The société civile immobilière (SCI) is a civil company governed by the Luxembourg Civil Code. Its purpose is strictly civil — owning, administering and letting real estate — which distinguishes it from commercial vehicles such as the SARL or the SOPARFI. This clear civil character is also the foundation of its most attractive feature: full tax transparency. Income and gains are not taxed at the entity level but flow through directly to the partners.

The SCI is widely used by families, private investors and joint-venture participants who wish to centralise property management while allocating beneficial ownership among several parties. It is particularly suited to succession planning because interests can be split between usufruct and bare ownership, enabling an orderly, tax-efficient transfer of wealth across generations. Governance is customisable by contract, without the mandatory corporate bodies required for commercial companies.

One critical boundary must be observed at all times: regular property trading, development or systematic furnished rentals with hotel-type services can prompt the administration to requalify the SCI as commercial. This requalification triggers full corporate taxation and removes the advantages that motivate most founders to choose the structure. Any investor considering an SCI should therefore ensure its actual operations remain genuinely civil and seek professional accounting advice before engaging in ancillary activities.

Given its flexibility, low formation cost and tax efficiency, the SCI remains the principal civil-law vehicle for collective real-estate ownership in Luxembourg and one of the most frequently requested structures from our company formation practice.

1. Legal nature and formation

An SCI is a civil company with legal personality, registered with the Trade and Companies Register (RCS). Since 2017, registration has been compulsory for all civil companies with legal personality. At least two partners — individuals or legal entities, resident or non-resident — are required.

Contributions and capital

Partners may contribute cash, assets in kind (including real estate) or industry (personal services or expertise). There is no statutory minimum capital, giving founders complete freedom to calibrate contributions to the value of the target property. Shares (parts sociales) are nominative and their transfer usually requires unanimous partner consent unless the articles provide otherwise.

Formation formalities

The constitutive deed may be executed as a simple private instrument, but a notarial deed is mandatory whenever Luxembourg real estate is contributed or purchased at formation. Registration with the RCS involves filing the articles, details of the managers (gérants) and paying the applicable fee.

RBE obligation — Within one month of incorporation, ultimate beneficial owners (those holding at least 25 % or exercising effective control) must be recorded in the Register of Beneficial Owners (RBE).

Since 12 November 2024, any natural person whose data appear in an RCS filing must provide a Luxembourg national identification number. For new company-formation projects, this requirement should be anticipated early in the preparation phase.

2. Governance and liability

Day-to-day administration is entrusted to one or more managers (gérants) acting within the limits set out in the articles. The scope of the managers’ powers should be drafted carefully, as any act beyond the stated authority may not bind the SCI vis-à-vis third parties.

Unless the articles provide otherwise, unanimous consent of all partners is required for:

• amendments to the articles
• admission of new partners
• capital changes
• disposal of immovable property

Partner liability

Partners are indefinitely and jointly liable vis-à-vis third parties, but only in proportion to their participation. Crucially, creditors must first seek payment from the SCI itself before pursuing the partners personally. This subsidiary character of individual liability is one of the protections built into the civil-law framework, although it falls short of the full limited liability offered by commercial companies.

Record-keeping and AML

Although the SCI is not obliged to file annual accounts with the RCS, it must maintain orderly books and produce financial statements upon request by banks or the tax authorities. Adequate bookkeeping is also essential for substantiating the civil nature of the activity in the event of a tax audit.

AML compliance — Anti-money-laundering legislation applies to all real-estate transactions. Notaries, banks and professional managers must conduct customer due-diligence, and the SCI must keep its partner register current at all times.

3. Tax transparency regime

Provided its activity remains civil, the SCI is fiscally transparent: it is not subject to corporate income tax (CIT), municipal business tax (MBT) or net wealth tax (NWT). Income and capital gains are taxed directly in the hands of each partner according to their share. Each partner declares their portion of rental income or disposal gains in their personal or corporate tax return, depending on their own status.

If the entity is requalified as commercial — for example by engaging in property development, systematic short-term furnished rentals with hotel-type services, or regular trading — the full corporate regime applies.

Criterion	Transparent SCI	Commercial requalification
CIT	None	16 %
Solidarity surcharge	None	7 % of CIT
MBT (Luxembourg City)	None	6.75 %
Combined rate	0 %	23.87 %
NWT	None	0.5 % on net assets
Taxation level	Partners personally	Entity level

Tip — Partners who are themselves Luxembourg-resident companies may benefit from the participation exemption on dividends received from subsidiaries, but this regime does not apply to income flowing through a transparent SCI. Each partner’s specific tax position should be analysed individually.

4. VAT treatment of rental income

VAT treatment depends on the nature of the letting and the type of property.

Letting type	VAT rate	Input-tax recovery
Unfurnished residential	Exempt	No
Commercial premises (no option)	Exempt	No
Commercial premises (joint option)	17 %	Yes
Short-term furnished / hotel-type	3 % (super-reduced)	Yes
Ancillary services predominate	17 % (standard)	Yes

Opting for VAT on commercial lettings can be advantageous when significant construction or renovation expenditure is planned, as it enables full input-tax recovery. The option is exercised jointly by landlord and tenant and must be explicitly stated in the lease agreement. Once made, the option applies for the duration of the lease and can have clawback implications if the property is later converted to an exempt use within the adjustment period.

Property tax and local duties

Property tax (impôt foncier) is payable annually to the municipality based on the unitary value of the property. A structural reform is slated to enter into force progressively from 2026. Until then, the historic rates continue to apply. Municipalities may also levy waste-collection or frontage taxes that the SCI must settle directly.

5. Acquisition costs and transfer duties

When an SCI purchases Luxembourg real estate, the following duties apply:

Duty	Rate
Registration duty (droit d’enregistrement)	6 %
Transcription duty (droit de transcription)	1 %
Municipal surcharge (Luxembourg City)	3 %
Total (Luxembourg City)	10 %

These costs are calculated on the purchase price or, if higher, the fair market value as determined by the Administration de l’enregistrement. They must be budgeted in full, as they are non-recoverable and cannot be offset against future income.

Share transfers

Transfers of SCI shares are effected by private deed and are not automatically subject to proportional transfer duties. A deed that is voluntarily registered or notarised attracts a fixed duty of EUR 75, making share transfers significantly cheaper than direct property transfers.

Anti-abuse warning — The tax administration may treat artificial share transfers as transfers of real property and levy full proportional duties. Any transfer designed primarily to circumvent acquisition costs should be reviewed with a tax adviser before execution.

Financing

SCIs may finance acquisitions with bank loans or partner loans. Interest payable at arm’s-length rates is deductible at the SCI level and taxable in the lender’s hands. No Luxembourg withholding tax is levied on interest paid to non-resident lenders, subject to applicable treaty provisions. The absence of withholding tax on outbound interest is a frequently cited advantage for cross-border financing structures.

6. Advantages and strategic uses

The SCI offers several advantages over direct personal ownership or fully taxable corporate structures:

• Separation of patrimony — Property is held by the SCI, not in the partners’ personal estates, facilitating succession and asset protection.
• Usufruct / bare-ownership split — Partners can structure interests to enable inter-generational transfer while retaining income rights during their lifetime.
• No double taxation — Tax transparency means income is taxed once, at the partner level, unlike a commercial company where profits are taxed first at entity level and again upon distribution.
• Customisable governance — Voting rights, management powers and transfer restrictions are freely determined in the articles without mandatory corporate bodies.
• Low transfer duties on shares — Share sales attract only a fixed EUR 75 duty, subject to anti-abuse provisions.
• Flexible financing — Shareholder loans complement traditional mortgage lending and can be structured to optimise cash flows across multiple properties.
• No minimum capital — Founders can calibrate their equity contribution to the specific investment, unlike commercial companies with statutory minimums.

7. Alternatives to the SCI

Vehicle	Key difference
SOPARFI	Fully taxable holding company; access to participation exemption and treaty network; limited liability
SCSp (special limited partnership)	Transparent; limited liability for limited partners; frequently used by institutional investors
SPF (société de gestion de patrimoine familial)	Dedicated to financial assets; cannot hold real estate directly
SARL	Commercial company; limited liability; subject to corporate tax regime

Where limited liability or a broader investment strategy is required, a SOPARFI or SCSp may be preferable. The SPF is reserved for financial-asset management and is incompatible with direct property holding. The choice between structures depends on the investors’ liability tolerance, the intended holding period, and whether the property portfolio may expand to include non-real-estate assets.

Practical note — It is common for Luxembourg-based groups to combine an SCI with a SOPARFI: the SOPARFI acts as a holding and financing platform while the SCI holds the underlying real estate in a tax-transparent wrapper.