Are SIICs condemned to perpetual existence?

In two recent rulings, the Paris Administrative Court (first level of jurisdiction) has confirmed the "market-wide tax adjustment" initiated by the French tax administration against SIIC subsidiaries that have sold their last real estate asset: this sale triggers a retroactive withdrawal from the SIIC regime, effective on the first day of the fiscal year of the sale. As a result, the capital gain realized is subject to standard corporate income tax treatment. 

Brief reminder of the SIIC regime

In return for compliance with distribution obligations, the SIIC regime (Article 208 C of the French General Tax Code) exempts the rental income, real estate capital gains, and dividends made by subsidiaries that have opted for this regime from French corporate income tax. 

It applies, on an optional basis, to listed real estate companies and their subsidiaries, as well as to subsidiaries of SPPICAVs. 

To be eligible, several conditions must be met, including a condition relating to the main purpose: acquisition or construction of buildings for rental, or direct or indirect ownership of shares in companies with the same purpose.
 
Dividends distributed by parent SIICs and by SPPICAVs do not benefit from the 40% allowance for individual shareholders or the parent-subsidiary regime for corporate shareholders. 

The cases in question

In summary, the two cases (TA Paris, 1st Sect. - 1st Ch., 15 Oct. 2025, No. 2316478 and TA Paris, 1st Ch., 19 Nov. 2025 No. 2407302) concern subsidiaries of SPPICAVs that had opted for the SIIC regime pursuant to Article 208 C III bis and that sold their last asset(s).

The Court approved the administration’s reasoning: a company that no longer owns real estate cannot be regarded as having as its main purpose the acquisition or construction of real estate for rental purposes. It therefore loses the benefit of the SIIC regime from the first day of the fiscal year in which the last asset is sold. 

It should be noted that in the first case of 15 October, one of the companies had retained a majority stake in a general partnership (SNC) that owned a rental property, but the court ruled that this activity was incidental, as more than 90% of its gross assets were devoted to its holding company activity. This is a surprising position, since the SIIC regime allows indirect holdings. 

A questionable position

Without delving into the technical details, it appears from the judgments that the taxpayers' arguments were brushed aside by the court, which considered, in particular, that withdrawing SIIC status for the fiscal year in which the last asset was sold was "consistent with the very purpose of the SIIC tax regime, which is to promote economic actors who acquire, build, and manage rental properties with a view to boosting the rental market, and not to promote the realization of tax-free capital gains on sales." It thus rejected the taxpayers’ argument based on the absence of any reinvestment obligation in the legislation, even though such a reinvestment obligation had been discussed at the time but was ultimately not retained by the legislature (see the Marini report on the 2003 Finance Bill). 

More broadly, taxing the capital gain realized on the last sale seems to us to be contrary to the spirit and balance of the SIIC regime.
 
Presumptively, the SIICs will have carried out a rental activity and complied with the requirements attached to this regime (in particular their distribution obligations).

Furthermore, the SIIC regime (like that of SPPICAVs) is based above all on a principle of transparency that avoids double taxation: by exempting the company subject to distribution obligations, taxation is transferred to the shareholders, who are taxed “in full”. The Paris Court's rulings undermine this logic.

What are the implications?

Combined with the recent opinions of the French Tax Abuse Committee (Session No. 4 of 12 June 2025, cases No. 2025-01 and No. 2025-02), which considered it abusive for a listed SIIC company to change its closing date to avoid the retroactive loss of SIIC status for major real estate disposals when the 60% capital holding limit was going to be exceeded, these judgments amount to condemning SIICs and SIIC subsidiaries to a form of perpetuity, regardless of whether they comply with the conditions of the regime up to the date of disposal of their last asset.

This is particularly problematic for professional SPPICAV subsidiaries, as these SPPICAVs generally have a limited lifespan.

More than 20 years after the creation of the SIIC regime and nearly 20 years after that of SPPICAVs, these decisions undermine the legal certainty of real estate investors.

In practice, caution and foresight are required while awaiting the outcome of what promises to be a lengthy dispute... unless, optimistically speaking, the central administration changes its position.