What’s an SCI for in France and how is it taxed?

If you want to start a property rental business in France you may need to set up an SCI. Learn what this means for your taxes with French Tax Online

A French SCI (Société Civile Immobilière) is a type of company for owning and managing properties in France.

The main advantages of an SCI are:

• Buying a property jointly (with two or more owners)

• Managing a rented property (furnished or unfurnished)

• Anticipating succession and inheritance tax

There are two tax options when setting up an SCI:

• impôt sur le revenu (income tax)

This option allows the owners to manage unfurnished rentals only and the SCI’s final profit will be split between the different shareholders that will each have to declare it in their personal income tax return.

• impôt sur les sociétés (corporate tax)

This option allows the owners to manage both furnished and unfurnished rental activities. In this case the SCI’s final profit will be taxed through corporate tax – it is important to highlight that the shareholders won’t be taxed at all in this case.

If shareholders want to withdraw money from the SCI they will have to be on payroll or taking dividends by the end of the year.

As soon as an SCI is incorporated, the French tax office will expect a tax return every year whether the SCI has any activity or not (even if the SCI does not own a property yet!)

The forms expected by the tax office depend on the tax option chosen during the incorporation.

You’ll find below a summary of both situations:

The income tax option involves two different kind of returns: form 2072 and the income tax return forms 2044 and 2042.

Indeed, given that an SCI’s shareholders must declare their share of the SCI profit, it must be included in their income tax return using the annex 2044.

SCI’s incorporate using this income tax option will also need to submit form 2072. From the 2021 tax season it will be mandatory to submit it electronically to the tax office: the paper forms won’t be accepted by French tax offices anymore. Please note that a fine will be due for any missing return.

Managing your French SCI tax returns might be complicated and stressful regarding the French tax law heaviness and the different language used. French Tax Online and its expert team will be delighted to help your deal with your French affairs so that you can enjoy la Belle Vie without its little problems.