You have formed your Société Civile Immobilière (SCI). You followed the common advice to keep the share capital low—perhaps €1,000—to minimize setup costs and keep the structure flexible. But the chateau, the farmhouse, or the Parisian apartment costs €500,000. So, to bridge the gap, you transferred the remaining €499,000 from your personal British bank account to the SCI’s French account to complete the purchase.
Congratulations. You have just created a Compte Courant d’Associé (Partner Current Account), or CCA.
For many British investors, this feels like a simple, functional transfer of funds. “It’s my money, just in a different pot,” you might say. You might even treat the SCI’s bank account as an extension of your own, moving money in and out as renovations require.
However, under French law, you have fundamentally changed your relationship with the company. You are no longer just an owner; you are a creditor. And this specific creditor status comes with a distinct set of rights, risks, and tax traps that are entirely separate from your status as a shareholder.
This guide explores the legal and fiscal minefield of the CCA. From the potential trap of capital gains tax to the strict rules on charging interest and the complex battles over reimbursement, here is why your “simple transfer” is actually a complex legal contract.
Part 1: The “Double Hat” – Understanding Your Legal Status
The foundational concept you must grasp is that a Partner Current Account constitutes a debt of the society towards the associate. By making these contributions, you add a second quality to your status: you are an “associé” (owner) and a “créditeur” (lender).
The Hierarchy of Rights
This distinction is not merely semantic; it creates a hierarchy of legal rights that can dictate the future of your investment.
- As an Associé: You hold shares (parts sociales). Your rights are tied to the capital, giving you voting power and a right to future dividends.
- As a Créditeur: You hold a claim (créance). This claim creates an indirect right over the real estate assets that is, in many ways, superior to your actual stake in the share capital.
Crucially, this duality protects you. A notable ruling by the French Supreme Court (Cour de cassation) on September 21, 2022 (Case n° 21-11.372) confirmed a vital principle for investors. The court ruled that there is no “anomaly” in financing a property acquisition almost entirely via a Partner Current Account rather than through share capital. Why does this matter? It means the French Tax Administration cannot claim you are the “real” personal owner of the property just because you financed 99% of it personally. The company remains the legal owner, and you remain the lender. This separation is the firewall that protects the corporate structure of the SCI.
The Freedom of Contract
Unlike the rigid rules governing Share Capital (which requires formal bylaws updates to change), the Partner Current Account is governed largely by contractual freedom. You can lend money for free, or for interest. You can lend it for a week, or for twenty years. However, this freedom is a double-edged sword. Because the law doesn’t impose a structure, if you fail to create one yourself (via a written agreement), you fall back on default civil code rules that may not suit your long-term plan.
Part 2: Charging Interest – The Fiscal Maze
You are lending money to a separate legal entity. Should you charge interest? In a commercial context, the answer is usually yes. In a family SCI, the answer depends entirely on your specific tax strategy and the tax regime of the SCI.
Scenario A: The SCI at Income Tax (IR)
Most family SCIs are transparent for tax purposes (Impôt sur le Revenu). Here, the deductibility of interest is strictly controlled.
1. The “Article 31” Conditions For the SCI to deduct the interest payments from its taxable rental income, the loan must meet the strict conditions of Article 31 I, 1°, d of the General Tax Code (CGI). This article defines deductible property charges. To be deductible, the debt must be contracted specifically for:
- Acquisition;
- Conservation;
- Construction;
- Repair; or
- Improvement of the property.
The Trap: Correlation. The SCI must be able to justify a “sufficient correlation” between the amount of the CCA and the cost of the works or acquisition. If you lend money simply to cover a cash-flow gap—for example, because your bank loan repayments are higher than your rental income—that interest is not deductible. Why? Because balancing the books is not listed in Article 31. Similarly, if the company has plenty of cash (self-financing capacity) but you choose to lend more money anyway just to generate interest for yourself, the tax courts have ruled (CE, July 8, 1988) that this interest is not deductible. It is seen as an investment strategy for you, not a necessity for the property.
2. The “Full Payment” Condition There is a lingering debate about whether the share capital must be fully paid up (libéré) before you can deduct interest on partner loans. This is a strict rule for commercial companies (Article 39, 1, 3° CGI). However, the Administration’s own doctrine suggests this restriction applies to companies taxed under the BIC category (Industrial and Commercial Profits). A standard SCI taxed under Land Income (Revenus Fonciers) is likely exempt from this specific “full payment” condition, although caution is advised.
3. The Risk of “Abnormal Management” Be very careful if you maintain a debit account (you owe the company money) while simultaneously lending the company money in a separate credit account. Paying interest to a partner who is simultaneously a debtor to the company is considered an “Abnormal Act of Management.” In a tax audit, these interest payments would be rejected and added back to the company’s taxable profit.
Scenario B: The SCI at Corporate Tax (IS)
If your SCI has opted for Corporate Tax (Impôt sur les Sociétés), the rules tighten significantly. Deductibility is capped by reference rates set by the central bank and by rules on “under-capitalization.” If the interest rate you charge exceeds the average variable rate for business loans (TMP), the excess is not deductible for the company and must be added back to the taxable result.
Taxation for the Lender (You)
If you do receive interest from your SCI, how is it taxed in your hands? Since the Macron reforms, this income is treated as investment income (revenus de créances) and falls under the PFU (Prélèvement Forfaitaire Unique), commonly known as the Flat Tax.
- The Rate: 30% total (composed of 12.8% Income Tax + 17.2% Social Charges).
- The Option: You can opt to be taxed at your marginal income tax scale rate if it is more beneficial (e.g., if you are in a very low tax bracket), but this option is “all or nothing”—it applies to all your investment income for the year.
Part 3: The Unremunerated Loan (0% Interest)
What if you don’t want to complicate things? Can you just lend the money for free? Yes, legally you can. But fiscally, it raises questions, particularly regarding “Renunciation of Receipts” (Renonciation à recettes).
The 2025 Council of State Ruling A very recent decision by the Council of State (CE, March 12, 2025, Sté civile Saint-Louis) has clarified the situation for SCIs. The question was whether an interest-free loan constitutes an “financial aid” under Article 39-13 of the CGI, which limits the deductibility of such aid. The Court ruled that for an SCI without commercial activity, sums credited to a CCA do not constitute financial aid within the meaning of this article. Therefore, lending money at 0% does not trigger the complex penalties associated with illicit inter-company financial support. This is a relief for family SCIs: you can lend for free without fear of the taxman reclassifying the “missing” interest as a taxable gift, provided the company remains non-commercial.
However, if your SCI is subject to Corporate Tax (IS), the rules of commercial aid apply fully, and renouncing interest can be scrutinized more heavily.
Part 4: Getting Your Money Back
This is the most common source of litigation in French SCIs. You lent the money to buy the property. Now, perhaps years later, you want it back. The company (or your business partner) says, “Sorry, we don’t have the cash.” Who wins?
The Golden Rule: Reimbursement at Will
The default rule in France is incredibly powerful for the lender. In the absence of specific restrictions in the statutes or a blocking agreement, a partner can demand the reimbursement of their CCA at any time. It does not matter if the company is in poor financial health. It does not matter if the cash flow is tight. Unless you signed a contract explicitly saying “I agree to lock up these funds for 5 years,” the debt is due on demand.
The Invalid Excuses (Myths vs. Reality)
Company managers often try to block reimbursement using creative excuses. The French courts have systematically dismantled these defenses. Here are the arguments that will not work:
1. “We have accumulated losses” A manager might argue, “You own 50% of the company, and we have €100,000 in losses. Therefore, your €50,000 loan is wiped out.” The Court says No. A company cannot refuse to pay you back by unilaterally offsetting your debt against losses. Why? Because losses are only “realized” upon liquidation or by a specific vote. Unless a General Assembly has formally approved the accounts and voted to offset your debt against those specific losses, the company must pay you back in full.
2. “You are withdrawing from the company” The withdrawal of a partner (retrait) and the reimbursement of their current account are two separate legal events.
- You do not need to withdraw as a partner to get your loan back.
- Conversely, withdrawing from the company is not a legal condition for getting paid. The Supreme Court (2014) confirmed that a partner can demand their loan back while remaining a partner, or leave without demanding it immediately. The two are not legally linked.
3. “The Manager decides” Some statutes contain a clause saying: “Reimbursement of current accounts is decided by the Manager based on available cash flow.” The Court says No. Such a clause is deemed null and void because it constitutes a “potestative condition” (Article 1174 Civil Code). A debtor (the company, represented by the manager) cannot have the sole power to decide if or when they pay a debt. The obligation to pay must be objective, not subject to the whim of the manager.
4. “It increases the partners’ engagements” Managers have tried to argue that paying back a large CCA depletes the treasury, forcing the other partners to put money in to save the company. They claim this violates Article 1836 of the Civil Code, which says you cannot increase a partner’s engagement without their consent. The Court says No. In a key 2018 ruling, the Supreme Court held that repaying a valid debt is simply the company honoring a contract. It is not an “increase in engagement” for the partners, even if it leaves the company broke. Article 1836 cannot be used to block a creditor.
The Only Real Obstacles
There are, however, two specific legal barriers that can delay or prevent you from seeing your money.
Obstacle 1: The “Certain, Liquid, and Due” Rule To demand payment in court, your debt must be indisputable. If the company accounts have not been approved for years, or if the exact balance of your account is contested, the company can legally refuse payment until the math is settled. The Supreme Court (2021) ruled that if a Current Account balance is “uncertain” or “awaiting the approval of accounts,” the judge cannot order payment. Investor Tip: This is why the Annual General Meeting (AGM) is vital. By voting to approve the accounts every year, you are legally certifying the amount the company owes you. Without that AGM minute, your debt is vulnerable.
Obstacle 2: The “Wall” of Article 1857 If the SCI has truly no money, can you sue your fellow partners personally to get your cash back? After all, partners in an SCI are liable for debts, right? The Court says No. In a controversial 2012 ruling, the Supreme Court decided that Article 1857 (which allows creditors to pursue partners for company debts) was written to protect third parties (tiers). It does not apply to partners. The court reasoned that you cannot wear two hats at once to sue your colleagues. As an associé (owner), you are an “insider,” not a “third party.” Therefore, if the company is empty, you cannot use Article 1857 to force your partners to pay your Current Account. You are stuck pursuing the empty shell of the company.
Part 5: The “Substitute Loan” Strategy
If the SCI has no cash to pay you back, but the property has increased in value, there is a solution: Refinancing. The SCI can take out a bank loan specifically to reimburse your Partner Current Account. This is known as a “Substitute Loan” (Prêt substitutif).
Is the interest on this new loan deductible? This is a common point of friction with tax authorities. They might argue that a loan taken to pay back a partner is not “for the acquisition or improvement of property” (Article 31). However, administrative case law (the Jabbari jurisprudence, 2012-2014) is favorable to the investor. The courts ruled that if the original Partner Current Account was used to buy or improve the property, then the bank loan used to repay that account effectively “substitutes” the original debt. Because the purpose of the debt remains the property acquisition (by proxy), the interest on the new bank loan is deductible from property income. This applies even if the original partner loan was interest-free. You can replace a 0% partner loan with a 4% bank loan and start deducting the interest, provided the paper trail clearly links the funds to the property.
Part 6: The Capital Gains Trap
We now come to the single most dangerous area for British investors who set up “low capital” SCIs. If you remember only one section of this guide, make it this one.
The Scenario
Let’s imagine a typical scenario:
- You set up an SCI with a nominal share capital of €1,000.
- You lend the SCI €350,000 via a CCA to buy an apartment.
- Ten years later, you decide to sell your shares in the SCI to a new buyer for a total price of €693,000 (reflecting the property value).
The Logical Calculation
You might think your profit calculation looks like this:
- Sale Price: €693,000
- Cost to you (Capital + Loan): €351,000
- Profit: €342,000.
You would be wrong. And this mistake could cost you tens of thousands of Euros.
The Fiscal Reality
According to strict French tax jurisprudence, famously illustrated in the following case: CAA Nancy, 1997 confirmed by CE, the Partner Current Account is not considered part of the “acquisition price” or “cost price” of the shares. It is a separate legal claim. Therefore, the tax office calculates your capital gain as follows:
- Sale Price of Shares: €693,000
- Acquisition Price of Shares: €1,000 (Nominal Capital only).
- Taxable Capital Gain: €692,000.
You are taxed on a phantom “gain” of nearly €700,000, even though half of that money was simply the return of your own loan. The court’s logic is ruthless: the current account is a claim against the company, not a charge included in the share price.
The Solution: Decoupling
To avoid this disaster, you must structure the sale correctly. You should never bundle the shares and the debt into a single price. Instead, the transaction must be split:
- Sale of Shares: The buyer pays you for the shares based on their nominal value plus any actual asset appreciation.
- Reimbursement of Debt: The buyer (or the company) separately repays your Current Account. Alternatively, you execute a “Cession de Créance” (Assignment of Debt) where the buyer purchases your debt for its face value. This assignment of debt is registered separately (cost: €125 fixed fee) and does not trigger capital gains tax, as you are selling a debt of €350,000 for €350,000 (zero gain).
Part 7: The Forbidden Fruit – The Debit Account
Finally, a word of warning on the reverse situation: treating the SCI account as an ATM. This happens when a partner withdraws more money than they have put in, creating a Compte Courant Débiteur (Debit Partner Account).
Is it Legal?
Legally, yes. Unlike in a commercial company (SARL/SAS) where it is a criminal offense for an individual partner to have an overdraft, there is no statutory ban on overdrafts in a civil society. The company can, of course, demand reimbursement of this overdraft at any time.
Is it Tax Wise?
This depends entirely on the tax regime of your SCI.
1. SCI at Corporate Tax (IS) This is less than ideal. Under Article 111-a of the CGI, any advance or overdraft granted to a partner is strictly presumed to be a distributed income (dividend). You will be taxed on the withdrawal immediately as if it were a dividend. Even if you pay it back later, the tax damage is done.
2. SCI at Income Tax (IR) The presumption of distribution does not apply here. However, you are not safe. In the Campou de Grimaldi-Regusse case (Lyon, 1996), a taxpayer took a loan through an SCI and transferred the cash to his personal account. The tax office proved the SCI had no real activity and was effectively a shell used to obtain personal financing. They taxed the withdrawal as “income of indeterminate origin.” While a genuine SCI is safer, maintaining a debit account looks messy to tax auditors and can trigger “Abuse of Rights” investigations. Proceed with caution.
Conclusion: The Checklist for the English Investor
The “Compte Courant d’Associé” is the unsung hero of the French SCI structure. It allows for flexible financing, easy cash injection, and liquidity without the heavy formalities of changing share capital. But as we have seen, it is a tool that requires respect.
Your CCA Safety Checklist:
- Documentation: Have you formally documented the loan? Even a simple written convention (Convention de Compte Courant) is better than nothing.
- Certainty: Do you approve the accounts annually? This is your only proof that the debt is “certain” and “liquid.”
- Sale Strategy: If you are selling your SCI, are you decoupling the share price from the CCA reimbursement?
- Reimbursement: Remember, you can ask for your money back anytime, but you cannot sue your partners personally if the company is empty.
- Interest: If you charge interest, ensure it is strictly correlated to property works (Article 31) to ensure deductibility.
Treat your loan with the same formality as a bank would, and your French investment will remain a secure asset rather than a fiscal burden.
