The Administrative Tribunal of Nîmes has ruled that a French real estate civil company (SCI), La Banastière, is liable for corporate income tax (IS) and VAT due to its furnished rental activity. The decision, issued on 5 December 2025, serves as a cautionary reminder for international investors using SCIs for property holding in France.
The Case
SCI La Banastière owned a property in Vaucluse comprising a furnished gîte and guest rooms. The company challenged tax reassessments for 2019, arguing it was not liable for IS or VAT. It claimed to have leased the property unfurnished to a partner who operated the furnished rentals independently. However, the court found that the SCI directly collected the income, paid expenses, and operated the rentals, dismissing the lease arrangement as artificial.
Legal Basis
Under French tax law, an SCI is normally considered a “civil” vehicle and taxed transparently through its partners when renting unfurnished property. But when an SCI engages in furnished rentals—especially short-term or with hotel-like services—it is deemed to be conducting a commercial activity. Article 206 of the French Tax Code mandates that any civil company carrying out commercial activities is subject to corporate tax.
Tax Consequences
As a result of the reclassification, La Banastière was liable for IS on its 2019 profits, including gains from the sale of the property. Unlike individual owners, SCIs taxed under IS cannot benefit from capital gains exemptions for long-term holding. The SCI was also liable for VAT, as furnished tourist rentals with services fall within the VAT regime, unlike long-term unfurnished leases.
This led to a significant increase in tax exposure, as profits were taxed at the corporate level (25%) and could also face dividend tax upon distribution. VAT arrears and penalties compounded the financial impact.
Implications for International Investors
The decision highlights the risks for high-net-worth individuals and families using SCIs to structure real estate ownership in France. While SCIs are effective estate and co-ownership tools, engaging in furnished rentals, even indirectly, can trigger corporate taxation and VAT obligations.
International investors should carefully evaluate how rental income is earned and reported. Using a separate operating company or ensuring any lease arrangements are genuine and commercially sound may help preserve the SCI’s civil status. Absent proper structuring, the tax cost of reclassification can be substantial.
The La Banastière case underscores the French tax authorities' willingness to look beyond formalities and requalify structures based on actual activity. Investors and advisors should proactively review their holding structures to ensure alignment with their tax objectives.
At Rosemont Consulting SARL, we offer tailored tax advisory services to help international clients navigate the complexities of French real estate ownership. Whether you are acquiring property through an SCI, considering furnished rentals, or planning for succession, our multilingual team provides strategic structuring advice to ensure tax efficiency and regulatory compliance.
Contact us consulting@rosemont.mc
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Sources: Tribunal Administratif de Nîmes judgment n°2303286 (5 Dec 2025)doctrine.frdoctrine.fr; French Tax Code (CGI) art. 34 & 206(2)