France's tax administration has confirmed that the reference rate for determining the tax deductibility of interest paid on shareholder and partner advances will remain at 4.33% for accounting periods ending between 30 June and 29 September 2026, while the alternative quarterly rate for the second quarter of 2026 has been set at 4.35%.
France’s tax administration has published updated administrative guidance confirming the reference interest rates used to determine the tax deductibility of interest paid on advances granted by partners or shareholders beyond their capital contributions for accounting periods ending between 30 June and 29 September 2026.
The guidance, published on 5 August 2026 under legal identifier BOI-BIC-CHG-50-50-30, confirms that the reference rate applicable to twelve-month accounting periods ending between 30 June 2026 and 29 September 2026 is 4.33%.
Under the first paragraph of point 3 of 1 of article 39 of the General Tax Code (CGI) and article 212 of the CGI, interest paid to partners or shareholders on funds made available to a company in excess of their capital contribution is deductible only up to a prescribed limit when calculating taxable income. Any interest exceeding the applicable reference rate is generally not deductible unless the taxpayer can demonstrate that the interest rate applied is at arm’s length.
Reference rate unchanged across three periods
The published guidance confirms that the 4.33% reference rate applies to the following accounting periods:
- Between 30 June 2026 and 30 July 2026 – 4.33%
- Between 31 July 2026 and 30 August 2026 – 4.33%
- Between 31 August 2026 and 29 September 2026 – 4.33%
An alternative quarterly rate for Q2 2026 has also been published at 4.35%.
The reference rate is calculated using the annual average of the average effective rates charged by credit institutions for variable-rate business loans with an initial term of more than two years, based on figures published by the Central Bank of France.
The quarterly average effective interest rates used in the calculation were:
- Third quarter 2025 – 4.36%
- Fourth quarter 2025 – 4.30%
- First quarter 2026 – 4.31%
- Second quarter 2026 – 4.35%
The guidance also notes that, where publication deadlines permit, companies may use the corresponding average rates for portions of calendar quarters included within their financial year.
Guidance covers non-standard accounting periods
The updated administrative guidance includes calculation methods for companies whose accounting periods do not correspond to a standard twelve-month calendar year. It provides formulas for financial years ending on dates other than 31 December, accounting periods of less than or more than twelve months, and cases where no financial year ends during the calendar year. Worked examples accompany each calculation method.
Deduction rules reiterated
The tax administration also reiterates that compliance with the deduction limit must be assessed using the gross interest rate and gross amount of interest, rather than the amount remaining after the deduction of income tax or withholding tax
It further confirms that each current account must be examined separately, meaning excess interest on one account cannot be offset against a lower interest rate applied to another account.
The guidance also restates that interest owed by subsidiaries on sums collected on their behalf by a parent company is subject to the limitation provided for in the first paragraph of point 3 of 1 of article 39 of the CGI.
