SCI IS 2026: depreciate, capitalise, and pass on your property portfolio

The SCI taxed at corporation tax (IS) is a property capitalisation vehicle: it allows you to depreciate the building, reduce current tax to 15% on initial profits, and reinvest rental income into further acquisitions without immediate tax friction. The trade-off is that disposal is heavily taxed and profit distributions are taxed twice. It is a regime suited to long-term wealth-building investors whose objective is capitalisation — not immediate income.

How does an SCI IS work?

The SCI IS (Société Civile Immobilière taxed at corporation tax) is subject to corporation tax (impôt sur les sociétés — IS) on its net taxable profit. It is no longer fiscally transparent — it is the company that pays tax, not the partners directly.

Simplified mechanism:

1. The SCI collects rental income and deducts all its expenses (including depreciation)
2. It pays corporation tax on the residual profit
3. The post-tax profit remains within the company (retained earnings)
4. If partners wish to receive the money → dividend distribution → 30% flat tax

Depreciation: the engine of the SCI IS

The SCI IS may deduct accounting depreciation (amortissements) on the building, furniture, and works. Unlike the SCI IR (where depreciation of the building is prohibited), this is a major structural advantage for reducing the taxable base.

Applicable depreciation rules

• Land: not depreciable — must be separated from the purchase price (typically 10–20% depending on location)
• Building (excluding land): straight-line depreciation over 25–40 years depending on condition — 30 years (3.33%/year) is standard practice
• Furniture and fittings: 5–10 years (10–20%/year) — 7 years is standard practice
• Major works: depreciated over their own useful life

Calculation formula

Worked example — year 1

Flat purchased for €250,000 (land 15% = €37,500, building €212,500), rent €1,100/month, expenses €5,000/year, interest €6,000/year, furniture €8,000.

Unlike an SCI IR, a loss in an SCI IS cannot be offset against the partners' personal income — it is carried forward indefinitely against future IS profits. It will be used in the years when the SCI generates a profit (end of the loan, rising rents, lower depreciation).

Corporation tax rates in 2026: 15% or 25%?

In 2026, an SCI IS benefits from the reduced rate of 15% on the first €42,500 of profit (bracket confirmed for 2026 — Article 219 CGI), provided two conditions are met:

1. The company's turnover (excluding VAT) is below €10 million
2. The share capital is fully paid up and held at least 75% by natural persons

For profits above €42,500, the standard rate of 25% applies.

Dividends: 30% flat tax

When partners wish to receive the profits of the SCI IS, they vote a dividend distribution. Those dividends are subject to the flat tax (prélèvement forfaitaire unique — PFU) of 30% — comprising 12.8% income tax and 17.2% social charges (prélèvements sociaux).

Progressive scale option: partners may elect to have dividends taxed under the progressive income tax scale instead, but with a 40% allowance on the gross amount. The election is global (it applies to all dividends for the year). It is advantageous only for partners with a marginal tax rate (TMI) of 11% or 0%.

Disposal under an SCI IS: the critical point

This is the main drawback of the SCI IS. The capital gain on the disposal of a property is taxed on the net book value (valeur nette comptable — VNC), i.e. the cost of acquisition reduced by all accumulated depreciation.

After 20 years of depreciation at 3.33%/year, the net book value of the building is reduced by approximately 67%. The accounting capital gain is therefore substantially higher than the actual economic gain. There is no taper relief for length of ownership under corporation tax.

The disposal generates a capital gain taxed at 25% under IS, then a liquidation distribution taxed at 30% flat tax. The combined tax burden can exceed 40–50% of the real economic gain depending on the situation.

SCI IS and the Finance Act 2025: residual advantage over LMNP réel

Since 16 February 2025, the Finance Act 2025 (LFI 2025, Art. 84) requires depreciation deducted under the LMNP actual-expenses regime (LMNP réel) to be added back to the taxable capital gain at resale. In practice, the LMNP réel loses part of its historically favourable tax treatment on exit.

This rule does not apply to the SCI IS — which is subject to the corporation tax regime, not the personal income tax rules. On this specific point, the SCI IS retains a relative advantage over the LMNP réel post-LFI 2025. However, this advantage must be weighed against the weight of IS plus flat tax at disposal, compared with the personal income tax exemptions still available under LMNP (even with the depreciation add-back).

Capitalisation: when the SCI IS really comes into its own

The SCI IS is optimal when profits are not distributed but reinvested:

• The SCI acquires a second property using accumulated cash
• It repays the loan faster thanks to net post-IS cash flows (15% vs 47% at a 41% marginal rate)
• It builds up growing equity at the pace of a business owner, not a private individual

Over 20 years, the difference in capitalisation between IS at 15% and income tax at 41% can represent one or two additional acquisitions on a portfolio of three to four properties. This is the decisive argument for investors in a wealth-building phase with a high marginal tax rate.

Illustration — capitalisation after IS

Annual profit before IS: €5,000. Over 20 years, with reinvestment of net cash flows.

Excluding disposal impact. The IS capitalisation advantage is partially offset by IS plus flat tax on the capital gain at exit.

Formation and annual obligations

Formation

• Drafting of articles of association (including IS election clause or provision for later election)
• Share capital freely set by the partners
• Registration with the Companies Registry (RCS)
• IS election filed with the local tax office (SIE) within 3 months of incorporation (or later — irrevocable once filed)
• Formation cost: €1,000–€2,500 (notary/solicitor + registry fees)

Annual obligations under IS

• Mandatory bookkeeping (balance sheet, profit and loss account, notes to the accounts)
• Annual IS return form 2065
• Corporation tax paid by quarterly instalments
• Accounting cost: €800–€1,500/year (a qualified accountant is essential)

FAQ

In summary

• IS at 15% on the first €42,500 of profit, 25% above that threshold
• Depreciation deductible — often reduces the taxable profit to zero
• Powerful capitalisation when profits are not distributed
• Flat tax 30% on distributed dividends (double taxation)
• Heavy disposal charge: IS on the accounting capital gain (net book value) + flat tax on liquidation distribution — no taper relief for length of ownership
• Irrevocable choice: the IS election cannot be reversed
• Best suited to investors with a marginal tax rate of 41–45%, a long time horizon, and a profit reinvestment strategy
• Residual advantage over LMNP réel post-LFI 2025 on capital gains (depreciation add-back does not apply under IS)