel) show zero annual tax in more than 70% of cases during the first ten years. An SCI taxed at corporation tax (SCI IS) achieves a comparable result over the long term, but with a very different legal structure and management obligations.

What you need to understand before comparing

LMNP and SCI are not two tax regimes on the same footing: one is an individual tax status, the other is a legal entity. The meaningful comparison involves four combinations:

LMNP réel vs SCI IS: the central comparison

These two structures are most commonly weighed against each other for a furnished or mixed-use long-term investment.

Ongoing taxation

LMNP réel (actual-expenses regime): you deduct real charges (interest, property tax (taxe foncière), insurance, management fees) and apply depreciation (amortissements) on the building (25–30 years), furniture (5–7 years), and works. Depreciation frequently reduces taxable profit to zero — resulting in no income tax and no social charges (prélèvements sociaux).

SCI IS (corporation tax): the company pays corporation tax (IS) on its profit (15% up to €42,500, 25% above). It may also depreciate assets. However, to extract money personally, the SCI must distribute dividends — which are subject to the 30% flat tax (prélèvement forfaitaire unique). Double taxation is real, even if it can be mitigated (director’s remuneration, repayment of shareholder current accounts).

Worked example: flat purchased for €220,000, rent €950/month

Assumptions: mortgage repayment €800/month of which €320 is interest (year 1), real charges €4,200/year, depreciation — building (€187,000 / 30 years = €6,233) + furniture (€7,000 / 7 years = €1,000) = €7,233/year.

In this example the two structures are equivalent because profit is nil. The difference emerges as soon as the SCI IS distributes dividends (an additional 30% flat tax applies) or at the point of sale.

LMNP réel vs SCI IR: when the SCI IR still makes sense

An SCI taxed at income tax (SCI IR) is assessed in the rental income category (revenus fonciers). Each partner declares their share of the net result at their own marginal tax rate (TMI). Depreciation of the building is not deductible (unlike under the BIC or IS regimes).

The SCI IR is relevant in two specific situations:

1. Estate planning and succession. An SCI allows you to split the company shares (démembrement), to make progressive gifts to children whilst retaining the usufruct (income rights), and to plan succession over several years. The €100,000 allowance per child every 15 years applies to the value of the shares, which may be discounted by 15–20% relative to the underlying property value (minority and illiquidity discount).

2. Pooling assets between co-investors. If you are investing with your spouse, a sibling, or a friend, an SCI provides a clear legal framework: bespoke articles of association, allocation of shares, decision-making rules, and exit provisions agreed from the outset. Co-ownership (indivision) — the alternative without a formal structure — is far more fragile in the event of a dispute.

However: if your objective is to maximise immediate net cash flow and you are investing alone or as a married couple, the LMNP réel regime is almost always superior to the SCI IR.

Capital gains at resale: the LMNP advantage

This is often the decisive factor over the long term.

LMNP réel: the private individuals' capital gains regime applies, with progressive taper relief — full exemption from income tax after 22 years of ownership, and from social charges (prélèvements sociaux) after 30 years. Since the Finance Act 2025 (Loi de Finances — LFI 2025, Art. 84), depreciation (amortissements) actually deducted under LMNP réel is added back to the taxable gain at resale. The advantage remains significant for long holding periods.

SCI IS: the capital gain is calculated on the net book value (NBV) — purchase price less cumulative depreciation. After 15–20 years of depreciation, the NBV is very low, generating a very large taxable accounting gain — taxed at 25% IS, then 30% flat tax on dividends. The total tax bill can exceed 40% of the real economic gain. No taper relief for length of ownership applies.

SCI IR: the private individuals' regime applies, identical to LMNP on this point (progressive taper relief, income tax exemption at 22 years, social charges exemption at 30 years). No depreciation add-back, since building depreciation is not deductible under the rental income category in the first place.

Assumptions: property purchased for €200,000 (land 15%, building €170,000), sold for €300,000 after 15 years. Cumulative depreciation = €170,000 / 30 years × 15 years = €85,000. SCI IS NBV = €115,000. LMNP/SCI IR acquisition cost = €215,000 (including notary fees at 7.5%). Marginal tax rate (TMI) 30%.

Indicative estimates. The SCI IS combines IS on the accounting gain (calculated on NBV) with flat tax on liquidation dividends, with no taper relief for length of ownership.

The SCI IS carries a significant tax penalty at resale after a long holding period with substantial accumulated depreciation. This is the structure's principal drawback.

Estate planning and succession: the SCI advantage

On this point, an SCI (IR or IS) clearly outperforms individual LMNP status.

Under LMNP, the property sits in your personal estate. On your death, it passes through succession with transfer duties calculated on the market value of the asset. No smoothing mechanism is available.

Through an SCI, you can:

• Make progressive gifts of shares to your children, using the €100,000 allowance per child every 15 years — without losing management control or rental income if you retain the usufruct
• Discount the value of shares relative to the underlying property: an illiquidity or minority discount may be accepted by the tax authority (5–20% depending on the articles and case law — not automatic, and must be justified)
• Set out governance rules in the articles of association (pre-emption rights, conditions for transfer to third parties) to prevent fragmentation of the asset between heirs

If passing assets to your children is a key objective, an SCI — even if less tax-efficient on a day-to-day basis — may prove more advantageous over the full life of the investment.

Complexity and running costs

Which structure suits which investor profile?

What RentValo calculates for this decision

On RentValo, the regime comparison feature analyses simultaneously:

• LMNP réel, LMNP micro-BIC, LMP
• SCI IR (with configurable ownership share)
• SCI IS (with reduced rate of 15% and standard rate of 25%)
• Actual-expenses rental income regime (régime réel foncier), micro-foncier regime

For each regime, RentValo displays the after-tax net yield, monthly cash flow, estimated annual tax, and projected capital gains tax at 10 years, 20 years, and at the end of the mortgage term. You get a complete picture from a single simulation.

The analysis is a decision-support tool. For your personal and estate circumstances, please consult a notary or a chartered accountant specialising in property.

FAQ

In summary

There is no universally superior structure: LMNP réel and SCI serve different objectives.

• LMNP réel: maximum short-term tax efficiency, high net cash flow, straightforward resale — but the asset remains in your personal estate with no mechanism for structured transmission
• SCI IR: a tool for estate planning and multi-partner management in bare rental — less tax-efficient on an ongoing basis
• SCI IS: long-term capital accumulation and portfolio consolidation — significant tax penalty at resale after substantial accumulated depreciation

For the vast majority of investors starting out with a single furnished property, LMNP réel remains the most tax-efficient starting point. An SCI becomes relevant once estate planning considerations, multiple co-investors, or portfolio scale come into play.