French Tax Update

In this second French Tax Update of the year, we will first focus on one of the key provisions of the Finance Law for 2014 (Loi de finances pour 2014, 2014 Finance Law) which essentially aims at combating hybrid debt instruments put in place between French borrowers and affiliated foreign lenders. We will then review a selection of recent official publications (such as guidelines issued by the French tax authorities, case law, and ongoing tax treaty negotiations) which may be of importance from both an inbound or outbound perspective.

FOCUS ON THE ANTI-AVOIDANCE PROVISION TARGETING HYBRID DEBT INSTRUMENTS

As presented in the previous French Tax Update, the 2014 Finance Law has implemented yet another limitation of the deductibility for tax purposes of interest payments made by a French borrower to an affiliated entity (i.e., an entity controlled by the borrower, controlling the borrower, or controlled by the same third party as the borrower), this time targeting