Taxation: what are the deductible expenses for SCIs?

A société civile immobilière (SCI) is a legal entity whose purpose is to buy real estate and manage it together. It's a legal status often favored by many French people.

There are several types of SCI: classic, family, etc. It cannot be used for commercial purposes. It's important to make the right choice, based on your wealth management, tax and investment objectives.

From a tax point of view, the tax return for an SCI can be lightened by deducting certain expenses from your tax base. These expenses must be necessary for the acquisition and preservation of income (art. 13 of the French General Tax Code). This mechanism also depends on the tax regime chosen when the company was set up.

Let's find out what they are and what expenses can be deducted from your SCI's taxable income.

What expenses are deductible in an SCI?

In an SCI, the main deductible expenses are as follows:

• Maintenance and repair costs, to keep the property in good condition. Repairs to faulty pipes or insulation work are taken into account.
• Insurance premiums, whatever the risk covered
• Unreimbursed recoverable expenses, i.e. expenses incurred by the landlord on behalf of the tenant for which he has not been reimbursed.
• Provisions for condominium charges are deducted from property income in the year they are paid, and adjusted the following year.
• Improvement expenditure adds a new element to a property to enhance its comfort. Examples include the installation of a fitted kitchen or the replacement of a boiler.
• Borrowing interest
• Property tax and other similar taxes, with the exception of household waste collection tax.
• Management fees related to the administration of the property, concierge fees and other fees. Management fees incurred for the purpose of letting the property are not deductible.
• Compensation for relocation and eviction from a commercial lease or any other tenancy only if it enables the property to be freed up for re-letting under better conditions.

SCI taxable under IR or IS: what are the differences in expenses?

SCIs subject to income tax can only deduct expenses from their property income. Expenses relating to unoccupied properties cannot be deducted.

Each expense must have been incurred by the owner in the same tax year and for the purpose of acquiring or retaining your income stream.

SCIs subject to corporation tax can deduct all the expenses listed below, as well as real estate agency fees paid at the time of property acquisition, notary fees and book depreciation of the property. It is therefore possible to deduct more income under this tax regime to optimize the SCI's net profit.

What expenses are not deductible from your property income?

Not all SCI expenses are deductible from taxable income. article 29 and article 31 of the French General Tax Code.

To distinguish between deductible and non-deductible expenses, keep in mind one simple principle: not all expenses affecting the structure of the building can be deducted. For example, construction, reconstruction or extension work is not eligible. Demolition or interior fittings equivalent to reconstruction are not deductible.

Work aimed at increasing the number of housing units is also considered to be similar to construction. The same applies to the creation of a new bedroom, bathroom or kitchen, for example.

SCI founders often opt for the services of a domiciliation company to simplify the day-to-day management of their company. They offer a number of advantages:

• Benefit from a wide range of prestigious addresses in the best-known districts of Paris and other major French cities to locate your head office
• Call on awide range of essential services to lighten your daily routine. These include day-to-day mail management, switchboard services, administrative and legal assistance, meeting room rentals and much more.
• Reduce your tax bill by strategically choosing your home address in a municipality with a low CFE rate.

Thanks to SeDomicilier, you can obtain a certificate of domiciliation in less than 5 minutes, in a 100% online process.

All your services are then available in a personalized, secure virtual office. Business domiciliation allows you to focus on the missions with the highest added value: those that make your SCI a success!