IS
Corporate tax that applies automatically when an IR-transparent SCI lets a property as a meublé — the reclassification trap (CGI Art. 206-2)
15%/25%
IS rates once an SCI is reclassified: 15% on first €42,500 net profit, then 25% above — double taxation when profits are distributed
3 years
Typical delay before the tax authority identifies and retroactively reclassifies an IR-transparent SCI conducting meublé activity
10%
Administrative tolerance threshold: IS reclassification not applied where meublé receipts do not exceed 10% of total SCI receipts — but this is a tolerance, not a right

What Is an SCI and Why Do Non-Resident Investors Use One?

A société civile immobilière (SCI) is a French civil company used to hold real estate — not a commercial company, but a civil law entity specifically designed for property ownership. SCIs are extremely popular in France for family property holding because they offer succession planning advantages (easier transfer of shares than property), co-ownership management, and IFI structuring. Non-resident investors are often advised to hold French property through an SCI, on the basis that it provides ease of transfer and succession planning benefits. This advice is often correct for unfurnished (nu) property. For meublé property, it creates one of the most costly traps in French real estate taxation.

The Meublé Trap: Commercial Activity Triggers IS

Under French tax law, an SCI is transparent for income tax purposes by default — income flows through to the shareholders and is taxed in their hands as revenus fonciers (property income). This transparency only works for civil activities. Furnished rental is a commercial activity, classified as BIC. When an SCI that is transparent for IR purposes lets a property as a meublé, the commercial activity causes the SCI to be automatically reclassified from an IR-transparent entity to a company subject to impôt sur les sociétés (IS — corporate tax) under Article 206-2 CGI. This reclassification is automatic, retroactive to when the commercial activity started, and triggers multiple adverse consequences.

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Important Exception: The 10% Administrative Tolerance

The tax administration has adopted a tolerance under which it does not apply IS to SCIs whose commercial receipts (including meublé rental income) do not exceed 10% of their total receipts (BOFiP-IS-CHAMP-10-30-§§ 320 et 330). A mixed-use SCI deriving the great majority of its income from unfurnished lets, with only a small incidental meublé element, may escape automatic IS reclassification. However, this is a tolerance — not a right — and the tax authority can withdraw it. Any SCI with meublé receipts approaching or exceeding 10% of total receipts should be reviewed immediately.

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The Reclassification Trap in Practice

An SCI is set up in 2020 to hold a Paris flat. The owners list it on Airbnb in 2022 to generate rental income while abroad — unaware of the meublé/commercial activity distinction. By 2025, the tax authority identifies the Airbnb income (reported by the platform to the DGFiP) and reclassifies the SCI to IS retroactively from 2022. Three years of revenus fonciers declarations are now wrong. Back-taxes, interest, and potentially penalties apply. The SCI loses its IR transparency permanently.

Consequences of IS Reclassification

Feature SCI under IR (as intended) SCI under IS (meublé reclassification)
Income taxation Shareholders taxed on their share of revenus fonciers SCI pays IS at 15%/25% on net profit
Amortissement Not available under revenus fonciers Available, but trapped inside SCI — no personal benefit
Dividend distributions Not applicable — income flows through directly Subject to 30% PFU (flat tax) when distributed to shareholders
Capital gains on sale Personal capital gains regime — immobilier taper relief applies IS on gain inside the company, then PFU on distribution — double taxation
IFI (wealth tax) Property value included at full value in shareholders' IFI base Shares may be partially deductible against IFI — complex calculation
Succession planning Shares transferable with valuation discount IS company shares — less favourable tax treatment
Exit from the SCI Requires liquidation or asset sale — not simple Even more complex once IS-reclassified — professional advice essential

What an SCI Is Actually Good For in a Meublé Context

The SCI is not useless for meublé investors — but its use must be carefully designed from the outset. An SCI that opts for IS from the start (rather than defaulting to IR transparency) can hold meublé property without triggering an involuntary reclassification. Under IS, the SCI pays corporate tax on its meublé profits, can claim amortissement, and distributes dividends to shareholders subject to PFU. The SCI is also still valuable for unfurnished (nu) property, for mixed-use property where meublé income remains below the tolerance threshold, and for succession planning where furnishings are held separately from the property.

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The Clean Solution: SCI IS from the Start

If you want to hold a French meublé in a corporate structure, explicitly opting the SCI for IS from its creation avoids the involuntary reclassification problem entirely. The SCI then operates as a standard IS company — taxed at 15%/25%, with amortissement available, and no risk of retrospective reclassification. The trade-off is that all profits are trapped in the company until distributed, and distributions are subject to PFU. But there is no hidden trap and the position is clear from day one. A commercial company (SARL/SAS) subject to IS from the outset is an equally valid alternative structure.

SCI and Furnished Rental: The Essentials
An IR-transparent SCI that lets a property as a meublé (furnished rental) is automatically reclassified to corporate tax (IS) under CGI Art. 206-2 — one of the most common and costly mistakes for non-resident investors. The reclassification is automatic, retroactive, and permanent.
Exception: the tax administration tolerates IS non-application where meublé receipts do not exceed 10% of the SCI's total receipts (BOFiP-IS-CHAMP-10-30-§§ 320 et 330) — but this is an administrative tolerance, not a right, and it can be withdrawn at any time.
Consequences of IS reclassification: back-taxes on prior years' revenus fonciers declarations, permanent loss of IR transparency, double taxation of future profits (IS at 15%/25% + PFU at 30% on dividends), and adverse capital gains treatment (IS on gain inside the company, then PFU on distribution).
The SCI remains appropriate for unfurnished (nu) property, for mixed-use holdings carefully structured to stay below the 10% tolerance, and for succession planning where the meublé activity is separated from the SCI structure.
If a corporate structure is desired for meublé property, the correct approach is: SCI explicitly opting for IS from creation (CGI Art. 206-3), or a commercial company (SARL/SAS) subject to IS from the outset. Either avoids the involuntary reclassification trap entirely.
Non-resident investors who have been advised to use an IR SCI for French meublé property should seek urgent French legal and tax advice to assess their current position and plan a remediation strategy before the tax authority identifies the meublé activity.
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Our English-speaking French lawyers advise on SCI meublé reclassification risk, remediation strategies, and the correct corporate structure for non-resident meublé investors before the tax authority acts.

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This article is for general information only. It does not constitute legal advice. Always seek qualified French legal advice.