Real Estate Company are structures very regularly used in the context of real estate investments, whether for rental or even in the context of the purchase of the main residence.

These are civil societies (as opposed to commercial companies) whose purpose is the holding and management of one or more real estate. The Real Estate Company is therefore the direct owner of the property it holds, and the partners own shares in the company.

There are two types of Real Estate Company:

• Either the Real Estate Company is fiscally transparent, that is to say that it is a Real Estate Company subject to income tax. In this case, if the real estate generates property income, each partner is taxed on the share of the income received, according to his marginal tax bracket.
• Either the Real Estate Company is subject to corporation tax. In this case, only the company will be taxed at 15%, 28% or 31% depending on the profits generated.

But in the event of resale and capital gain, what happens to the taxation of the latter?

As a reminder, a capital gain is realized on the sale of a property when the price of it, at the time of resale, is higher than the initial purchase price. If this is the case, a tax will be applied on the realized capital gain.

But beware! This taxation will be different depending on the tax regime of the Real Estate Company.

In the context of a Real Estate Company subject to the income tax, the tax applied is that of individual capital gains. In this case, it is possible to add to the purchase price of the property certain costs incurred such as acquisition costs or work costs. The recording of these costs makes it possible to lower the amount of the realized capital gain. Once determined, the realized capital gain is taxed at 19%. However, there are reductions depending on the length of detention. Beyond 22 years of detention, the capital gain is totally exempt from taxation.

Also, if it is the sale of your main residence, the capital gain is fully tax exempt. However, if it is held through a Real Estate Company, its statutes must specify that the residence is made available to you free of charge in order to benefit from this exemption.

In the context of a Real Estate Company subject to corporation tax, the tax applied will be that of professional capital gains, which will be much less advantageous. In this case, the capital gain is then calculated based on the difference between the sale price and the net book value of the asset.

But what is net book value?

One of the peculiarities of the Real Estate Company subject to corporation tax is that it is possible to write off the purchase of its property. Depreciation of an asset makes it possible to record its fictitious loss in value due to wear or time. The net book value therefore corresponds to the purchase price of the asset less the depreciation applied. These depreciations will increase the tax base.

The realized capital gain will then be integrated into the Real Estate Company 's result and taxed with corporation tax which will be 15%, 28% or 31% depending on the Real Estate Company 's result.

In addition, unlike a Real Estate Company subject to corporation tax, no allowance will be applied, regardless of the length of time the property is held.

In order to determine which tax regime to choose when investing with a Real Estate Company, it is essential to establish a real wealth strategy and to plan for the long term. Our entire team is at your side to give you the best advice according to your profile, your goals and your situation.

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