On 28 March 2024, the Official Journal of France released the inaugural quarterly average floating rate for bank loans and credit facilities exceeding two years in maturity for 2024. This rate is utilized in determining the yearly maximum interest rate on loans from direct shareholders, with the average floating rate established at 5.97% for the initial quarter of 2024.
According to the French Tax Code (FTC), interest on loans from direct shareholders is capped by the average floating rate for bank loans exceeding two years’ maturity. A debtor’s maximum tax deduction for a fiscal year depends on the four quarterly average floating rates within that year. If the lender is a “related party,” an arm’s length interest rate is referenced, and if met, the maximum interest rate limit doesn’t apply. Companies with fiscal years ending between 31 March 2024, and 29 June 2024, can now determine their maximum deductible tax rate for the year, following the release of the first quarterly average floating rate for 2024. Generally, for a 12-month fiscal year ending in this period, the maximum interest rate varies between 5.88% and 5.96%.
