France, on 29 June 2024, has published in its Official Journal the second quarter 2024 interest rates for companies whose fiscal year (FY) ends between 30 June and 29 September, 2024. The interest rates are used to calculate the deductibility of interest payments to company shareholders.
As per Article 39-1, 3° of the French Tax Code (FTC), interest paid or accrued on loans from direct shareholders is subject to an internet rate cap. This cap corresponds to the average floating rate on bank loans with maturities surpassing two years. The maximum deductible interest rate for a debtor in a given fiscal year is determined by the four quarterly average floating rates calculated during that fiscal year.
If the interest payments exceed the following rates, they are generally not deductible unless properly documented evidence is provided to prove that the applied interest rate is applied at arm’s length. When the lender qualifies as a “related party” under article 39-12 of the FTC, an arm’s length interest rate is applied under article 212 of the FTC.
The fiscal year-end period and the applicable rates are as follows:
- Between 30 June 2024 and 30 July 2024, the rate is 5.96%;
- Between 31 July 2024 and 30 August 2024, the rate is 5.97%;
- Between 31 August 2024 and 29 September 2024, the rate is 5.97%.
