The SCI (French property company): a tool for managing and passing on property

The SCI (société civile immobilière) is a legal form often used to manage and pass on family property. It brings together several properties held by members of the same family within a separate legal entity. In this article, we look at the family SCI and the tax options (income tax or corporation tax) open to its partners.

The SCI is a French property company widely used by families to hold real estate together. It allows several properties to be held in one legal entity, separate from the partners themselves, which simplifies management and transmission.

The family SCI: a tool for managing and passing on property

A family SCI is an SCI whose partners are members of the same family. It can be formed between close relatives (parents and children, spouses, brothers and sisters) to manage and pass on the family’s property efficiently.

The family SCI has several advantages:

1. Simpler management: the SCI centralises the management of the properties in one entity, making lettings, maintenance work and rent collection easier.
2. Easier transmission: the SCI makes it easier to pass property on to heirs, avoiding the difficulties of joint ownership and allowing shares to be divided fairly among family members.
3. Protection: the SCI can protect family assets in the event of disputes or claims, by separating the SCI’s properties from the partners’ personal assets.

Taxing the SCI: income tax or corporation tax?

When creating an SCI, the partners choose between two tax regimes: income tax (IR) and corporation tax (IS).

1. Income tax (IR): this is the default regime. The SCI’s profits are taxed directly in the hands of the partners, according to their shares. Each partner declares their share of the SCI’s rental income in their personal tax return. This regime is open to any SCI that lets unfurnished property, family-owned or not.
2. Corporation tax (IS): under this regime, the SCI is a separate taxpayer subject to corporation tax, and its profits are taxed at the corporation tax rate. This option can be preferable if the partners wish to reinvest the profits in the SCI or to depreciate the buildings.

Note that opting for corporation tax is in principle irrevocable. It is therefore advisable to seek professional advice (notaire, accountant) to choose the regime best suited to your situation and objectives.