SCI IR or SCI IS: which structure to choose for your French rental investment in 2026?
In short
The SCI at IR is transparent (property income, déficit foncier possible, no depreciation) and suits simple wealth holding. The SCI at IS depreciates the property and smooths tax, but profit extraction (30% flat tax) and capital gains on net book value make it mainly relevant for reinvesting and long-term accumulation.
An SCI (Société Civile Immobilière — French property holding company) can be subject to two radically different tax regimes. The SCI IR is fiscally transparent — the partners declare rental income in their personal tax returns. The SCI IS is a company taxed like a business — it pays corporation tax (impôt sur les sociétés) on its profits, and the partners then pay the flat tax on any dividends distributed. These two structures do not share the same strengths, and the right choice depends on your time horizon, your objectives, and your marginal tax rate (TMI).
The essentials at a glance
| Criterion | SCI IR | SCI IS |
|---|---|---|
| Who pays the tax? | The partners (rental income) | The company (corporation tax) |
| Base tax rate | TMI + social charges 17.2% | 15% corporation tax (≤ €42,500) then 25% |
| Depreciation (amortissements) | Not deductible | Deductible |
| Rental property loss (déficit foncier) | Deductible against global income (cap €10,700) | Carried forward indefinitely against BIC (not global income) |
| Dividends | No distribution (income flows directly) | Flat tax 30% (12.8% income tax + 17.2% social charges) |
| Capital gains on sale | Private individual regime (IR exemption after 22 years) | Corporation tax regime (no taper relief) |
| Furnished lettings | Risk of forced switch to IS if > 10% of receipts | Permitted without restriction |
| Estate transfer | Gift of shares (€100k allowance per child) | Idem |
| IS option | Available → irreversible | Default (or on election) |
| Revert to IR | — | Impossible |
Ongoing taxation: the SCI IS has the apparent advantage
The SCI IS is subject to corporation tax: 15% up to €42,500 of profit, then 25% above that threshold. On the face of it, this is attractive compared with a partner on a marginal tax rate (TMI) of 30% or 41%.
However, the SCI IS can deduct depreciation (amortissements) — building over 25–40 years, furniture over 5–10 years. In many cases, depreciation reduces the taxable profit to zero, and the corporation tax liability is nil.
The SCI IR does not depreciate its assets. On the other hand, it can offset a déficit foncier (rental property loss carry-forward) against each partner’s global income — which is attractive where the marginal tax rate is high and deductible charges are substantial.
Worked example
Flat purchased for €250,000 (of which land 15% = €37,500, building €212,500), rent €1,050/month, charges €4,800/year, loan interest €5,500/year, building depreciation (€212,500 ÷ 30 = €7,083), furniture depreciation (€8,000 ÷ 7 = €1,143). Partner’s marginal tax rate: 30%.
| Tax calculation | SCI IR | SCI IS |
|---|---|---|
| Annual rent | €12,600 | €12,600 |
| Deductible charges | − €4,800 | − €4,800 |
| Loan interest | − €5,500 | − €5,500 |
| Depreciation (amortissements) | — | − €2,300 (capped at income − charges) |
| Taxable result | €2,300 | €0 |
| Tax (income tax + social charges or corporation tax) | €1,085 | €0 |
In this example, the SCI IS eliminates the current tax charge entirely through depreciation.
Distributing income: the double taxation trap of the SCI IS
In an SCI IS, money stays within the company. To receive it personally, the partners must pay themselves dividends, which are taxed at the flat tax rate:
// Double taxation — SCI IS
net_profit_after_ct = profit × (1 − 0.15) // or 0.25 above €42,500
net_dividend = net_profit_after_ct × (1 − 0.30) // flat tax 30%
On a profit of €10,000, the partner receives net: 10,000 × 0.85 × 0.70 = €5,950. The combined effective tax rate is 40.5% (corporation tax 15% + flat tax 30%).
In an SCI IR, the same €10,000 profit is taxed at the marginal rate (TMI) plus social charges (prélèvements sociaux). For a partner on a 30% TMI: 10,000 × 47.2% = €4,720 in tax. The partner retains €5,280 — slightly less than under the IS. But the income is received directly, without the need for a formal dividend distribution.
The SCI IS is therefore advantageous only if you do not distribute the profits but instead reinvest them within the structure or allow them to accumulate.
The sale: the decisive argument in favour of the SCI IR
This is often the strongest argument for or against the IS regime.
SCI IR: capital gains are taxed under the private individual regime. Full income tax exemption after 22 years of ownership, full social charges exemption after 30 years — the same mechanism as for an individual investor.
SCI IS: the accounting capital gain is calculated on the net book value (valeur nette comptable) — that is, the purchase price less accumulated depreciation. After 20 years of depreciation at 3.33% per year, the net book value is approximately 33% of the original purchase price. The accounting capital gain will therefore be substantially higher than the actual economic gain.
Assumption: flat purchased for €200,000 (building €170,000), sold for €280,000 after 20 years. Accumulated depreciation = €170,000 × 20/30 = €113,333. Net book value = €200,000 − €113,333 = €86,667.
| Sale after 20 years | SCI IR | SCI IS |
|---|---|---|
| Sale price | €280,000 | €280,000 |
| Tax reference cost | €215,000 (purchase + costs) | €86,667 (net book value) |
| Taxable capital gain | €65,000 | €193,333 |
| Income tax taper relief (66% after 20 years) | €42,900 | None |
| Taxable base (income tax or corporation tax) | €22,100 | €193,333 |
| Corporation tax (25%) / Income tax (19%) | €4,199 income tax + social charges | €48,333 corporation tax |
| Flat tax on liquidation dividends | — | ~€43,000 |
| Estimated total tax | ~€11,000 | ~€91,000 |
The SCI IS costs approximately €80,000 more in tax than the SCI IR on sale in this example. This is the principal structural disadvantage of the SCI IS — one that is frequently underestimated at the time the company is set up.
Estate transfer: a slight advantage for the SCI IR
Both structures allow shares to be gifted to children under the €100,000 allowance per child per 15-year period. Dismemberment of ownership (bare ownership to children, usufruct to parents) is possible in both cases.
Advantage of the SCI IR: shares are valued on the basis of undepreciated rental income — a simpler basis to defend for tax purposes. The illiquidity discount is also more readily argued.
SCI IS: shares are valued on the company’s net assets (shareholders’ equity). After years of depreciation, the book value may be lower than the true market value — which reduces the taxable base for the gift. A potential advantage, but more complex to manage.
When to choose SCI IR vs SCI IS
Choose the SCI IR if:
- • Bare rental (location nue) only — no furnished lettings
- • Your primary objective is structured estate transfer
- • You intend to distribute income each year
- • Low marginal tax rate (11% or 0%) → low income tax + social charges
- • A sale is anticipated within 20–30 years
- • Significant charges generating a rental property loss (déficit foncier)
Choose the SCI IS if:
- • You wish to reinvest profits in further properties through the SCI
- • Furnished or mixed lettings
- • Very high marginal tax rate (41% or 45%) → 15% corporation tax more advantageous
- • Long horizon with no planned sale
- • You are building a property portfolio
- • The company itself will be transferred or sold (rather than the individual assets)
An (almost) irreversible decision
SCI IR → SCI IS: the IS option can be elected at any time. However, it triggers a deemed disposal — an immediate tax charge on unrealised capital gains as if the assets had been sold. Professional advice should be sought before making this move.
SCI IS → SCI IR: impossible. The IS option is irreversible.
This is why the initial choice must be made with care, taking into account not only the current tax position but also the long-term estate strategy.
FAQ
Can you switch tax regime (IR → IS or IS → IR)?
The switch from IR to IS is possible at any time — but it is irreversible. Once the IS option has been exercised, there is no going back. Switching from IS → IR is impossible.
Can an SCI IS carry out furnished lettings?
Yes. Unlike an SCI IR, an SCI IS can let properties furnished without any tax restriction — this is in fact one of its advantages over the SCI IR.
Can you place assets in an SCI IS and rent them to yourself?
Technically yes (letting between a company and one of its shareholders). However, the rent must be set at market rate, failing which there is a risk of tax reclassification (acte anormal de gestion — uncommercial transaction).
Is an SCI IS subject to VAT?
Not for the letting of residential property (bare or furnished) used as a principal residence. VAT does apply to para-hotel activity, office lettings, and so on.
What is the minimum share capital for an SCI?
There is no legal minimum share capital for an SCI — one euro is sufficient. In practice, capital of €1,000 to a few thousand euros is recommended for credibility with lenders.
In summary
| Dimension | SCI IR wins when… | SCI IS wins when… |
|---|---|---|
| Ongoing tax | Low marginal rate or strong rental loss | High marginal rate + depreciation |
| Income distribution | Always (no double taxation) | Reinvestment (no distribution) |
| Sale | Always (private individual taper relief) | Never, or on restructuring |
| Estate transfer | Simple and efficient | Complex but reduced book value base |
| Furnished lettings | Risky | No restriction |
| Reversibility | Greater flexibility | Permanent decision |
SCI IR or IS: find the right structure for your project
Ongoing taxation, sale at 10/20 years, dividends — RentValo calculates both side by side.
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