French Tax Report June 2018

We are pleased to provide you with a summary of certain recent French tax case law and would be glad to discuss with you in more details any of these matters which may be of specific interest to you. Please also let us know if anyone else within your organization would be interested to receive our periodic French Tax Reports.

1. Tax treatment of Interest Rate Swaps (IRS)

The French tax legislation provides various rules to limit the deductibility of interest and financial expenses.

One of these rules, the so-called "rabot," consists in limiting the deduction of the "net financial expenses" (NFE) i.e. the positive difference (if any) between the interest type items paid by the corporate taxpayer and the interest type items received by it. The limitation operates if the NFE amounts to at least €3 million, in which case 25 percent of the NFE would not be deductible (special rules apply in case of tax groupings).