The SCI is a legal structure commonly used for the holding of real estate assets in France. Yet many taxpayers neglect or simply ignore the legal and fiscal formalities to be accomplished annually.
A civilian activity
An SCI is a civilian company that is not supposed to carry on commercial activities such as furnished rental or para-hotels. If the commercial activity represents more than 10% of the company’s total revenue, the risk of re-qualification to the corporate tax is high. However, this is not the most appropriate tax regime for the holding of assets: the tax on capital gains is considerably increased by the reinstatement of previous depreciations. In addition, the distribution of earnings between partners implies a distribution of dividends, and therefore a new taxation in the category of income from capital movements (income tax).
What can we do if we still want to rent furnished?
It is possible to organize this activity legally and it is possible to envisage, for example, a transformation of the structure. In the case of assets, it is advisable to avoid the corporate tax system at all costs. It is possible to avoid this trap by opting for a commercial structure in fiscal transparency such as the family LLC or the CNS. On the other hand, it is necessary to be suspicious as to the possible subjection to the social regime of the self-employed.
When the SCI is subject to income tax, profits made during the fiscal year are taxed in the hands of the partners in proportion to their social rights. In order to determine the amount of the taxable income, SCI must subscribe to a tax declaration 2072. For the 2016 income tax return, the deadline for sending the declaration is 2 May 2017.
The partners will then have to postpone their share of the result in their own income tax return (cerfa 2044, property income category).
Accounting obligations are relatively limited because there is no obligation to maintain a commercial accounting system. There is sufficient revenue / expenditure book keeping.
On the other hand, the absence of a true accounting management can be problematic in some cases:
In the case of transfer or transfer of shares: how can the value of the company be valued without taking into account the company’s receivables and debts or the current accounts of partners?
In the event of a dispute with the other partners, with third parties: the accounts will make it possible to justify and make opposable the current accounts of partners to third parties;
In the event of a tax audit: The accounting will justify the operations of the SCI to the Tax Administration. According to Article 46 D of the CGI, SCI “shall be required to submit to all requisitions of the tax department all accounting or social documents, inventories, copies of letters, receipts and expenses justifying the accuracy of the information On the statements [..] “(cerfa 2072).
Thus, although it is not compulsory, accounting in SCI remains advisable.
In the SCI, the manager is required to report to the partners at least once a year. Accordingly, the manager is required to provide a written report on the company’s activities during the past financial year, including an indication of the realized or foreseeable profits and the losses incurred or anticipated (C. civ., Article 1856 ). This is a legal obligation whose non-compliance involves the civil liability of the manager (C. civ., Article 1850).
Within six months of the end of the financial year, the General Manager shall convene the Annual General Meeting to approve the financial statements. The minutes of such meeting shall be recorded in a record of proceedings.