SCI à l’IS: how to calculate the real return on a rental investment in France
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A gross yield of 5.36% says almost nothing about what an SCI à l’IS (a French property company, société civile immobilière, taxed under corporate tax, impôt sur les sociétés or IS) will really earn you. Between the loan, corporate tax, depreciation, the capital gain and the flat tax on the payout, the gap can be wide. This guide follows an invented example — a T2 (a two-room flat: living room + one bedroom) bought for €150,000 — through the three stages our simulator calculates: before tax, after corporate tax, after the sale.
Why gross yield is not enough
Gross yield divides one year’s rent by the total cost of the purchase (price, notary fees, works and other costs: an agency fee paid by the buyer, loan fees). Net yield also takes off the charges the owner pays himself, the taxe foncière (the annual property tax) and the everyday repairs, and allows for the months without a tenant.
Yet these two ratios ignore everything that makes up the real return of an SCI à l’IS:
- the loan: the repayments weigh on cash flow, but every euro of principal repaid comes back to you at the sale (leverage);
- the appreciation of the property, which applies to the whole price and not only to your down payment;
- corporate tax (IS), which depreciation reduces while you hold the property… and then takes back at the sale, sometimes more than it saved (as in our example);
- the selling costs and the flat tax paid when the SCI distributes the proceeds of the sale.
To work out your own gross and net yields in a few seconds, use the rental yield calculator. For the rest, you need a year-by-year simulation: that is what this guide walks through.
The invented example: a €150,000 T2 in an SCI à l’IS
| Item | Amount |
|---|---|
| Purchase price | €150,000 |
| Notary fees (frais de notaire; estimated at 8% of the price, existing property) | €12,000 |
| Loan arrangement and guarantee fees | €1,000 |
| Refurbishment works (paint, floors: generally maintenance) | €5,000 |
| Total cost of the purchase | €168,000 |
Loan of €120,000 (80% of the price) over 20 years at an assumed nominal rate of 3.40%: a monthly payment of €690 excluding loan insurance, i.e. €8,278 a year (the loan is repaid month by month, like a bank schedule). The associates (associés, the members of the SCI) contribute €48,000 (the rest of the price, the fees and the works), lent to the SCI through a compte courant d’associé (shareholder current account, i.e. a loan from the associates to the company).
| Item | Per year |
|---|---|
| Rent excluding charges (€750 a month) | €9,000 |
| Vacancy (0.5 months a year on average) | -€375 |
| Repairs and everyday upkeep (6.25% of the rent excluding charges, collected) | -€539 |
| Non-recoverable co-ownership charges (charges de copropriété) | -€720 |
| Taxe foncière | -€900 |
| Non-occupying landlord’s insurance (PNO, assurance propriétaire non occupant) | -€116 |
| Accountant (expert-comptable) | -€1,200 |
| Bank fees | -€72 |
| Loan insurance | -€180 |
| Loan interest | -€4,014 |
| Principal repaid | -€4,264 |
| Year-1 cash flow | -€3,380 |
Simulation assumptions: rent, taxe foncière (property tax) and co-ownership charges rise by 1.4% a year; repairs and everyday upkeep at 6.25% of the rent excluding charges, collected each year (so they follow the rent); home insurance, accountant, bank fees and loan insurance stay flat; the property’s value rises by 2.2% a year, sale after 20 years.
Cash flow is negative: the rent does not cover all the charges and the loan payment. The monthly payment after the purchase from your own pocket (effort d’épargne) is about €282 a month in the first year, then shrinks as rents rise. In the simulation, the associates cover the gap by lending the SCI the amount needed each year (through the compte courant): €48,858 in total over 20 years. With the initial contribution, they will therefore have invested €96,858. It is against this sum, and the date on which each euro was paid in, that what the investment returns must be compared.
Step 1: the return before tax
Before any tax, we look at what the investment has built after 20 years. Three things add up: the share of the property the SCI has paid for (the down payment on the price plus all the principal repaid to the bank), the property’s appreciation, and the cash accumulated in the SCI.
| Item | Amount |
|---|---|
| Share of the property paid for (down payment on the price + principal repaid) | €150,000 |
| Appreciation of the property (2.2% a year) | €81,798 |
| Cash held by the SCI, IS not deducted | €0 |
| Net worth before tax | €231,798 |
The before-tax IRR (internal rate of return; TRI, taux de rendement interne, in French) measures what the operation would be worth with no tax at all (€231,798) against the €96,858 they would have invested with no tax (the contribution and the cash payments after the purchase), each euro at its own date: 5.5% a year. That is more than the gross yield (5.36%), thanks to appreciation and leverage: the bank financed 80% of the price, the rent repaid most of the principal (the associates’ cash payments after the purchase, €48,858 before tax, paid the rest), and appreciation applies to the whole value of the property, not only to the down payment.
Step 2: after corporate tax (IS)
An SCI à l’IS pays corporate tax on its profit: 15% up to €42,500 of profit a year, then 25% above that (threshold unchanged in 2026). For €42,500 of profit, IS is therefore €6,375; for twice that, it is €17,000. The reduced rate is reserved for companies whose turnover excluding VAT (hors taxes) stays below 10 million euros and whose capital, fully paid up, is held continuously at least 75% by individuals (natural persons) or by a company meeting the same conditions.
The main lever is depreciation (amortissement): each year, the SCI deducts a fraction of the property’s price, without spending a euro. In the example, 2% of the purchase price a year, i.e. €3,000. On top of that, in the year of purchase, come €18,000 of notary fees, loan fees and maintenance works: the year-1 taxable result is -€20,116, a loss carried forward to the following years. As a result, the SCI pays no IS during the 20 years it holds the property (its first euro of IS would come in year 22 if it kept it).
With no IS paid while the property is held, net worth after IS stays at €231,798 and the after-IS IRR is the before-tax one: 5.5% a year. But the tax has not disappeared: it is paid at the sale.
Step 3: after the sale and the distribution
After 20 years, the SCI sells the property for €231,798. It pays €11,590 of selling costs (agency); the loan is already fully repaid. The net sale proceeds are €220,208.
In an SCI à l’IS, the capital gain is not calculated on the purchase price but on the net book value (valeur nette comptable, VNC): the acquisition cost recorded on the balance sheet minus all the depreciation deducted. The €60,000 of depreciation that reduced IS over 20 years therefore comes back into the capital gain, taxed at IS, with no allowance for the holding period (abattement pour durée de détention).
The capital gain is added to the year’s result and goes through the same scale (15% then 25%): €26,588 of IS on the capital gain. Then the money has to come out of the SCI. The compte courant d’associé (€96,858: the contribution and the cash payments after the purchase) is repaid first, tax-free, because it is the repayment of a loan. The surplus (€96,763) is distributed to the associates and subject to the prélèvement forfaitaire unique (PFU, the “flat tax”) at the current (2026) rate of 31.4%, i.e. €30,383.
| Item | Amount |
|---|---|
| Net sale proceeds | €220,208 |
| Cash held by the SCI (after the IS already paid) | €0 |
| IS on the capital gain | -€26,588 |
| Amount available for distribution (subtotal) | €193,620 |
| Flat tax (31.4%, 2026 rate) on the part above the compte courant | -€30,383 |
| Net cash to the associates | €163,237 |
The associates invested €96,858 in total: their net gain is €66,379.
The after-sale IRR, the most complete of the three since it includes every tax and the exit, is 3.3% a year.
The result in three stages
After the sale
| Item | Amount |
|---|---|
| Net sale proceeds | €220,208 |
| Cash held by the SCI | €0 |
| IS on the capital gain | -€26,588 |
| Flat tax on the distribution | -€30,383 |
| Net cash to the associates | €163,237 |
IRR after the sale: 3.3% a year
| Indicator | Invented example |
|---|---|
| Gross yield | 5.36% |
| Yield net of charges | 3.02% |
| IRR before tax | 5.5% |
| IRR after IS | 5.5% |
| IRR after the sale and the flat tax | 3.3% |
IRR: an annual rate rather than a total gain
A net gain of €66,379 is not enough to compare: it does not say how long the money was tied up, nor when it was paid in. The IRR (internal rate of return) answers that question: it is the single annual rate at which each euro the associates paid in (the contribution, then each cash payment after the purchase, on its date) would have to be invested to reach exactly what they get back at the end. It can be compared with the rate of a savings account, of a bond or with the return of the stock market, with one caveat: these investments have neither the same risk nor the same liquidity (a property cannot be sold in a day, and its rent is not guaranteed).
The definition of each term is in the glossary.
Frequently asked questions
How do you calculate the return of an SCI à l’IS?
In three stages. Before tax: what the investment builds (principal repaid, appreciation, cash). After IS: minus the corporate tax paid each year, reduced by depreciation. After the sale: minus the IS on the capital gain (calculated on the net book value) and the flat tax on the distribution. In our invented example, the IRR goes from 5.5% before tax to 3.3% after the sale.
What is the IS (corporate tax) rate of an SCI?
15% on the part of the annual profit up to €42,500, then 25% above that. The reduced rate requires a turnover excluding VAT below 10 million euros and a capital fully paid up, held continuously at least 75% by individuals (or by a company meeting the same conditions).
Does depreciation really save tax in an SCI à l’IS?
It reduces IS while the property is held, but it lowers the property’s net book value by the same amount: at the sale, the depreciation deducted comes back into the taxable capital gain. So it is not just a deferral: profits wiped out at the 15% rate can come back in a capital gain taxed at 25%. In our invented example, total IS including the sale is €26,588 with depreciation against €21,944 without, and the after-sale IRR is 3.32% against 3.40%.
How is the sale of a property held by an SCI à l’IS taxed?
The capital gain equals the sale price, minus the selling costs, minus the net book value (acquisition cost recorded on the balance sheet minus depreciation). It is taxed at IS with the year’s result, with no holding-period allowance. To receive the rest, the associates have their compte courant repaid (tax-free), then distribute the surplus to themselves, subject to the flat tax at the current (2026) rate of 31.4%, unless they opt for the progressive income-tax scale, with a 40% allowance.
Why put the money in through a compte courant d’associé?
Because the repayment of a compte courant d’associé (shareholder current account) is not taxable: it is the repayment of a loan. In our invented example, €96,858 (the contribution and the cash payments after the purchase) comes back to the associates without flat tax; only the surplus distributed is taxed.
What is the IRR of a rental investment?
The internal rate of return (TRI in French) is the single annual rate at which each euro invested, on its date, would have to be invested to reach the sum received at the end. It takes into account the amount invested, when it was paid in and how long the property was held, which neither a gross yield nor a total gain does.