Share with your friends

France: ATAD and possible loosening of new interest limitation

France: ATAD and loosening of new interest limitation

The high chamber of the French Parliament (“Sénat”) on 23 November 2018 voted to limit the effects of a lower interest limitation to the net interest expenses corresponding to the debt above a debt-to-equity ratio.


Related content


The French government in September 2018 unveiled the main tax provisions of the draft Finance Bill for 2019 that included certain provisions of the EU anti-tax-avoidance directive (ATAD), in particular regarding the deductibility of net financial expenses. Read TaxNewsFlash

According to the new proposed limitation (which slightly differs from the ATAD’s minimum standard) the deductibility of net financial charges would be limited to the greater of:

  • €3 million or 
  • 30% of the company’s (or the tax group’s) adjusted tax earnings before interest, tax, depreciation, and amortization (EBITDA) 

However, if the ratio of related-party debt-to-equity of the company (or tax group) exceeds a 1.5:1 ratio, the 30% limitation would be reduced to €1 million or 10% of the tax EBITDA. 


The Sénat on 23 November 2018 voted on an amendment, introduced by the government, that would limit the effects of the lower 10% (or €1 million) limitation to the net interest expenses corresponding to the debt above the 1.5:1 debt to equity ratio.

If the amendment is finally adopted and included in the enacted legislation (enactment of the French Finance Law for 2019 is expected in late December 2018), the new capping mechanism would provide for the simultaneous application of the following limitations: 

  • A 30% tax EBITDA cap on net financial charges owed to 
    • non-related companies,
    • and related companies, but only for the portion below 1.5 times the company’s (or tax group’s) equity, and
  • A 10% tax EBTIDA cap on the remaining net interest

Non-deductible interest expenses, in light of this new limitation, would be eligible for carryforward without a time limitation:

  • For the full portion added-back in application for the 30% (or €3 million) cap, and
  • For one third of the portion disallowed in application of the 10% (or €1 million) cap


For more information, contact a tax professional with Fidal* in France or with the KPMG member firm in France: 

Olivier Ferrari | +33 1 55 68 14 76 |

Gilles Galinier-Warrain | +33 1 55 68 16 54 |

Laurent Leclercq | +33 1 55 68 16 42 |

Bruno Bacrot | +33 1 47 38 89 96 |

Patrick Seroin | + 33 (0) 1 5568 4802 |


* Fidal is a French law firm that is independent from KPMG and its member firms.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal