The French tax authority has updated reference interest rates used to determine the deductibility of interest on shareholder loans under the French General Tax Code (CGI), including rates applicable to fiscal years ending between 31 March 2026 and 29 June 2026, with specific quarterly benchmarks and calculation rules for assessing compliance with deduction limits.
The French tax authority has published updated reference interest rates used to determine the deductibility of interest payments to shareholders, including for companies with fiscal years ending between 31 March 2026 and 29 June 2026.
Under the French General Tax Code (CGI), interest paid to associates or shareholders for funds provided to a company beyond their capital share is only deductible within a specific limit when determining taxable income. Any portion of interest payments exceeding the applicable reference rates is generally not deductible, unless documentation is provided demonstrating that the interest rate applied is at arm’s length.
The limitation applies broadly to all sums provided by any associate, whether directors or not. It affects companies subject to corporate tax (IS) as well as those not subject to it, provided they carry out industrial or commercial activities. Interest due from subsidiaries for funds collected on their behalf by a parent company is also subject to these limits.
Reference rate mechanism
The applicable limit is based on a reference rate equal to the annual average of the effective average rates charged by credit institutions for variable-rate loans to companies with an initial duration of more than two years.
Quarterly effective average rates:
| Period | Effective average rate |
| Q2 2025 | 4.60% |
| Q3 2025 | 4.36% |
| Q4 2025 | 4.30% |
| Q1 2026 | 4.31% |
Applicable reference rates for 12-month fiscal year ends
| Fiscal year end period | Reference rate |
| 31 March – 29 April 2026 | 4.39% |
| 30 April – 30 May 2026 | 4.37% |
| 31 May – 29 June 2026 | 4.34% |
Calculation methods
The calculation of the limit depends on the duration and timing of the company’s fiscal year. Where the fiscal year coincides with the calendar year, the limit is the arithmetic average of the four quarterly rates for that year. For non-calendar year exercises, a weighted formula is applied based on the number of months the fiscal year spans across different calendar quarters.
Specific rules apply for fiscal years shorter or longer than 12 months, as well as situations where no fiscal year is closed within a calendar year.
Compliance assessment
To determine whether interest exceeds the deductible limit, gross amounts and the gross interest rate must be used rather than net amounts after tax withholding. Each shareholder’s current account must be assessed separately, and companies cannot offset a higher rate on one account against a lower rate on another.
