In France, investing in real estate is a profitable venture, providing a reliable way to benefit from the many advantages of tax exemption. These benefits can vary depending on the nature and legal status of the real estate properties. For instance, investing in a Real Estate Investment Company (SCI) does not offer the same advantages as investing in a non-professional furnished rental (LMNP) due to the difference in legal status between these two forms of real estate investments. This article explores the nuances between LMNP and SCI, as well as the advantages each offers.
LMNP stands for "Loueur Meublé Non Professionnel" or non-professional furnished lessor. Investing in LMNP involves purchasing a new property, furnishing it, and renting it out on a non-professional basis. Therefore, you cannot rent out your property unfurnished and benefit from this tax status.
Legally, LMNP is a tax status that allows an investor to declare their income for taxation. This type of real estate investment offers many advantages. For example, by investing in LMNP, you benefit from a particularly favorable tax regime for your rental income. Among others, you get:
Indeed, with the LMNP status, you don't need to create a management company for your property. It allows you to own rental properties in your own name, which does not prevent you from engaging in income-generating activities in parallel.
All rental income from LMNP is taxed under the BIC category (Industrial and Commercial Profits). This category allows a free choice between the Micro-BIC regime and the simplified real regime. The former offers a flat-rate deduction of 50%. This is 71% in the case of classified furnished tourism accommodation. The latter regime, more advantageous than the former, allows you to deduct numerous expenses related to your property, including the ability to amortize the value of the property, work done, and furniture.
With an LMNP, your rental income is subject to a solidarity levy of 7% and a total social contributions rate of 17.2% on property income.
A Société Civile Immobilière (SCI) is a legal business status. It is a legal entity for the collective management of real estate properties. An SCI is made up of investors who pool their properties or resources to purchase them. These properties are then leased out to generate profit. Properties of an SCI can be either furnished or unfurnished rentals. Like any company, an SCI has capital, a registered office, and is based on statutes and regulatory norms. The management of properties within an SCI is carried out by a committee appointed by the board of directors.
An SCI can be family-based or simply consist of partners with no familial ties. This legal status offers many advantages, among which are:
It's important to note that there are several nuances between an LMNP and an SCI. Firstly, an SCI is a legal entity responsible for several properties, while LMNP is merely a tax status. Also, the rental income from LMNP must not exceed €23,000, whereas the capital of an SCI is freely determined. The latter is free to lease its properties unfurnished to professionals or not, which is not the case with LMNP.