SCI at income tax 2026: fiscal transparency in the service of estate planning
In short
An SCI at IR is fiscally transparent: each partner is taxed on their share of the result as property income (real regime), at the income-tax scale + 17.2% social levies. It allows the déficit foncier (€10,700/yr per partner) but not depreciation of the property.
The SCI IR — SCI (Société Civile Immobilière — French property holding company) taxed at income tax — is the preferred estate planning vehicle for families wishing to invest together, organise the transfer of their property portfolio, and optimise the tax treatment of their rental income. It is built on the principle of fiscal transparency: the company itself pays no tax — it is the partners who declare their share of income in their own personal tax returns.
Fiscal transparency: the basic principle
An SCI IR is not itself a taxpayer. It is fiscally transparent(CGI art. 8): the SCI's result is taxed directly in the hands of its partners, in proportion to their shareholding.
Formula:
// Tax calculation for an SCI IR partner
sci_result = annual_rent − actual_charges
partner_base = sci_result × ownership_share
partner_tax = partner_base × (partner_TMI + 0.172)
// If partner_base < 0 → déficit foncier (rental property loss — CGI art. 156 rules apply)
Which charges are deductible in an SCI IR?
An SCI IR falls under the actual-expenses rental regime (régime réel foncier). The micro-foncier regime never applies. The deductible charges are the same as for individual bare rental under the actual-expenses regime (CGI art. 31):
- Loan interest (credit taken out in the SCI's name)
- Property tax (taxe foncière)
- Non-occupier home insurance (assurance PNO)
- Service charges (charges de copropriété)
- Management fees and letting agent fees
- Maintenance and repair works (not construction or extension works)
- SCI accounting fees
However, depreciation (amortissements) is not deductible in an SCI IR — unlike in an SCI IS. This is a fundamental distinction from the furnished rental regimes (LMNP/LMP/SCI IS).
Déficit foncier (rental property loss carry-forward) in an SCI IR
If deductible charges exceed rental receipts, the SCI generates a déficit foncier (rental property loss carry-forward). This deficit is allocated among the partners in proportion to their shares, and each partner may offset it according to the usual rules:
- Portion excluding loan interest: deductible against the partner's global income up to €10,700/year — directly reducing income tax
- €21,400 cap: where works improve the property's EPC rating from E/F/G to A/B/C/D (scheme available until 31/12/2027)
- Portion arising from loan interest (and any excess above the cap): carried forward against rental income for up to 10 years
Example — SCI with 2 partners
SCI with 2 equal partners (50% each). Rent: €20,000, charges: €28,000 (of which €5,000 loan interest), total deficit: €8,000. Partner A: 41% marginal rate. Partner B: 30% marginal rate.
| Item | Partner A (41%) | Partner B (30%) |
|---|---|---|
| Share of deficit | − €4,000 | − €4,000 |
| Of which excl. interest (75%) | − €3,000 | − €3,000 |
| Offset against global income | − €3,000 | − €3,000 |
| Income tax saving | €1,230 | €900 |
Estate transmission: the SCI IR's principal advantage
The SCI IR is particularly effective for organising the transfer of a property portfolio. The main mechanisms are as follows:
1. Gift of company shares
You may give SCI shares to your children. The €100,000 allowance per child applies to the value of the shares, renewable every 15 years. With 2 children, you can transfer €200,000 of share value every 15 years free of gift tax.
2. Split ownership (démembrement de propriété)
You may give the bare ownership (nue-propriété) of the shares to your children whilst retaining the life interest (usufruit). The consequences are:
- You continue to receive the rental income (income attached to the life interest)
- Your children pay no inheritance tax on the shares at your death (they already hold the bare ownership)
- The taxable value is calculated on the bare ownership only — often 40% to 60% of the total value depending on your age
3. Minority and illiquidity discount
The French tax authority and courts accept a 10% to 20% discount on the value of SCI shares relative to the underlying property value, on the grounds that shares are less liquid than the property itself and that minority partners have less decision-making power. This discount reduces the taxable base on gifts.
Setting up and running an SCI IR
Formation
Creating an SCI involves:
- Drafting the articles of association: management, share allocation, decision-making rules, share transfer conditions — to be carried out with a notaire or solicitor
- Share capital: freely set (often €1,000 to a few thousand euros)
- Registration with the RCS (Companies Register at the Commercial Court) — cost: €40 to €70
- Total formation cost: €1,000 to €2,500 depending on the degree of customisation of the articles
Annual obligations
- Maintaining accounts (even simplified bookkeeping)
- Annual tax return 2072-S (SCI taxed at income tax)
- Annual general meeting (required under the articles)
- Accounting cost: €300 to €600/year depending on complexity
Capital gains in an SCI IR
This is a crucial point — and a significant advantage of the SCI IR over the SCI IS.
Capital gains realised by partners of an SCI IR fall under the private individual immovable property capital gains regime (CGI art. 150 U):
- Full income tax exemption after 22 years of ownership of the shares
- Full social charges (prélèvements sociaux) exemption after 30 years
- Progressive tapered relief from the 6th year onwards
- Calculation base: sale price minus acquisition price plus costs (notaire fees, capitalised works)
Unlike the SCI IS, there is no depreciation add-back (since depreciation is not deductible in an SCI IR). And unlike LMNP réel since the Finance Act (Loi de Finances) 2025, the SCI IR is not affected by the depreciation add-back on capital gains.
SCI IR vs individual investment: when the SCI makes sense
| Situation | SCI IR relevant? |
|---|---|
| Investing alone, furnished property | ❌ LMNP réel is more tax-efficient |
| Investing alone, bare rental, yield focus | ⚠️ Useful if long-term estate planning is the goal |
| Investing as a couple (unmarried) | ✅ Secure legal framework vs joint ownership (indivision) |
| Investing with children | ✅ Ideal for share gifts and estate transmission |
| Building a multi-property portfolio | ✅ Centralised management, organised transmission |
| Very different marginal rates between partners | ✅ Optimisation through share allocation |
| Goal: quick income without estate planning | ⚠️ LMNP may be simpler and more profitable |
FAQ
Can an SCI IR carry out furnished lettings?
An SCI IR may let property furnished on an ancillary basis (roughly less than 10% of receipts), but beyond that threshold it automatically switches to corporation tax (CGI art. 206-2). For a predominantly furnished investment, the SCI IR is not suitable — opt instead for individual LMNP or an SCI IS.
Can an SCI IR use the micro-foncier regime?
No. SCIs taxed at income tax are always assessed under the actual-expenses rental regime (régime réel foncier). The micro-foncier regime is reserved for individuals who let property directly.
Is an SCI IR subject to VAT?
Not as a general rule for bare residential lettings (location nue). VAT applies in specific cases (para-hotel activity, commercial lets).
How is capital gains tax calculated in an SCI IR?
The private individual capital gains regime applies (CGI art. 150 U): full exemption from income tax after 22 years of ownership, and from social charges (prélèvements sociaux) after 30 years. The gain is calculated pro rata to each partner's share.
Can an existing property be contributed to an SCI?
Yes, by way of a contribution in kind (apport en nature). The contribution is subject to transfer duties (as with a sale) and may trigger a taxable gain if the property has appreciated in value. Contributing an existing property to an SCI is a significant estate planning decision — consult a notaire.
In summary
- Fiscal transparency: the SCI pays no tax; partners declare their own share
- Actual-expenses rental regime mandatory — micro-foncier does not apply in an SCI
- Depreciation not deductible — unlike an SCI IS or LMNP
- Déficit foncier (rental property loss carry-forward): deductible against each partner's global income (capped at €10,700/year)
- Private individual capital gains regime: full income tax exemption after 22 years, social charges after 30 years
- Estate planning vehicle: share gifts, split ownership (démembrement), illiquidity discount
- Bare rental only — significant furnished activity triggers automatic switch to corporation tax
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Tax per partner, déficit foncier, capital gains and comparison with individual investment.
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