Real estate firm : income tax or corporate tax ?

The january 21, 2020

Invest in real estate through a real estate firm has many benefits in terms of management and transmission.
The real estate firm is flexible and usefull for many asset strategies. But what about taxation ? You have the choice  between 2 options : the income tax or the corporate tax. This choice depends of your project :


•    The income tax : it’s the best solution if you plan to sell the real property in the middle/long run.
The rents are subject to the income tax schedule as if you owned the real property yourself. Then, if your TMI (let’s take a look to our patrimonial lexical to read the french definition) is 30%, you will pay to the tax authorities 47,2% (with the social contribution) of your income and that’s a lot ! 
However, if you decide to sell your real property, you will benefit from a tax allowance based on the period of detention. You can even have a total tax exemption beyond 30 years.


•    The corporate tax : it’s the best solution if you plan to keep the real property in order to get an additional income for your retirement. 
The rents are subject to the corporate tax from 15% to 28% and the taxable profit is lower than the 1st option thank’s to the amortization method. Then, your rents are less heavily taxed than under the income tax system.
In contrast, you won’t benefit from any tax allowance for period of detention and the taxable base of the capital gains will be larger because of the amortization method. 


You have a real property project, you want to be adviced about the tax regime you must choose ? Contact our team of experts and make your whishes come true !
 

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Article by : Orane Tréhet

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