France intercompany loans 2026: interest deductibility, CGI 39.1.3° cap, thin capitalization and ATAD interest barrier

Updated on 13 May 2026.

A holding lending to its subsidiary, two sister companies financing each other, a director injecting cash via a shareholder current account: these schemes have become routine in French SMEs and mid-caps. But behind the apparent simplicity lie three CGI articles whose articulation determines the deductibility of interest paid — and therefore the real corporate tax optimisation of the operation.

Article 39.1.3° sets the TMP (taux moyen pratiqué) ceiling for shareholder advances and loans between related entities. Article 212 locks in loans in case of thin capitalisation. Article 212 bis (the French transposition of the ATAD interest barrier) caps net financial expense at 30% of fiscal EBITDA or €3M. To this layer add the case law on abnormal management acts and abuse of right.

This pillar guide details the three caps, their articulation, the contemporaneous documentation expected by the DGFiP and the traps that turn a legitimate intercompany loan into a costly tax reassessment.

• Article 39.1.3°: maximum deductible rate = quarterly TMP published by the DGFiP (approx. 6.5% in Q2 2026).
• Article 212: thin capitalisation — limitation if intercompany debt > 1.5× equity AND interest > 25% EBITDA.
• Article 212 bis: ATAD barrier — net financial expense capped at 30% fiscal EBITDA or €3M.
• Contemporaneous documentation: mandatory above €50M turnover / €400M balance sheet; recommended below.
• Reclassification risks: abnormal management act (Conseil d'État), disguised distribution (Art. 109), abuse of right (Art. L. 64 LPF).

Mechanics#

CGI Article 39.1.3° caps the tax deductibility of interest paid to a shareholder (individual or legal entity) at the average rate practiced (TMP) on variable-rate corporate loans of initial duration over 2 years, published quarterly by the Banque de France and the DGFiP.

TMP rates 2025-2026 (illustrative)#

The applicable TMP is the one in force at the moment interest is paid (not at the date the loan is granted).

Simple presumption#

As long as the intercompany loan rate is at or below the TMP, interest is deductible as of right, with no additional demonstration required for the vast majority of SME and mid-cap situations.

Our expert view#

Many groups mechanically apply the TMP without checking it is consistent with the borrowing subsidiary's actual situation. For international groups or struggling subsidiaries, the TMP may be below the real market rate — in which case the DGFiP can consider the insufficient rate an abnormal management act prejudicial to the lender. Conversely, a rate above TMP automatically triggers non-deductibility of the excess. Golden rule: a documented external comparable in addition to the TMP, particularly for loans over €1M or loans to non-EU subsidiaries.

Mechanics#

CGI Article 212 prevents disguised thin capitalisation: if a company borrows massively from related parties rather than capitalising, interest becomes partially non-deductible.

The triple cumulative test#

The limitation applies if all three conditions are met:

1. Debt ratio: debt to related parties > 1.5× equity of the borrowing company.
2. Coverage ratio: interest paid to related parties > 25% of adjusted current pre-tax profit.
3. Interest served ratio: interest paid to related parties > interest received from other related parties.

If all three are exceeded, the excess fraction of interest is no longer deductible but can be carried forward indefinitely.

Exclusions#

• Banks and financial institutions: out of scope.
• Specialised financing companies: specific regime.
• Restructuring cases: adjustments possible via tax ruling.

Mechanics (transposition of EU ATAD Directive)#

Article 212 bis caps the deductibility of net financial expense (interest paid minus interest received) at the higher of:

• €3 million per fiscal year and per taxpayer (absolute safety floor).
• 30% of fiscal EBITDA (profit before interest, tax, depreciation, provisions, adjusted for gains/losses).

Indefinite carryforward#

The non-deductible surplus is carried forward indefinitely to subsequent years, within unused deduction capacity each year.

Tax integration group#

For groups opting for fiscal consolidation, the cap is calculated at group level (not company-by-company), which can provide optimisation.

The underestimated risk#

The €3M threshold reassures most SMEs. But fast-growing groups (scale-ups, acquisition holdings) cross this threshold without realising it. An LBO holding with €40M debt at 6% generates €2.4M interest — still below threshold. The same holding after a second acquisition bringing debt to €70M generates €4.2M interest — above the €3M threshold. The test then becomes 30% EBITDA, which may be restrictive if EBITDA is still ramping up. To watch in any post-acquisition business plan.

The application of the three caps follows a specific order:

• Step 1 — Rate test (Article 39.1.3°): rate ≤ TMP? If not, immediate exclusion of excess.
• Step 2 — Thin capitalisation test (Article 212): are the 3 ratios cumulatively exceeded?
• Step 3 — General ATAD barrier (Article 212 bis): net financial expense > max(€3M; 30% fiscal EBITDA)?

A fraction of interest may be excluded at each of the three steps — exclusions add up (without double-counting, however).

Profile: French holding holds 100% of a Spanish operating subsidiary. The holding lends €5M to the Spanish subsidiary over 7 years at a fixed rate of 5.80%.

TMP compliance#

In Q2 2026, the TMP is ~6.49%. The loan rate (5.80%) is below the TMP — presumption of deductibility on the Spanish subsidiary side for the part of the convention applicable in France.

Thin capitalisation test (Spanish subsidiary side)#

• Subsidiary equity: €8M
• Intercompany debt: €5M
• Debt/equity ratio: 5/8 = 0.625 < 1.5 → ratio not exceeded
• → Article 212 not triggered.

General ATAD barrier (French holding side on IS-France result)#

• Net financial expense for the holding: (€5M × 5.80%) − negligible interest received = €290,000
• Safety threshold €3M: €290,000 < €3M → barrier not triggered
• → Article 212 bis not triggered.

Contemporaneous documentation#

Signed loan agreement, attached schedule, internal CFO attestation + analysis of 5 external comparables (CUP method) → file compliant with CGI Article 57.

Conclusion: operation fiscally secured under all three articles. Had the rate been 7% instead of 5.80%, the fraction (7 − 6.49) × €5M = €25,500 would have been excluded by Article 39.1.3°.

Scheme A — Circular parent/subsidiary loan → dividend#

• Parent lends to subsidiary → subsidiary pays dividend to parent.
• DGFiP reading: circular operation without economic substance → abuse of right (Art. L. 64 LPF), 80% surcharge.

Scheme B — Loan at 0% without justification#

• Abnormal management act (Conseil d'État, 22 February 1989).
• Possible reclassification as disguised distribution (Art. 109).

Scheme C — Excessive rate (above TMP)#

• Excess non-deductible (Art. 39.1.3°).
• If beneficiary abroad: potential withholding tax on excess.

Scheme D — Stacking loans to circumvent Article 212#

• Company A lends to B, B lends to C, C lends to A.
• DGFiP reading: reconstitution of the direct loan → application of Article 212 on the cumulative amount.

• Loan rate: align with the in-force quarterly TMP, document the choice.
• Formal contract: written agreement, schedule, interest clause, repayment terms.
• Repayment capacity: test before signing with a subsidiary forecast.
• Thin capitalisation: calculate the 3 Article 212 ratios before any loan > 30% equity.
• General barrier: project net financial expense vs €3M and 30% EBITDA.
• Contemporaneous documentation: external comparables systematic for cross-border loans or > €1M.
• Annual audit: verify that interest effectively paid matches the convention.

• LF 2026: no structural change to Articles 39.1.3°, 212 and 212 bis confirmed as of 13 May 2026.
• Volatile TMP: ECB rate hikes in 2024-2025 have raised the TMP. Check the applicable rate at each maturity.
• Reinforced DGFiP controls: the national transfer pricing audit brigade (BNVPT) targets Franco-European groups in 2026.
• Shareholder current account: for the "individual → company" version, see our shareholder current account guide.
• Tax integration coordination: if holding under integration, watch for the merging effect on Article 212 bis (group calculation).

Intercompany loans are a legitimate tool for group financing and cash optimisation. But their fiscal security requires a triple reading — TMP, thin capitalisation, ATAD barrier — coupled with solid contemporaneous documentation. Schemes perceived as "simple" are often the first reassessed during an audit.

Our firm secures around a hundred intercompany loans each year for French holdings and groups, from preliminary diagnosis to contemporaneous documentation. Contact our experts for an audit of your intercompany loan agreements.