On paper, the match looks settled: 15% corporate income tax up to €42,500 of profit (article 219, I-b of the French General Tax Code — CGI) on one side; your marginal income tax rate plus 17.2% social charges — 47.2% in total for a 30% bracket — on the other. That annual comparison is where most guides stop. And it is precisely where they mislead you.
Because the real gap shows at resale. Under IS, the taxable gain of an SCI (société civile immobilière — French non-trading property company) falls under the business capital gains regime: sale price minus net book value, so the depreciation deducted comes back into the base, with no holding-period allowance. Under IR, the private capital gain is progressively erased — income tax exemption after 22 years, social charges exemption after 30 years. Over 15 or 20 years, this single line item can reverse the ranking.
€57,750 versus €13,062: that is the tax on the resale capital gain after 20 years in our worked projection, depending on whether the SCI is under IS or under IR — before even the 31.4% flat tax due to distribute the sale proceeds to the shareholders.
What this article covers
This article compares the two tax regimes of a French SCI in 2026: annual taxation of rents, depreciation, the tax on rental income (CRL), dividends at the 31.4% flat tax, and above all exit taxation — the private capital gain with its allowances versus the gain computed on net book value. It works through a 20-year projection and details the holding-company layer: the parent-subsidiary regime and tax consolidation.
SCI under corporate tax or income tax: two opposing logics
By default, a société civile immobilière falls under article 8 of the CGI: it is "tax-transparent" (translucide). The company pays no tax itself; each individual shareholder is taxed on their share of the result as property income, at the progressive income tax scale, plus 17.2% social charges — a rate maintained in 2026 for unfurnished rents as well as for private real estate capital gains.
This regime opens the door to the property income deficit (déficit foncier) mechanism: when expenses exceed rents, the deficit can be set against overall income up to €10,700 per year (article 156, I-3° CGI), raised to €21,400 for energy renovation works taking a dwelling rated E, F or G to class A, B, C or D — a doubling extended to 31 December 2027 by the 2026 Finance Act. This lever combines with the DPE obligations weighing on a family SCI that owns a thermal sieve.
The election for corporate tax is made under article 239 of the CGI. Since the 2019 Finance Act (Act No. 2018-1317, art. 50), it is no longer irrevocable from the outset: the company may renounce it up to the 5th financial year following the year of the election, before the end of the month preceding the deadline for the first corporate tax instalment of the year concerned (BOI-IS-CHAMP-20-20-30). Past that window, the election becomes irrevocable; and after a renunciation, no new election is possible.
IS can also apply automatically: furnished letting being a commercial activity (articles 35 and 206, 2 CGI), an SCI under IR that furnishes its units switches to IS as of right as soon as commercial receipts exceed 10% of total receipts excluding VAT (BOI-IS-CHAMP-10-30, §320).
| Criterion | SCI under IR | SCI under IS | Reference |
|---|---|---|---|
| Taxation of rents | Income tax scale + 17.2% social charges | IS 15% up to €42,500, 25% above | art. 8 and 219 CGI |
| Building depreciation | No | Yes, by components (land excluded) | ordinary IS rules |
| Deficit offset against overall income | Yes: €10,700/year (€21,400 for energy renovation) | No — the deficit stays at company level | art. 156, I-3° CGI |
| Capital gain on resale | Private individuals' regime, 22/30-year allowances | Sale price − net book value, full rate | art. 150 U and following; art. 219 CGI |
| Getting cash to the shareholder | Direct (result already taxed at shareholder level) | Dividends at the 31.4% flat tax | art. 200 A CGI; 2026 SSFA, art. 12 |
| CRL at 2.5% of rents | No (individual shareholders only) | Yes, buildings completed 15 years ago or more | art. 234 nonies CGI |
| IFI wealth tax on the units | Taxable | Taxable — the election is neutral | art. 965 CGI |
Two further levies complete the picture. The tax on rental income (CRL — contribution sur les revenus locatifs) hits the rents of legal entities — including SCIs under IS — at 2.5% on buildings completed at least fifteen years ago (article 234 nonies CGI), with exemptions notably for rents subject to VAT and rents not exceeding €1,830 per unit per year. The IFI (Impôt sur la Fortune Immobilière — French Real Estate Wealth Tax) is neutral: units remain taxable up to the fraction representing taxable real estate, whichever election is made (article 965 CGI).
Beware of outdated figures: since 1 January 2026, the flat tax on dividends is no longer 30% but 31.4% (12.8% income tax + 18.6% social charges — 2026 Social Security Financing Act, Act No. 2025-1403 of 30 December 2025, art. 12). Any IS/IR comparison still built on 30% distorts the exit projection.
Ownership, distribution, exit: where the IS/IR match is really played
Comparing the two regimes means following the money through three stages: during ownership, at distribution, then at resale. Each regime wins on one field and loses on the other.
Ownership phase: depreciation, the trump card of IS
Under IS, the building is depreciated by components — structural work, roof, technical installations, fittings — each over its own useful life, while the land is not depreciable. This accounting charge, with no cash outflow, reduces the taxable result year after year: on an older building it often absorbs a large share of net rents and keeps the profit within the 15% band, reserved for the first €42,500 of profit (article 219, I-b CGI).
Under IR, nothing of the sort: the taxable base is the rents received minus deductible expenses alone (works, loan interest, management, property tax). Every euro of result is taxed at the shareholder's marginal rate plus social charges: 47.2% for a 30% bracket, 58.2% for a 41% bracket.
Unfurnished letting has had an embryonic equivalent since 2026: the rental depreciation scheme created by article 47 of the 2026 Finance Act, whose application to an SCI under IR remains to be confirmed against the text itself. For furnished letting operated in one's own name, the actual-expenses regime does offer fully comparable depreciation: see our comparison LMNP 2026, micro-BIC or actual regime.
Distribution: the 31.4% toll that changes the equation
The annual advantage of IS only holds as long as the result stays inside the company. As soon as the shareholders want to pocket the rents, the distribution bears the flat tax (PFU — prélèvement forfaitaire unique) of 31.4% — 12.8% income tax (article 200 A CGI) and 18.6% social charges since 1 January 2026 (article L. 136-8 of the French Social Security Code, as amended by the 2026 Social Security Financing Act, art. 12). A global election for the progressive scale remains open, with a 40% allowance on the dividend (article 158, 3-2° CGI).
Key takeaway: depreciation under IS does not cancel the tax, it defers it. The SCI under IS is a capitalisation machine; the SCI under IR, a distribution regime. What should drive the election is the use of the rents — reinvested or consumed — not the headline rate alone.
Exit: private capital gain with allowances versus gain on net book value
Under IR, the sale falls under the private individuals' capital gains regime (articles 150 U and following of the CGI): 19% income tax and 17.2% social charges, i.e. 36.2% before allowances. The holding-period allowances shrink the base: for income tax, 6% per year from the 6th to the 21st year then 4% in the 22nd, hence full exemption after 22 years; for social charges, 1.65% per year from the 6th to the 21st year, 1.60% in the 22nd then 9% per year from the 23rd to the 30th, hence exemption after 30 years. A surcharge of 2% to 6% applies above €50,000 of net taxable gain (article 1609 nonies G CGI), still in force in 2026 — and the exemption at 17 years floated in late 2025 was never voted. The detail is set out in our guide to real estate capital gains in 2026.
Under IS, the business capital gain equals the sale price minus the net book value, that is the original cost reduced by the depreciation charged. It is taxed at the standard corporate rate, with no holding-period allowance: owning for 5, 15 or 25 years changes nothing. The more you have depreciated, the higher the taxable gain.
⚠️ Warning: depreciation is not a tax gift, it is an advance. At resale, every euro depreciated during ownership adds one euro to the capital gain taxable under IS — and a further 31.4% flat tax will still be due to pass the sale proceeds up to the individual shareholders.
The holding layer: parent-subsidiary regime and tax consolidation
When several SCIs under IS are held by a holding company, two regimes structure how results flow up. The parent-subsidiary regime (articles 145 and 216 CGI) exempts dividends received from subsidiaries in which at least 5% of the capital is held for two years, subject to a 5% share of costs and charges added back to the result. Tax consolidation (article 223 A CGI) consolidates the results of subsidiaries held at 95% or more, all subject to IS with matching financial years. The holding also eases transmission — gifting units rather than a building — a cost quantified in our guide to inheritance tax on real estate in 2026.
Both regimes require every company in the group to be subject to IS: an SCI that stayed under IR can be neither a subsidiary under the parent-subsidiary regime nor a member of a tax consolidation. With the 5% share of costs and charges, the effective taxation of dividends flowing up comes out at roughly 1.25% at the 25% rate — no comparison with the 31.4% flat tax on a direct distribution to individual shareholders.
20-year worked projection: SCI under IS versus SCI under IR
Profile: an older multi-unit rental building, completed more than fifteen years ago, bought for €400,000 (of which €80,000 of land), let for €24,000 per year — a 6% gross yield — financed over twenty years within the 3.3% to 3.5% range excluding insurance seen in July 2026 (broker barometers). Deductible expenses and interest: €8,000 per year. Shareholders taxed at a 30% marginal rate. A prudent revaluation of 1% per year, consistent with a stabilised market (+0.2% year on year in Q1 2026, Notaires de France-INSEE market report No. 72, July 2026).
To set your own rent and expense assumptions, our method for calculating gross and net rental yield details each line item.
Scenario A — A typical ownership year
| Line item (typical year) | SCI under IR | SCI under IS |
|---|---|---|
| Rents received | €24,000 | €24,000 |
| Deductible expenses and interest | −€8,000 | −€8,000 |
| Building depreciation (2.5% × €320,000) | — | −€8,000 |
| Taxable base | €16,000 | €8,000 |
| Tax for the year | €7,552 (30% scale + 17.2% social charges) | €1,200 (IS 15%) |
| CRL (2.5% of rents, building 15 years or older) | — | €600 |
| Cash after taxes | €8,448 (in the shareholders' hands) | €14,200 (inside the company) |
During ownership, IS crushes the match: €1,800 of annual levies (IS and CRL included) versus €7,552, a gap of €5,752 per year and roughly €115,000 over twenty years. But that cash sits inside the company: if the shareholders distribute the net accounting profit each year (about €6,200), the 31.4% flat tax takes another €1,947, bringing the net flow received down to €4,253 — less than the €8,448 of the SCI under IR.
Scenario B — Sale after 20 years
| Line item (sale in year 20) | SCI under IR | SCI under IS |
|---|---|---|
| Resale price (+1% per year) | €488,000 | €488,000 |
| Capital gain base | €88,000 (price − purchase price) | €248,000 (price − net book value of €240,000) |
| Holding-period allowances (20 years) | −90% for income tax, −24.75% for social charges | None |
| Income tax / corporate tax | €1,672 (19% × €8,800) | €57,750 (15% then 25%) |
| Social charges | €11,390 (17.2% × €66,220) | — |
| Total tax on the sale | €13,062 | €57,750 |
| Gap in favour of IR at exit | — | €44,688 |
At exit, the ranking flips. With the net book value down to €240,000, the SCI under IS is taxed on a €248,000 gain at the full rate. The private capital gain, meanwhile, is reduced by 90% for income tax after twenty years, its €8,800 net base staying far below the surcharge threshold. And the gap worsens over time: after 22 years, the private gain is fully exempt from income tax; after 30 years, from social charges. The IS gain knows no holding-period discount — and the sale proceeds will still bear a 31.4% flat tax to be extracted.
The verdict therefore depends on your trajectory: roughly €115,000 of tax saved during ownership under IS, but €44,688 handed back at resale and a 31.4% toll on every distribution. Long capitalisation with no planned sale: IS often wins. Rents consumed and a sale within a 20-30 year horizon: IR takes back the lead.
The 4 mistakes that distort the SCI corporate tax or income tax comparison
Mistake No. 1 — Comparing annual rates and ignoring exit taxation
This is the bias of nearly every comparison out there: 15% versus 47.2%, case closed. But if you ever sell, IS claws back at exit a large part of what it granted — €44,688 of extra tax in our projection. No serious election can be made without costing the sale, even a hypothetical one.
Mistake No. 2 — Working with the 30% flat tax
The flat tax on dividends has been 31.4% since 1 January 2026 (2026 Social Security Financing Act, art. 12): any spreadsheet still set to 30% underestimates the cost of distributions. The symmetrical error also exists: applying 18.6% to unfurnished rents or to private real estate capital gains, which stay at 17.2% — the increase hits only dividends, other investment income and furnished-rental profits.
Mistake No. 3 — Electing for IS "to give it a try"
The election is only reversible during a five-financial-year window (article 239 CGI); past that window it becomes permanently irrevocable, and a renunciation bars any new election. Electing without a 15-20 year projection amounts to locking in the exit taxation of your whole portfolio on a back-of-the-envelope calculation.
⚠️ Warning: the reduced 15% rate only applies to the first €42,500 of profit, and subject to conditions: turnover excluding VAT not exceeding €10 million, capital fully paid up and at least 75% held by individuals (article 219, I-b CGI). The increase of the cap to €100,000 floated during the 2026 budget debates was not retained.
Mistake No. 4 — Furnishing a unit in an SCI under IR
Furnished letting is commercial: beyond 10% of total receipts excluding VAT, the SCI switches to IS as of right (article 206, 2 CGI; BOI-IS-CHAMP-10-30, §320) — with all the consequences described above for the exit capital gain. If furnished letting is your strategy, compare operating in your own name under the actual-expenses regime first.
What to check before electing for IS: your sale horizon (before or after 22 years?), your current and future marginal tax rate, the share of the rents you intend to consume rather than reinvest, the presence of furnished units, the age of the building (2.5% CRL beyond 15 years) and any holding-company or transmission plan. Each parameter shifts the tipping point.
Project both regimes on your own deal
Mon Simulateur Immobilier real estate holding simulator
Compare an SCI under IR and an SCI under IS on your own figures: annual taxation of rents (progressive scale + 17.2% versus IS 15%/25% and CRL), the cost of distributions at the 31.4% flat tax, and above all exit taxation — the private capital gain with its allowances versus the gain on net book value — projected over 15 to 20 years, directly held or through a holding company.
To go further: the real estate capital gains calculator to cost your sale under IR, and the rental yield simulator to set your rent assumptions.
Conclusion
Choosing between an SCI under IS and an SCI under IR is not a duel of rates, it is a trade-off between two taxation calendars. IS lightens the ownership years thanks to depreciation, at the price of an exit gain computed on net book value and a 31.4% toll on every distribution. IR taxes more heavily each year, but offers an exit progressively relieved then exempt at 22 and 30 years. Horizon, marginal rate, income needs and transmission plans tip the balance — never the headline rate alone.
Before making an election that will only remain reversible for five financial years, cost both trajectories on your own assumptions. The Mon Simulateur Immobilier real estate holding simulator projects ownership, distribution and resale under both regimes, including the exit taxation that annual comparisons leave out.
