Corporate Tax SCI: Advantages, Tax Pitfalls, and Rental Income Contribution (CRL)

The Context: between Tax Instability and the Search for Solutions

As furnished rentals become more heavily taxed and several advantageous schemes are gradually phased out, many owners are turning to a French property company (société civile immobilière, SCI) that elects for corporate income tax (impôt sur les sociétés, IS).

This ownership structure, often presented as a safe alternative, offers several advantages: tax stability, flexible management and optimized rental yields.

Behind these strengths, however, a Corporate Tax SCI carries tax pitfalls that are often overlooked, notably the rental income contribution (contribution sur les revenus locatifs, CRL).

Income Tax SCI or Corporate Tax SCI: What Are the Differences?

By default, a rental SCI is subject to income tax (impôt sur le revenu, IR): each partner reports their share of the rent as property income (revenus fonciers). The SCI can elect for corporate income tax: the company is then taxed on its own profit, and the partners are taxed only when profits are distributed.

Neither regime is better in absolute terms. The outcome depends on the level of rent, borrowing, the partners’ tax brackets, what happens to the profits (distributed or reinvested) and how long the property is held. The worked example below shows these trade-offs.

Tax Advantages of the Corporate Tax SCI

An SCI subject to corporate income tax pays tax at the standard IS rates: a reduced rate of 15% on the first €42,500 of profit (conditions: turnover below €10 million, share capital fully paid up and at least 75% held by individuals), then 25% above that threshold.

A Corporate Tax SCI offers a more predictable tax framework than furnished rentals (LMNP or LMP status).

The main advantages are:

• Greater tax stability: the corporate tax regime changes little, unlike the rules for property income or furnished rentals.
• No direct personal tax: individual partners are not taxed on the rent as long as they receive no dividends.
• Room to build up capital: profits can stay in the company to fund future investments or strengthen cash reserves.
• Depreciation of the property: buildings recorded as assets of the SCI can be depreciated, which reduces taxable profit.

As a result, a Corporate Tax SCI can look more profitable in the short and medium term, especially for investors who want to reinvest their rent in new projects.

Paying Out Profits: A Second Layer of Tax

Rent taxed under corporate income tax stays in the company. When it is paid to the partners as dividends, it is taxed under the flat tax (prélèvement forfaitaire unique, PFU): 12.8% income tax (or, on election, the progressive scale) plus 18.6% social contributions on investment income received in 2026, i.e. 31.4% in total.

Only accounting profit can be distributed. Depreciation reduces that profit without reducing cash, so part of the rent collected cannot be paid out as dividends in the short term, except by repaying the partners’ current account loans (comptes courants d’associés).

Often Overlooked Disadvantages

Over the long term, however, this regime has several unwelcome side effects.

When the property is sold, the real estate capital gain is calculated under rules specific to corporate income tax:

• it includes the depreciation claimed over the years,
• and no allowance for length of ownership applies (unlike an Income Tax SCI).

The result: tax on the sale is often much heavier than expected.

Capital Gains in a Corporate Tax SCI: Depreciation Comes Back

Under corporate income tax, the gain on a sale is not measured against the purchase price but against the net book value of the building: its acquisition cost less the depreciation already deducted. Every euro depreciated during ownership lowers the annual corporate tax bill, then comes back into the taxable gain on sale.

Illustrative example (fictitious figures): a building bought for €300,000 including costs, of which €255,000 is the building itself, depreciated at €8,500 a year, has a net book value of €215,000 after ten years. Sold for €380,000, it produces a gain of €165,000 taxable under corporate income tax, even though the difference between the sale price and the purchase cost is only €80,000.

The same sale by an Income Tax SCI would fall under the capital gains rules for individuals: the purchase price is increased by flat-rate amounts (7.5% for acquisition costs, 15% for works after five years of ownership), an allowance of 6% a year applies from the 6th to the 21st year for income tax, the gain is taxed at 19% income tax plus 17.2% social contributions, and it becomes fully exempt from income tax after 22 years and from social contributions after 30 years.

The most overlooked risk, though, is the CRL (rental income contribution), an additional tax that many taxpayers discover too late.

The CRL: a Discreet but Costly Tax

When Does the CRL Apply?

The rental income contribution (CRL) is payable by:

• legal entities subject to corporate income tax,
• partnerships with at least one partner subject to corporate income tax (Article 234 nonies of the French Tax Code, CGI).

In other words, a single partner subject to corporate income tax is enough to bring all the rent received by an SCI within the CRL.

This condition is assessed at the close of the financial year.

Does the CRL Apply to an Income Tax SCI?

An Income Tax SCI whose partners are all individuals does not owe the CRL. The question arises when a company subject to corporate income tax (a holding company, for example) becomes a partner: the CRL is then payable by the SCI itself, on all the rent from the premises concerned, whatever the size of that partner’s stake.

Possible Exemptions

Some SCIs are exempt from the contribution:

• those that charge VAT on their rent;
• those whose annual rent per unit does not exceed €1,830;
• holiday villages and approved family holiday homes;
• new or recent buildings, completed less than 15 years before 1 January of the tax year.

For the 2026 tax year, the CRL therefore applies to premises in buildings completed no later than 1 January 2011 (that is, completed at least fifteen years before 1 January of the tax year).

CRL Amount

The CRL rate is 2.5% of gross rent collected.

Modest as it may look, this rate eats directly into the return of the structure, especially when rents are high.

Concrete Example

Take a Corporate Tax SCI receiving €60,000 a year in rent from an older building.

The CRL comes to €1,500 a year, or €7,500 over 5 years.

This cost comes on top of corporate income tax (IS) and, if profits are distributed, the tax on dividends.

Ten-Year Comparison: Income Tax SCI or Corporate Tax SCI

Illustrative example with fictitious figures, intended to show how the rules work, not to pick a winner. Assumptions: an older building (completed more than 15 years ago) bought for €280,000 plus €20,000 of costs, i.e. €300,000, with no borrowing; land valued at €45,000; rent of €18,000 and expenses of €4,000 a year, both constant; partners are individuals in the 30% income tax bracket; sale after 10 years for €380,000; 2026 rules and rates assumed unchanged.

How to read it: under corporate income tax, the tax paid while the property is held is much lower, thanks to depreciation and the 15% rate. On the sale, the gap narrows, because the €85,000 of depreciation is added back into the gain and no allowance for length of ownership applies. As long as the profits stay in the company to fund other investments, corporate income tax keeps the edge in this example; if everything is paid out to the partners, income tax becomes the cheaper option again.

These results change with the assumptions: borrowing (interest is deductible under both regimes), an 11% or 41% tax bracket, major works, holding the property for more than 22 years (gain exempt from income tax in an Income Tax SCI), a building completed less than 15 years ago (no CRL), or a transfer of the shares instead of a sale. The calculation ignores the deductible portion of CSG, any deduction of the CRL from taxable profit and the time value of money.

A Strategy to be Evaluated Case by Case

The decision to put an SCI under corporate income tax needs careful thought.

It can make sense for:

• long-term wealth planning projects,
• or high-yield investments with regular reinvestment.

For owners planning to sell in the medium term, on the other hand, an Income Tax SCI is often the more advantageous choice.

A tailored comparison is therefore essential to measure:

• the effective tax rate,
• the tax on exit,
• and the cumulative effect of depreciation on the capital gain.

The choice is not set in stone on day one: an SCI that has elected for corporate income tax can revoke its election until the fifth financial year following the one for which it was made; after that, the election becomes irrevocable. Going back to income tax has its own tax consequences, which should be quantified before deciding.

The firm runs these calculations as part of its real estate taxation practice (SCI, rentals, capital gains). Related topics: how landlords are taxed on works carried out by the tenant and structuring your assets for tax purposes.