Can we rent out second SCI home in France?

Reader question: I and several other family members own a second home via an SCI. Can we rent it out occasionally as a holiday rental to generate income?

You need to be careful: in many cases, short-term furnished rentals via an SCI can create significant tax risks.

Most family SCIs are set up under income tax (impôt sur le revenu – IR).

If an SCI carries out furnished rentals the tax authorities may reclassify the activity as commercial and this can be seen as incompatible. 

This can lead to the SCI being taxed under corporation tax, often with retrospective effect, and can lead to loss of capital gains tax exemption for length of ownership.

There may be a limited tolerance if income from furnished holiday rentals remains below around 10% of the SCI’s total receipts but a recent case showed that even a few weeks of holiday rentals (eg. on Airbnb) can trigger reassessment.

There can also be other consequences. For example, if such a property is made available to shareholders without them paying rent, this may then be treated as a benefit to them on which they should personally pay tax.

If your aim is to rent out the property furnished, alternative structures such as a family SARL or Société en nom collectif may be better.

In some cases, an SCI can instead rent the property unfurnished to another entity (including the shareholders themselves), which then carries out furnished rentals — but this requires careful structuring.

Given the risks, it is advisable to seek professional advice before doing this.