Taxation of SCPIs
Investors in an SCPI (Société Civile de Placement Immobilier) must declare and pay the income related to the rents received as real estate income.
When a real estate asset is sold by the SCPI, the capital gains tax regime applies and differs according to the nature, the tax regime and the tax residence of the investor. Several solutions exist to reduce the tax burden.
The SCPI is fiscally translucent
The objective of SCPIs is to distribute regular income to investors, of which two types can be distinguished. Property income linked to the potential rents generated by the portfolio of real estate assets and financial income received from their possible holdings as well as cash flow returns.
The income from property is subject to income tax and social security contributions. The calculation base can be reduced by the interest paid in repayment of a loan that may have been taken out when the SCPI units were acquired. As for financial income, it is subject to a single flat-rate withholding tax (also composed of income tax and social security contributions) at a rate of 12.8% unless exempted (only rental income can be deducted from interest). In addition to this deduction, the social security deductions of 17.2% are added. If it is more advantageous for him, the investor can however opt for the application of the progressive scale of the income tax, to which are added all the same the social levies (17,2%).
Good to know : By including SCPI units in a life insurance contract, the income is not subject to tax or social security contributions as long as it is reinvested (i.e. as long as no capital outflow occurs). When the policy is surrendered, the life insurance tax system applies. Moreover, capital gains are totally exempt from tax if they are reinvested in another SCPI. In case of withdrawal after 8 years of ownership, the investor benefits from a reduced tax rate of 7.5% + allowance1 or, in certain cases linked to his personal situation, from a total exemption.
Investing in sustainable investments
Like any financial investment, the resale of SCPI units, if it leads to a capital gain, is subject to capital gains tax. The difference between the sale price and the purchase price is taxed at 19% plus 17.2% social security contributions. In the end, a rate of 36.20% applies to the capital gains realized.
Several deductions are applicable according to the length of the holding period. A reduction of 6% applies to the tax on capital gains realized after the 5th year of ownership and up to the 21st year. A reduction of 1.65% in social security contributions applies over the same period.
The tax reduction is 4% and 1.6% for social security contributions in the 22nd year of ownership. Finally, the investor is totally exempt from income tax on capital gains after the 22nd year of ownership and benefits from a reduction in the rate of social security contributions of 9% each year after the 22nd year and a total exemption after 30 years of ownership.
Good to know : Primonial REIM France's Patrimmo Croissance SCPI is primarily aimed at individuals seeking an investment with a positive social and environmental impact and to build up savings over the long term. Generally, these investors wish to capitalize via a life insurance policy or direct ownership financed by debt, which makes it possible to reduce the tax base and even create a property deficit.
SCPI: some risks to keep in mind
Investing in SCPI units presents risks, including the risk of capital loss. The investment is considered to be illiquid and should be considered from a long-term perspective and for asset diversification. The management company does not guarantee the resale of units. The potential income of the fund and the value of the units are not guaranteed. They may go up or down depending on the fund's performance, real estate market trends and economic conditions.
1Rules applicable for premiums paid since September 27, 2017, in accordance with the reform that came into force on January 1, 2018. The reduced rate of 7.5% applies up to a ceiling of €150,000, beyond which the rate reverts to 12.8%.