When a Société Civile Immobilière (SCI, Civil Society for Real Estate Management) is taxed under the corporate tax system (Impôt sur les Sociétés (IS), Corporate Tax), the capital gains tax on property sales becomes significant. Reducing current taxes is possible through deductions like depreciation, but this increases the taxable base upon sale.
1.SCI Tax Regimes 📊
SCI can be taxed under either the personal income tax (Impôt sur le Revenu (IR), Personal Income Tax) or corporate tax (Impôt sur les Sociétés (IS), Corporate Tax):
• IR: Participants pay taxes individually, proportional to their share.
• IS: The company pays taxes at a rate of 15% (on profits up to €42,500) or 25%.
Examples of choosing between IR and IS will be covered in separate articles.
2.Who is Subject to IS Taxation? 🏢
SCI automatically switches to IS (Corporate Tax) if it engages in commercial activities, such as renting furnished property. The exception is if commercial income is less than 10% of the total income.
Details and exceptions will be discussed in the next article.
3.Deductions and Depreciation in SCI under IS 💰
In SCI under IS, you can deduct expenses related to property management: notary fees, loan interest, repairs, taxes, etc. Additionally, depreciation of buildings (but not land) is allowed, which reduces the taxable base.
Depreciation calculations and the list of deductible expenses will be provided with examples.
4.Taxation on Property Sales 🏠
When selling property in SCI under IS, it is subject to capital gains tax under the professional capital gains system. The capital gain is calculated as the difference between the sale price and the Valeur Nette Comptable (BSC, Net Book Value) — the book value of the property (original price minus depreciation).
• Formula: Capital Gain = Sale Price - BSC.
Since depreciation reduces BSC over time, the taxable base increases.
Examples of calculations will be discussed in the next article.
5.Social Contributions on the Sale of SCI Shares 💸
The sale of SCI shares under IS (Corporate Tax) is subject to the Prélèvement Forfaitaire Unique (PFU, Flat Tax) of 30% (12.8% income tax and 17.2% social contributions). You can also opt for progressive taxation.
The pros and cons of these options will be covered in a separate article.
Each of these points will be discussed with calculations and practical examples in the following articles.
Contact us to discuss your specific situation.
1.SCI Tax Regimes 📊
SCI can be taxed under either the personal income tax (Impôt sur le Revenu (IR), Personal Income Tax) or corporate tax (Impôt sur les Sociétés (IS), Corporate Tax):
• IR: Participants pay taxes individually, proportional to their share.
• IS: The company pays taxes at a rate of 15% (on profits up to €42,500) or 25%.
Examples of choosing between IR and IS will be covered in separate articles.
2.Who is Subject to IS Taxation? 🏢
SCI automatically switches to IS (Corporate Tax) if it engages in commercial activities, such as renting furnished property. The exception is if commercial income is less than 10% of the total income.
Details and exceptions will be discussed in the next article.
3.Deductions and Depreciation in SCI under IS 💰
In SCI under IS, you can deduct expenses related to property management: notary fees, loan interest, repairs, taxes, etc. Additionally, depreciation of buildings (but not land) is allowed, which reduces the taxable base.
Depreciation calculations and the list of deductible expenses will be provided with examples.
4.Taxation on Property Sales 🏠
When selling property in SCI under IS, it is subject to capital gains tax under the professional capital gains system. The capital gain is calculated as the difference between the sale price and the Valeur Nette Comptable (BSC, Net Book Value) — the book value of the property (original price minus depreciation).
• Formula: Capital Gain = Sale Price - BSC.
Since depreciation reduces BSC over time, the taxable base increases.
Examples of calculations will be discussed in the next article.
5.Social Contributions on the Sale of SCI Shares 💸
The sale of SCI shares under IS (Corporate Tax) is subject to the Prélèvement Forfaitaire Unique (PFU, Flat Tax) of 30% (12.8% income tax and 17.2% social contributions). You can also opt for progressive taxation.
The pros and cons of these options will be covered in a separate article.
Each of these points will be discussed with calculations and practical examples in the following articles.
Contact us to discuss your specific situation.