Update regarding the new French tax regulations on hybrid loans: a fairly lenient approach
By Guillaume Valois
France’s tax authorities (FTA) have released draft guidance on the way they intend to apply new restrictions under the 2014 French finance act to the deduction of interest on related party loans (referred to as an anti-hybrid rule, although its scope is wider than just hybrid instruments).
Pursuant to this provision, interest on related party loans is tax deductible only if the French borrower can prove that such interest is subject to an income tax in the hands of the lender at a rate equal to at least to 25 per cent of the French standard corporate income tax rate (i.e. 8.61 per cent or 9.5 per cent, depending on the additional contributions applicable under French law).
The draft guidelines outline a relatively lenient approach…
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