The accounting management of a Civil Real Estate Company (SCI) raises many questions for real estate owners and investors. Although SCIs benefit from a certain flexibility in their operation, they are nevertheless subject to accounting obligations that vary according to their tax regime and structure. Understanding these requirements helps ensure transparent management that complies with current legislation. Whether you are considering creating an SCI or already have such a structure, mastering the accounting aspects will allow you to optimize your real estate investment while respecting the legal framework.
The legal framework of accounting obligations for SCI
Unlike commercial companies, SCIs are not systematically subject to the obligation to keep complete accounts. However, certain situations impose stricter requirements.
French law distinguishes between two main tax regimes for SCIs: income tax (IR) and corporate tax (IS). This distinction is fundamental because it largely determines the company’s accounting obligations. SCIs subject to IR generally benefit from a more flexible framework, while those opting for IS are subject to more rigorous obligations.
Even in the absence of a strict legal obligation, keeping detailed accounts is strongly recommended for all SCIs because it allows them to meet tax requirements, but also provides a true picture of the company’s financial situation to partners and potential creditors.
Maintaining the accounts of SCI methods and tools
General accounting plan (PCG) applied to SCI
The General Accounting Plan (PCG) is the basic accounting framework for SCIs, as well as for all economic entities in France. However, its application to SCIs has certain particularities. SCIs must adapt the PCG to their activities, particularly in the accounting of real estate transactions, rents, and rental charges.
Using the PCG ensures uniformity in the presentation of accounts and facilitates comparison between different periods or between different SCIs. You will need to master the accounts specific to real estate transactions, such as class 2 accounts for fixed assets or class 7 accounts for rental income.
Specialized accounting software for SCI
To simplify the accounting management of an SCI, specialized software makes it possible to automate recurring tasks without compromising compliance with current accounting standards.
Accounting software for SCI generally offers suitable features such as:
- Management of rents and charges
- Monitoring of works and depreciation
- Automated editing of financial statements
- Generation of tax returns specific to SCI
Suitable software can greatly simplify daily management and ensure better compliance with the SCI’s reporting obligations.
Specific features of accrual accounting for SCIs
Accrual accounting, which is mandatory for SCIs subject to IS, has specific features that distinguish it from cash accounting. This method involves recording transactions from their legal inception, regardless of the associated financial flows.
For an SCI, this means, for example, that rents must be recorded as soon as they are due, even if they have not yet been received. Similarly, rental charges are recorded on the date they are incurred, and not on the date they are paid. This approach allows for a more precise view of the real financial situation of the SCI at a given time.
Setting up accrual accounting requires particular rigor and a good knowledge of accounting principles. It involves in particular the management of accrual accounts (expenses and income recognized in advance, invoices not received, etc.) which can be complex in the context of a real estate activity.
Mandatory accounting documents for an SCI
Journal and general ledger recording of transactions
A real estate company is required to update a journal and the general ledger. The journal chronologically lists all transactions carried out by the company. Each entry must be justified by an accounting document (invoice, bank statement, etc.) and include essential information such as the date, the wording of the transaction, and the amounts debited and credited.
The general ledger, for its part, takes up these same transactions but classifies them by account. It thus provides an overview of each accounting item (bank, suppliers, rents, etc.). The rigorous maintenance of these two documents ensures the traceability of transactions and facilitates possible checks.
Annual accounting report assets and liabilities of the SCI
The annual balance sheet is a summary document that allows you to visualize the financial situation of the SCI at the end of the financial year. It is made up of two parts: the assets, which list the company’s property and receivables, and the liabilities, which detail its resources (capital, reserves, debts).
For an SCI, the assets will mainly include the real estate assets held, possibly work in progress, as well as rental receivables. The liabilities will include the share capital, loans taken out to finance real estate acquisitions, and various debts (suppliers, tax, social).
Income statement details of income and expenses
The income statement is a document that complements the balance sheet and traces the economic activity of the SCI over the past financial year. It presents in detail all of the company’s income (mainly rents for an SCI) and expenses (property maintenance, management fees, loan interest, etc.).
The difference between income and expenses is the result of the financial year, which may be a profit or a loss. This result determines the tax base of the SCI and its partners, depending on the tax regime chosen.
Accounting annexes additional information required.
The accounting annexes supplement the balance sheet and the income statement by providing additional qualitative and quantitative information. They are essential for understanding the financial situation of the SCI as a whole and for meeting transparency requirements.
For an SCI, the annexes may include information such as
- Methods of assessment and presentation of accounts
- Details of fixed assets and depreciation
- The status of receivables and payables
- Off-balance sheet commitments (guarantees, guarantees)
- The composition of the share capital and the distribution of shares between the partners
This information may be necessary for partners, creditors, and the tax authorities because it allows them to assess the real situation of the SCI beyond the simple figures in the balance sheet and the income statement.
Tax regimes and mandatory declarations of SCI
Corporate tax (IS) vs. income tax (IR) for SCI
Choosing between IS and IR is a strategic decision for an SCI. By default, SCIs are subject to IR, which means that profits are taxed directly at the level of the partners, in proportion to their shares in the company. This regime benefits from a certain administrative simplicity but may prove less advantageous from a tax point of view in certain situations.
The option for IS, on the other hand, implies that the SCI is considered a tax entity in its own right. Profits are then taxed at the company level, at the IS rate, before being possibly distributed to the partners. This regime can provide advantages in terms of tax optimization, particularly for SCIs making significant profits or wishing to reinvest part of their income.
Note that IS involves stricter accounting obligations, including the maintenance of accrual accounting and the preparation of complete annual accounts.
Declaration 2072 property income from the SCI
The 2072 declaration is a tax document specific to SCIs not subject to IS. It allows you to declare the company’s property income and its distribution between the partners. This declaration must be completed each year, even in the absence of income.
The 2072 declaration includes several essential pieces of information
- Identification of the SCI and its partners
- Details of rental income and deductible expenses
- Distribution of the result between the partners
- Information on the buildings owned by the SCI
Complete this declaration accurately, as it serves as the basis for taxing the partners’ property income in their personal income tax return.
VAT and SCI cases of liability and declarations
The VAT liability of an SCI depends on the nature of its activities. As a general rule, unfurnished rentals for residential use are exempt from VAT. However, certain transactions may result in mandatory or voluntary VAT liability, in particular:
- Rental of professional or commercial premises
- Renting furnished accommodation
- Construction-sale operations
When an SCI is subject to VAT, it must comply with reporting obligations, including periodic declarations (monthly, quarterly, or annual depending on the regime) and the maintenance of suitable accounting to distinguish between transactions subject to VAT and those exempt from it.
VAT liability may have repercussions on the accounting and financial management of the SCI, particularly in terms of cash flow and recovery of VAT on investments. It is therefore recommended to carefully assess the advantages and constraints before opting for this regime.
Accounting specificities according to the type of SCI
Accounting requirements and practices can vary significantly depending on the type of SCI. Each form of SCI has specific features that influence how the accounting must be kept and the information that must be produced.
SCI management accounting for rent and charges
Management SCIs, whose purpose is to rent out buildings, must be particularly attentive to the accounting of rents and charges. Rents constitute the main source of income and must be recorded accurately, taking into account any vacancy periods or unpaid rent.
For effective accounting management, it is recommended to establish a detailed accounting plan for the different types of rents and charges, set up a regular and automated invoicing system, and carry out monthly bank reconciliations to ensure the effective collection of rents, as well as anticipate future charges (works, property taxes, etc.).
SCI attribution accounting specificities
The SCI attribution has accounting particularities linked to their specific object: the allocation in enjoyment or ownership of real estate lots to their partners. The accounting of these SCI must faithfully reflect the rights of each partner on the different lots.
The main accounting specificities of attribution SCIs include
- Accounting for calls for funds for the construction or acquisition of assets
- Registration of the partners’ rights to the various lots
- Management of common charges and their distribution between partners
- Monitoring of partners’ current accounts, often used to finance operations
These SCIs must ensure detailed analytical accounting, allowing the precise monitoring of costs and rights associated with each lot. This approach facilitates the management of allocations and the resolution of possible disputes between partners.
Construction-sale SCI accounting for real estate transactions
Construction-sale SCIs, also called real estate development SCIs, must adapt their accounting to their construction and real estate sales activity. These companies must follow the accounting rules specific to real estate development operations.
The main aspects to take into account in the accounting of a construction-sale SCI are:
- Accounting for construction costs (land, materials, labor)
- Recording sales based on the progress of work
- Management of deposits paid by buyers
- Monitoring of real estate inventories under construction
These SCIs must apply the percentage-of-completion method for accounting for their income, which implies a precise estimate of costs and revenues at each stage of the project. This method allows the company’s economic activity to be faithfully reflected throughout the implementation of real estate programs.
Control and certification of the accounts of an SCI
Appointment of an auditor mandatory cases
The appointment of an auditor is not systematically mandatory for all SCIs. However, certain situations make this appointment necessary:
- When the SCI exceeds two of the following three thresholds for two consecutive financial years:
- Balance sheet total exceeding 1.55 million euros
- Turnover excluding tax exceeding 3.1 million euros
- More than 50 employees employed
- If the SCI controls one or more companies
- If the SCI is controlled by one or more companies
The presence of an auditor provides an additional guarantee of the reliability of the accounts and can reassure the associates, creditors, and partners of the SCI.
Accounting audit procedures and standards applicable to SCI
Even in the absence of a legal obligation, some SCIs may choose to have a voluntary accounting audit carried out. The main steps of an accounting audit for an SCI include:
- Audit planning and risk assessment
- Review of internal control procedures
- Verification of accounting records and supporting documents
- Analysis of the main items in the balance sheet and income statement
- Review of the information provided in the appendix
The auditor applies the professional standards in force, adapting them to the specificities of SCIs, particularly about the valuation of real estate assets and the accounting of rental income.
Responsibility of the manager in the accounting of the SCI
The manager of an SCI is responsible for ensuring that the accounts are kept in accordance with the rules in force and that they accurately reflect the financial situation of the SCI. He ensures the implementation of an accounting system adapted to the activity of the SCI and supervises the regular maintenance of the accounting books. He verifies the establishment of the annual accounts within the legal deadlines and ensures the retention of supporting documents for the required legal periods.
In the event of a breach of these obligations, the manager may be held liable, both to the partners and third parties. It is therefore crucial for the manager to surround himself with competent professionals (accountants, and auditor) to ensure compliance with the accounting obligations of the SCI.
In conclusion, the accounting obligations of an SCI, although variable depending on its size and tax regime, constitute a fundamental aspect of its management. The implementation of suitable and rigorous accounting is essential to ensure financial transparency, optimize tax management, and facilitate decision-making. SCI managers and partners have every interest in fully understanding the