Investment via a company subject to corporate tax

«Alexis, I already pay 41,% in income tax. If I buy a new apartment in my own name, between property tax, social security contributions of 17.2,%, and my income tax, I won't have anything left to repay my loan. How can I build equity without the state taking everything?»

This issue is the starting point for most strategies of estate planning that we develop at Balmont Conseil. For the savvy investor, the question is no longer simply whether wherein invest, but how to hold the asset.

L'’investment via a company subject to corporate income tax (CIT) has become the linchpin of capitalization strategies. Whether through a SCI subject to corporate income tax, Whether through a family-owned limited liability company (SARL) or a holding company, this structure allows you to decouple the taxation of your investment from your personal taxes. Here is the complete guide to mastering this powerful tool.

Personalized analysis

Understanding the mechanism of corporate income tax (CIT)

Investing through a corporate tax-exempt structure creates a "tax shield" between the profits generated by your assets and your personal portfolio. Unlike personal income tax, where you are taxed on profits even if you don't withdraw them from the company, corporate tax only taxes the legal entity.

The choice between income tax and corporation tax is not simply a matter of comparing percentages. It's a choice between undergo an immediate puncture Or preserve your capital to make it grow.

Corporate tax rate (CTR): A capitalization lever

1. The interest rate mechanism: A launching pad

The French system offers a genuine growth opportunity for asset management structures.

15 % (Reduced rate) It applies to profits up to €42,500. It's the ideal "engine" for financing new assets (real estate, securities) with minimal tax friction.

25 % (Normal rate) Beyond this threshold, the rate remains significantly lower than the higher income tax brackets.

2. The available "Cash-Flow" differential

The strength of corporate income tax lies in the net amount you have left to reinvest. For €10,000 of profit generated:

To the IR (TMI 41% + PS) You are left with only €4,180 after taxes. Your investment capacity is reduced by more than half.

At the reduced corporate tax rate You have €8,500 left. You have twice as much capital to generate compound interest.

3. Managing the tax base

Unlike income from real estate or securities held directly (income tax), a company subject to corporate income tax allows for optimization of the taxable base:

Accounting depreciation In real estate, the depreciation of the property often reduces taxable profit to zero, making income virtually painless from a tax perspective for many years.

Deduction of expenses: All expenses related to management (consulting fees, study trips, headquarters expenses) are deductible from the profit, which is impossible for an individual.

Control of personal income You only pay personal tax (flat rate at 30% or the standard tax scale) on the dividends you actually decide to pay yourself. The rest works for you within the structure.

SCI subject to corporate income tax vs. SCI subject to personal income tax The comparative match

The choice of SCI tax regime is one of the most structuring decisions for an investor.

The comparative table

Features	SCI taxed under the IR (Property Income) scheme	SCI subject to corporate income tax (Industrial & Commercial Profits)
Income taxation	In the hands of the partners (TMI + 17.2 %)	At the company level (15 % or 25 %)
Depreciation of the asset	Impossible	Possible (Reduces taxable profit)
Deduction of expenses	Limited (acquisition costs not deductible)	Wide (Deductible expenses for a French real estate company (SCI) totals)
Capital gains (Resale)	Individual tax regime (Long-term exemption)	Professionals' scheme (Calculated on net worth)
Treasury	Available immediately	""Locked" in the company (Flat tax upon exit)

The major advantage: Real estate depreciation

This is the "Holy Grail" of"tax optimization of investment. Under IS, you have the right to recognize the depreciation of the building in your accounts each year (approximately 2 to 3 % of the value of the asset).

This fictitious charge is added to the Deductible expenses for a French real estate company (SCI) (interest, taxes, work), often allowing a zero or negative tax result to be shown even though the cash flow is positive.

Analysis of deductible expenses for a French real estate company (SCI)

Under corporate income tax (IS), the scope of deductible expenses is much broader than under personal income tax (IR). You can deduct:

Acquisition costs (notary fees, registration fees) from the first SCI tax year.
Management and accounting fees.
The manager's remuneration (and related social security contributions).
Renovation and maintenance work, without distinction of "nature" (unlike land where certain expansion work is excluded).

Accounting rigor: Accrual accounting and real estate investment companies

Switching to corporate income tax is not just a tax choice; it's a paradigm shift in administration. SCI accounting subject to corporate income tax is heavier and more demanding.

Accrual accounting and real estate investment companies

Unlike a French SCI (Société Civile Immobilière) taxed under the personal income tax (IR) regime, which often uses cash-basis accounting (income/expenses), an SCI taxed under the corporate income tax (IS) regime requires accrual-basis accounting. This means that receivables and payables must be recorded as soon as they are incurred, not when they are paid. This necessitates:

Keeping a journal, a ledger, and a scale.

The preparation of a mandatory balance sheet and profit and loss statement at the close of each fiscal year of the SCI.

The tax return (form 2065 and annexes) must be electronically transmitted to the tax office every year.

Real estate valuation and balance sheet

The real estate valuation on the balance sheet of a French SCI (Société Civile Immobilière) subject to corporate income tax is based on historical cost (purchase price). Each year, depreciation reduces this gross value. This rigorous accounting method provides an extremely precise view of the net profitability of the operation, far removed from the approximations associated with a property held in its own name.

Capitalization Strategy: Why IS Wins in the Short Term

L''investment via a company subject to corporate tax is a capitalization strategy pure.

Use of deficits and carryovers

If your company generates losses (particularly through notary fees in the first year or major renovations), these losses carried forward can be used against future profits indefinitely. This allows you to avoid paying any tax for many years.

Net profitability after tax and debt repayment

Under the personal income tax (IR) system, you have to pay your taxes with money that should be used to repay the bank. Under the corporate income tax (IS) system, since the tax is almost zero thanks to depreciation, 100% of the cash flow is available for debt repayment. For a rental investment with bank leverage, the repayment speed is increased tenfold.

Tax deferral and deficits

When a French real estate investment company (SCI) subject to corporate income tax (IS) undertakes significant renovations or deducts notary fees, it generates a tax loss. This loss can be carried forward indefinitely against future profits. Using these losses is a strategic move: it allows the company to avoid paying any tax on its rental income for up to 10 or 15 years. The resulting preserved cash flow is then used entirely to repay the principal on the bank loan, creating a cumulative capitalization effect.

Deferral of capital gains tax

In certain complex holding company structures (contribution-sale), the tax deferral (Article 150-0 B ter) allows for the sale of securities without immediate tax payment, provided that the proceeds are reinvested in an economic activity (such as real estate subject to corporate income tax) within two years. This is where Balmont Conseil's expertise becomes invaluable.

Limitations and pitfalls: The other side of the coin

While corporate income tax is attractive during the operational phase, it has constraints that a wealth management advisor must anticipate.

Capital gains tax on resale

This is the main drawback. Under corporate income tax, the capital gain is calculated on the difference between the selling price and the Net Book Value (NBV).

Example: You buy a property for €500,000. You depreciate it by €200,000 over 10 years. The net book value is €300,000. If you resell it for €600,000, your capital gain subject to tax at 25% is €300,000 (€600 - €300).
Under the personal income tax (IR) system, you would have been taxed on €100,000 with allowances based on the holding period. Corporate income tax (IS) is therefore a long-term investment where holding is preferred to quick resale.

The cost of management (accounting balance sheet...)

A company subject to corporate income tax imposes a accrual accounting, A mandatory accounting statement annual and holding general meetings. The use of a chartered accountant is essential, which generates annual costs (approximately €1,500 to €2,500).

Double taxation in the event of cash withdrawals

To use the money for personal gain, you must pay yourself dividends (after tax). These revenues are then subject to the Flat Tax (30 %) or the income tax scale. Corporate tax is ideal for reinvestment, less so for immediate consumption of rental income.

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For which profiles is this setup relevant?

Few advisors emphasize this, but the expatriate benefits from a breathing room on their real estate assets.

Senior executive or professional (TMI 30%+)

If your goal is to build up retirement savings without increasing your current tax burden, corporate income tax (IS) is the ideal solution. It allows you to "store" wealth in a dedicated structure.

The business owner (Holding company and Integrated Scheme)

The use of a holding Being subject to corporate income tax for holding real estate subsidiaries allows one to benefit from integrated tax regime (or the parent-subsidiary regime). You can therefore reinvest the profits of your operating company in real estate with a tax friction of only 1.25 %.

The investor in SCPI via a company

Buy shares of SCPI via a company subject to corporate income tax This allows for the neutralization of heavy taxation on foreign or French rental income through the depreciation of shares (under certain accounting conditions). It is a investment tax strategy increasingly popular.

Capital gains on real estate investment companies (SCIs): A point to be aware of

This is where the tax rules become less favorable for IS in the very long term.

Capital gains tax on resale

At IS, the capital gains on real estate SCI are calculated according to the rules for professional capital gains.

The calculation: Selling price - Net Book Value (NBV).
The trap: The more you depreciate the asset (which reduces your annual tax), the lower the net book value (NBV), and the higher the taxable capital gain mechanically. Unlike income tax, there is no'capital gains tax exemption for the holding period. Under corporate income tax, you are "married" to the asset. The goal is not to resell to pocket the cash, but to reallocate your assets to reinvest in a new project, or to transfer the shares.

Avoidance strategies

To circumvent this friction at resale, the wealth management experts recommend:

Selling the shares rather than the building.
The division of ownership from the outset to purge part of the value.
Maintaining the asset in the portfolio to generate lifelong income.

Setting up the plan: Key steps

The creation of a structure subject to IS should not be seen as a mere administrative formality, but as laying the foundations of a capitalization vehicle.

Drafting the articles of association: Choosing a suitable legal structure (SCI, SAS or SARL)

The choice of legal structure defines your management flexibility. A French real estate investment company (SCI) is ideal for family succession, while a simplified joint-stock company (SAS) offers complete freedom in organizing powers and financial flows (preferred shares). A family-owned limited liability company (SARL), although taxed under the personal income tax (IR) regime by default, can be a valuable transitional tool.

The IS option: An irreversible strategic choice in the long term

If you create a French SCI (Société Civile Immobilière), it is automatically subject to personal income tax (IR) (tax transparency). The option to be taxed under corporate income tax (IS) must be exercised with the Business Tax Office (SIE). Note: since 2019, this option can be revoked up to the fifth fiscal year. After that, the switch to corporate income tax becomes permanent, setting the tax strategy in stone.

Contribution or Financing: Managing the Shareholder Current Account (CCA)

The aim is to determine the amount of share capital and, above all, the current account contribution. The current account is a major lever: it allows the shareholder to be reimbursed by the company first and without personal taxation on the first profits generated, even before dividends are distributed.

Opening of the fiscal year: Accounting consistency

Define the closing date (often December 31). A first financial year can exceptionally last up to 24 months, which allows start-up costs (notary fees, works) to be spread over a longer period and optimizes the first balance sheet.

The company's purpose: Legal security

It must be drafted broadly enough to include the management of financial and real estate assets, thus avoiding any challenge to the deductibility of expenses by the tax authorities.

Balmont Consulting: Your Expert and Facilitator

At Balmont Conseil, we implement structural, financial, and investment solutions perfectly tailored to your specific situation. With my expertise and ALTA, the AI-powered wealth management engineer, my mission is to transform your tax situation into a strategic asset, optimizing every lever of your wealth holding company to ensure the long-term preservation and seamless transfer of your legacy. Tax optimization for investments is not something that can be improvised. A mistake in choosing the right tax regime or an inaccurate assessment of wealth transfer can cost tens of thousands of euros.

Why contact us?

At Balmont Conseil, we act as architects of your wealth. As Augmented Wealth Engineers, we don't just create companies. We use artificial intelligence to:

Perform customized IR vs IS comparisons over 20 years, incorporating resale assumptions.

Model the tax impact on partners based on changes in their overall income.

Anticipating the transfer of assets through the division of company shares.

We act as the bridge between your accountant, your notary, and your financial ambitions. Our role is to ensure that your capital accumulation strategy remains smooth, legal, and above all, highly profitable.

FAQ Everything you need to know about corporate income tax investment

Can I switch an existing SCI from IR to IS?

Does corporate income tax (IS) allow for a reduction of the real estate wealth tax (IFI)?

What exactly is accounting depreciation?

How to withdraw money from a company subject to corporate income tax?

Can a deficit in a SCI subject to corporate income tax reduce my personal income tax?

What are the risks of "aggressive tax optimization" via corporate income tax?

What are the advantages of a SARL subject to corporate income tax compared to a SCI?

IS, the tool of wealth builders

L''investment company corporate tax is the ideal strategy for anyone wishing to reinvest their profits to build a real estate or financial empire. It requires rigorous accounting and a long-term vision, but offers a net profitability after tax unsurpassed during the growth phase.

Your assets deserve engineering excellence.

Alexis Sagnier

With over 17 years of expertise in financial engineering, Alexis Sagnier assists executives and expatriates in securing their cross-border challenges.

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