SCI under IR vs SCI under IS: full comparison

SCI under IR: the company is fiscally transparent. Income and expenses are allocated among the partners in proportion to their shares, and each declares them within their own income (property income). Taxation depends on each partner's marginal tax bracket.

SCI under IS: the company is a taxpayer in its own right. It declares its profits and pays corporate tax (15% up to 42,500 euros, then 25%). Partners are only taxed if they pay themselves dividends.

Under IS, the SCI can depreciate the property (excluding land, over 25-30 years) and renovation work. This significantly reduces the taxable income and therefore the tax. During the first years, the tax is often nil or very low thanks to this depreciation combined with loan interest.

Under IR, no depreciation is possible. The only deductions are actual expenses (interest, renovation work, management fees). The advantage of IR is the ability to create a property deficit that can be offset against overall income.

Under IR, partners are taxed each year on their share of the result, whether or not they actually receive the income. It is automatic and proportional to the shares held. Social levies (17.2%) are added on top of income tax.

Under IS, as long as the profits remain in the company, the partners pay nothing. But as soon as they want to withdraw the money as dividends, they are taxed under the PFU (flat tax at 30%) or the progressive scale with a 40% deduction. There is therefore double taxation: IS + tax on dividends.

This is where the paths diverge significantly. Under IR, the capital gain is calculated on the actual purchase price, with allowances for holding period (full exemption after 22 years for income tax and 30 years for social levies).

Under IS, the capital gain is calculated on the net book value, i.e. the purchase price minus all depreciation applied. If you have depreciated 150,000 euros on a property bought for 200,000 euros and sold for 250,000 euros, the taxable capital gain is 200,000 euros (250,000 - 50,000). This is considerably higher than under IR.

IS is suitable if you do not need the income immediately, if you reinvest profits, and if you plan to hold the property for a very long time (or pass it on). IR is preferable if you want to receive income directly, if you envisage a medium-term sale, or if you are in a low tax bracket.

On Buy&Rent, the SCI simulation automatically compares IR and IS for each partner, taking into account their tax bracket and their share. You can view the net cashflow and tax for each option.