You run a company abroad and you have lent money to your French subsidiary to get it started. Your loan agreement charges five percent interest, your French accountant warns you that the company cannot deduct the full amount, and a letter from the SIE (Service des impôts des entreprises, the French corporate tax office) asks for proof that the rate is arm’s length and that the correct withholding was applied. The principal will come back one day; the question this year is whether the interest survives. This guide answers exactly that: the maximum rate France lets your French company deduct, the file that proves a higher rate, the withholding paperwork for a lender living abroad, and the documents that protect the interest during a tax audit.

If the background is new to you, start with our step-by-step overview of setting up a company in France as a foreign founder, from bank account and Kbis to VAT and first hire, which explains the building blocks used here: the Kbis (the official identity certificate of a French company), the greffe (the registry office of the commercial court where companies file documents), the RCS (Registre du commerce et des sociétés, the French trade and companies register), the INPI (Institut national de la propriété industrielle, the public body operating the Guichet unique, the single online window for company formalities), the BODACC (Bulletin officiel des annonces civiles et commerciales, the official gazette for company notices) and the BOFiP (Bulletin officiel des finances publiques, the official tax commentary). Where this guide prices the interest, our companion guide covers the principal: how a foreign founder recovers a stuck shareholder loan, blocked repayment and recovery from abroad. Read the companion piece when the dispute is about getting the money back; read this guide when the dispute is about what the money earns.

Part I explains how France sets the price of your loan: the written-rate requirement and the ceiling that caps the French company’s deduction. Part II shows how to keep that interest deductible and collectible while you live abroad: cross-border withholding and treaty proof, the zero-rate question, and the audit file that ties every figure to a document.

I. How France prices interest on your shareholder loan and where the ceiling sits

A. No written rate, no agreed interest: the clause to sign before the money moves

A shareholder advance, known in France as a compte courant d’associé, is analysed by French courts as a loan from the shareholder to the company, and its interest obeys ordinary loan law first. The governing principle is short: “L’intérêt est légal ou conventionnel. L’intérêt légal est fixé par la loi. L’intérêt conventionnel peut excéder celui de la loi, toutes les fois que la loi ne le prohibe pas.” The same article adds the sentence that decides most disputes involving foreign parents: “Le taux de l’intérêt conventionnel doit être fixé par écrit.” (Article 1907 of the Civil Code). Interest is therefore due only if the parties agreed it in writing before it starts running, and the rate must be written down, not remembered, not implied from a spreadsheet, not reconstructed after the audit notice arrives.

The Court of Cassation applies this strictly to current-account balances. In a 2017 commercial-chamber judgment, the court quashed an appeal decision that had limited interest to the statutory rate running only from the court writ, holding instead that “à défaut d’écrit fixant le taux conventionnel, le taux légal est applicable au solde débiteur d’un compte courant à compter de la date d’ouverture du compte” (Cass. com., 24 May 2017, appeal No. 15-27.376). Two lessons follow for a lender living abroad. First, sign the rate clause before the wire transfer, because money sent first and priced later invites the argument that no rate was ever agreed. Second, state the starting point of interest expressly, because silence sends the parties back to the statutory rate computed from the account’s opening date, which may be lower or higher than what either side intended and always produces a surprise for the company that booked nothing.

A workable rate clause contains five elements. It states the annual rate as a number, for example four percent, and whether it is fixed or revisable by reference to an identifiable benchmark. It states the day from which interest runs, normally the value date of each advance. It states the calculation method, typically actual days over three hundred and sixty-five, so that the French accountant and the foreign parent produce the same figure. It states whether interest accrues during any blocked period, because banks that require a convention de blocage (a written blocking agreement freezing repayment until a date or event, often the full repayment of the bank loan) do not automatically freeze interest, and the parties must say so. And it states the currency of the advance and of the interest, because an advance denominated in euros funded from a dollar account leaves the exchange difference with the lender unless the agreement shifts it. Company seals and apostilles are unnecessary; a signed PDF exchanged by email and stored with the transfer slip is enough, provided the French company’s books record the same figures and the same dates.

Three drafting errors recur in foreign groups. The first is the rate “to be agreed later”, which French law treats as no rate at all. The second is the rate buried in a board presentation or an email thread, which fails the writing test when the figures differ across documents. The third is the rate that changes every year by oral decision of the parent, which leaves the French subsidiary deducting a charge its file cannot evidence. Each error converts deductible interest into a contested charge, and the contest arrives years later, when the directors have changed and the emails are gone. A one-page loan schedule, signed by both sides and attached to the annual reconciliation of the balance, prevents all three.

The official business portal describes the general mechanics and taxation of these shareholder accounts in its English-language page, a useful starting point before reading the statutes themselves (see Compte courant d’associé: fonctionnement et fiscalité). That page covers the landscape; the paragraphs below give the exact ceiling and the proof the tax administration demands, which is where foreign parents win or lose the deduction.

B. The tax ceiling on the deduction: the maximum rate and the proof needed above it

For the French borrowing company, interest paid to a related foreign lender is deductible only within a ceiling set by the Tax Code. The rule provides: “Les intérêts afférents aux sommes laissées ou mises à disposition d’une entreprise par une entreprise qui est son associée ou par une entreprise liée, directement ou indirectement, au sens du 12 de l’article 39, sont déductibles : a) Dans la limite de ceux calculés d’après le taux prévu au premier alinéa du 3° du 1 du même article 39 ou, s’ils sont supérieurs, d’après le taux que cette entreprise emprunteuse aurait pu obtenir d’établissements ou d’organismes financiers indépendants dans des conditions analogues ;” (Article 212, I of the General Tax Code). In plain terms, the French subsidiary deducts interest only up to the statutory maximum rate published by the tax administration, unless it proves it could have borrowed at a higher rate from an independent bank in similar conditions, which requires a genuine comparability file, not an assertion. Interest above the ceiling stays a non-deductible cost, and the excess may be recharacterised as a distribution, with dividend withholding for a non-resident parent depending on the applicable treaty.

The practical discipline is therefore to set the contractual rate at or below the published maximum and to verify that maximum for each financial year in the official tax commentary (see the BOFiP and impots.gouv.fr, the portal of the French tax administration). The maximum moves with market rates, so a rate that was safe two years ago can exceed the ceiling today; groups that fix a single rate in a multi-year agreement should add a clause capping the applied rate each year at the published maximum, with the balance of the contractual rate deferred or waived rather than booked as a receivable the company cannot deduct. Booking undeductible interest as though it were deductible creates a double loss: the company pays corporate tax on the disallowed portion and may still owe the parent the full contractual amount, which the parent declares as income at home.

Where the group genuinely needs a rate above the maximum, the comparability file is the whole case. It identifies independent loans granted to the French subsidiary or to comparable standalone borrowers in the same period, with matching currency, duration, guarantees and subordination. A parent guarantee changes the analysis: a subsidiary borrowing with its foreign parent standing behind it is not in the same position as a standalone borrower, and the file must adjust for that support or compare with guaranteed loans. Bank refusal letters also help, not as proof of the rate itself, but as evidence that no independent lender would fund the subsidiary at all, which supports pricing the advance with a risk premium documented by the group’s treasury. What never works is a one-line memo stating that the rate is arm’s length, a screenshot of a central-bank base rate with an unexplained margin, or a transfer-pricing report written for another country and another year pasted into the French file.

French competitors describe the mechanics of these accounts in general terms: a widely read legal news site details how shareholder accounts operate, pay interest and are repaid under domestic law, and practitioners’ publications explain the blocking technique and its interaction with bank guarantees. None of them gives the foreign parent a year-by-year method for staying under the ceiling while living abroad: checking the published maximum each year, capping the applied rate automatically, assembling the comparability file before the audit, and keeping the lender’s residence proof with the payment. That annual pricing discipline is the specific contribution of this guide, and it costs one review meeting a year against the price of a full reassessment.

One boundary must stay clear throughout. The advance must flow from the foreign company to the French company, never the reverse when the recipient is an individual manager. French company law voids loans granted by the company to its own individual directors and shareholders, and the nullity is absolute. In the SARL (société à responsabilité limitée, the rigid French limited-liability company; the SAS, société par actions simplifiée, is the flexible form most foreign founders choose), the statute provides: “A peine de nullité du contrat, il est interdit aux gérants ou associés autres que les personnes morales de contracter, sous quelque forme que ce soit, des emprunts auprès de la société, de se faire consentir par elle un découvert, en compte courant ou autrement, ainsi que de faire cautionner ou avaliser par elle leurs engagements envers les tiers.” (Article L. 223-21 of the Commercial Code). The same prohibition targets directors and senior officers of companies with a board: “A peine de nullité du contrat, il est interdit aux administrateurs autres que les personnes morales de contracter, sous quelque forme que ce soit, des emprunts auprès de la société, de se faire consentir par elle un découvert, en compte courant ou autrement, ainsi que de faire cautionner ou avaliser par elle leurs engagements envers les tiers.” (Article L. 225-43 of the Commercial Code). A foreign parent organised as a corporation sits outside this ban; an individual founder living abroad who draws on the French company’s cash through a debit account falls squarely inside it, and no interest clause can save a void loan.

II. How to keep the interest deductible and collectible while you live abroad

A. Cross-border payment: withholding, treaty proof and the zero-rate question

Interest paid by a French company to a lender established abroad may bear French withholding tax on the payment date, subject to reductions or exemptions under bilateral tax treaties and European Union directives for associated companies. The French payer applies the treaty rate when it pays, keeps the lender’s certificate of residence in its file, and reports the payment to the administration; the burden of proving treaty entitlement rests on the payer, which the SIE tests during audits. Concretely, the foreign parent sends a fresh residence certificate each year, states its beneficial ownership of the interest, and confirms the address of its effective management, because treaty benefits follow the real lender, not an invoicing intermediary. Where the parent sits in the European Union and the association and holding conditions of the applicable directive are met, the exemption must be claimed with its own documentation, not assumed from the treaty alone. Missing certificates do not merely delay the deduction: the company that withholds too little pays the difference with late-payment interest, and the company that withholds too much leaves its parent to reclaim the excess abroad, a slow procedure that sours the economics of the loan.

The lender’s home state taxes the interest as financial income, usually with a credit for the French tax within treaty limits, so the group should model the combined burden before fixing the rate. A high rate that is fully deductible in France but fully taxed at home with no available credit may cost more than a lower rate within the French ceiling; conversely, a rate set below the ceiling for caution can waste deduction capacity the group could have used. The annual pricing review therefore looks at both ends: the French maximum for the year, the treaty withholding applicable on payment, and the parent’s home taxation of the receipt. Exchange differences add a third moving part: where the advance is denominated in euros and the parent thinks in dollars or pounds, the interest computation and the foreign-exchange result must be booked separately, because the administration allows the deduction of the interest within its ceiling but examines foreign-exchange gains and losses under their own rules.

Some groups lend at zero interest to a young subsidiary that no bank would finance. French law does not forbid a free loan between associated companies, and the group’s treasury exception to the banking monopoly covers it: the Monetary and Financial Code reserves lending to licensed institutions, since “Il est interdit à toute personne autre qu’un établissement de crédit ou une société de financement d’effectuer des opérations de crédit à titre habituel.” (Article L. 511-5 of the Monetary and Financial Code), while the same code expressly permits group treasury operations: “Les interdictions définies à l’article L. 511-5 ne font pas obstacle à ce qu’une entreprise, quelle que soit sa nature, puisse :” (Article L. 511-7, I of the Monetary and Financial Code), including “3. Procéder à des opérations de trésorerie avec des sociétés ayant avec elle, directement ou indirectement, des liens de capital conférant à l’une des entreprises liées un pouvoir de contrôle effectif sur les autres ;” (Article L. 511-7, I, 3° of the Monetary and Financial Code). A foreign parent controlling its French subsidiary therefore sits inside this exception, whether the advance bears interest or not, provided the funding is genuine group cash management rather than a lending business offered to the public.

Zero interest is lawful but not invisible. The tax administration can ask why a profitable group lends for free, and transfer-pricing reasoning may impute arm’s-length interest between associated enterprises where the facts show the French borrower would have paid for the money. A zero rate remains defensible for a subsidiary in its first years, carrying no rating and refused by every bank, but the file must say so explicitly, with the refused loan applications or the bank correspondence attached, rather than leaving the return to show an interest-free balance with no explanation. Between related parties, the administration also watches the boundary between interest and dividends: interest above the deductible ceiling, or interest paid where no genuine loan exists, may be recharacterised as a distribution, which changes the withholding regime and the parent’s home treatment. Keeping the advance a real loan, with a real rate clause, real entries in the books and real demands when it matures, is what keeps the interest on the interest side of that line.

B. The audit-proof file: agreements, approvals, reconciliations and Paris practicalities

Everything above depends on a file that a director living abroad can operate without travelling. The complete file contains the signed advance agreement with amount, currency, rate, start date and repayment terms; the wire transfer slips matching the agreement; the French company’s books and annual accounts showing the credit balance; the shareholder vote or report covering the agreement under the related-party procedure; the residence certificate and treaty analysis for each payment year; the annual reconciliation of the balance with the interest computation; and, where the advance is frozen, the blocking agreement with its precise duration and release events. Each year, the foreign parent reconciles the balance in writing with the French company and confirms the interest calculation, because a signed reconciliation restarts the five-year limitation period that civil law attaches to personal actions for quantified sums: “Les actions personnelles ou mobilières se prescrivent par cinq ans à compter du jour où le titulaire d’un droit a connu ou aurait dû connaître les faits lui permettant de l’exercer.” (Article 2224 of the Civil Code). A foreign lender that lets years pass without writing may discover that an old balance has become unenforceable, while one annual letter keeps the whole history alive.

Inside the company, the advance passes through the related-party agreement procedure (conventions réglementées), which exists to warn shareholders that money moves between the company and its insiders. In the SARL, the manager or the statutory auditor presents a report on agreements between the company and its managers or shareholders, the shareholders vote on that report, and the interested person does not vote: “Le gérant ou, s’il en existe un, le commissaire aux comptes, présente à l’assemblée ou joint aux documents communiqués aux associés en cas de consultation écrite, un rapport sur les conventions intervenues directement ou par personnes interposées entre la société et l’un de ses gérants ou associés.” (Article L. 223-19 of the Commercial Code). In the SAS, the auditor, or the president where no auditor has been appointed, reports on agreements with the president, senior officers and shareholders holding more than ten percent of voting rights: “Le commissaire aux comptes ou, s’il n’en a pas été désigné, le président de la société présente aux associés un rapport sur les conventions intervenues directement ou par personne interposée entre la société et son président, l’un de ses dirigeants, l’un de ses actionnaires disposant d’une fraction des droits de vote supérieure à 10 % ou, s’il s’agit d’une société actionnaire, la société la contrôlant au sens de l’article L. 233-3.” (Article L. 227-10 of the Commercial Code). In companies with a board, the agreement needs prior board authorisation with a reasoned justification of its interest for the company, including its financial conditions: “L’autorisation préalable du conseil d’administration est motivée en justifiant de l’intérêt de la convention pour la société, notamment en précisant les conditions financières qui y sont attachées.” (Article L. 225-38 of the Commercial Code). Failure to follow this procedure does not automatically cancel the advance, but the interested manager or shareholder bears the harmful consequences for the company, and an auditor who discovers an unreported advance must disclose it, which starts the dispute the file was meant to prevent.

The file also protects the lender if the French subsidiary cannot pay. The default rule favours the creditor: unless the articles or a written blocking agreement says otherwise, an advance for an indefinite period is repayable at any time on simple demand, whatever the reason, as the Court of Cassation confirmed in a published judgment: “sauf stipulation contraire, tout associé était en droit d’exiger à tout moment et peu important les motifs de sa demande le remboursement du solde de son compte courant, dès lors que l’avance ainsi consentie constituait un prêt à durée indéterminée” (Cass. com., 12 February 2025, appeal No. 23-17.483, published in the Bulletin). A trial court applied the same principle plainly: “Sauf clause conventionnelle ou statutaire contraire, l’avance en compte courant consentie par un associé pour une durée indéterminée, est remboursable à tout moment.” (Tribunal judiciaire de Lorient, 3 June 2026, RG No. 23/02097). Financial difficulty does not extinguish the debt, but a subsidiary that cannot pay immediately may ask the court for breathing space: “Le juge peut, compte tenu de la situation du débiteur et en considération des besoins du créancier, reporter ou échelonner, dans la limite de deux années, le paiement des sommes dues.” (Article 1343-5 of the Civil Code). Such a grace period, capped by statute at two years, suspends enforcement while it runs, and the judge can order that the postponed sums bear interest, which is why the demand letters should document the creditor’s own cash needs. For the full mechanics of recovering the principal, including formal notice, court claims and urgent interim proceedings, see our companion guide on recovering a stuck shareholder loan from abroad.

One caution closes the file. An advance that strips the French subsidiary of the cash it needs to pay its staff, its landlord and its URSSAF contributions (Unions de recouvrement des cotisations de sécurité sociale et d’allocations familiales, the bodies collecting French social-security contributions) can later be characterised as mismanagement if the company collapses: where a court-ordered liquidation reveals a shortfall of assets, the court may order the managers whose faults contributed to the shortfall to bear all or part of it, with only simple negligence excluded as a ground (Article L. 651-2 of the Commercial Code). Foreign directors of French subsidiaries should never empty the accounts overnight by recalling the full advance the day trouble appears; a staged repayment plan, minuted and consistent with continued trading, protects both the claim and the director.

Where the French company sits in Paris or elsewhere in the Paris region (Île-de-France), filings run through the same national Guichet unique, but the competent registry is the registry of the Paris commercial court, notices appear in the BODACC like anywhere else, and tax correspondence comes from the Paris SIE for the company’s district, whose auditors handle a heavy volume of intra-group files: allow extra weeks for replies, keep a Paris address for service on the company’s counsel, and file powers of attorney early so that a director living abroad can be represented without travelling. Interest computations, reconciliations and residence certificates need no local form; they need dates, signatures and matching figures, which travel perfectly well by email.

Conclusion

A shareholder advance remains the fastest way for a foreign parent to fund its French subsidiary, and its interest is worth exactly what its paperwork proves. A written rate signed before the wire decides whether any agreed interest exists at all; the published maximum for the year decides how much of it the French company deducts; a comparability file decides whether a higher rate survives; and a residence certificate with the treaty analysis decides what crosses the border net of withholding. None of these steps requires presence in France: agreements, reconciliations, votes and representation before the court of the company’s registered office can all be handled from abroad with signed documents, provable delivery and counsel on the ground. Foreign parents who put three habits in place, a rate clause before each transfer, a rate check against the published ceiling each year, and a signed reconciliation of the balance with the interest computation, collect their interest, deduct it and defend it. The principal comes home through the demand letter; the interest stays home through the file.