2: Determination of taxable profits

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Article 38 bis C

French General Tax CodeIn force
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Updated 8 Nov 2023

By way of exception to the provisions of Article 38, interest rate or currency swaps entered into by credit institutions, finance companies or investment firms referred to in article 38 bis A and which are allocated to the hedging of financial instruments valued at their market value or to the specialised management of a trading activity, are valued at their market value at the close of each financial year or at the date on which they cease to meet the conditions for being subject to this valuation rule. The difference resulting from this valuation constitutes an item of income taxable at the standard rate.

If the conditions provided for in the first paragraph are no longer met, the valuation of contracts at their market value ceases to apply; in this case, the cash flows relating to these contracts are attached to the results according to the accrued interest rule. Correspondingly, the profit or loss resulting from this valuation is respectively deducted from or added to taxable income according to an actuarial allocation over the period remaining until the maturity of the contracts concerned.

For the application of the provisions of the first paragraph, the market value of the contract is determined, at the end of the financial year, by discounting future cash flows according to the corresponding market interest rate; this value is adjusted to take account of counterparty risks and the discounted value of expenses relating to the contract.

Provisions for losses relating to interest rate or currency swap contracts not subject to the provisions of the first paragraph are not deductible from taxable income.

Compensation payments recognised when interest rate or currency swap contracts not subject to the provisions of the first paragraph are entered into are added back to taxable income on an actuarial basis over the life of the contracts concerned. When these contracts are, subsequent to their conclusion, subject to the provisions of the first paragraph, the fraction of the balancing payments not yet reported to the tax bases is included in the income for the financial year during which their change of allocation takes place.

The valuation methods for contracts subject to the rules set out in the first paragraph are the subject of a detailed statement submitted to the control of the commission mentioned in the third paragraph, which makes it possible to justify the rates used for the discounting calculations; this statement is kept at the disposal of the administration.

For the application of the provisions of this article, other than those provided for in the last member of the first sentence of the second paragraph, over-the-counter contracts intended to guarantee the parties an interest rate relating to a reference capital, a term or one or more future maturities, as well as those intended to guarantee interest rate ceilings or floors, are treated in the same way as interest rate swaps.

(Paragraph disjoined).

A decree shall lay down the detailed rules for the application of this article.

Mariela Petrova

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Working with a corporate lawyer in France — Q&A

Any time a strategic decision changes how the company is owned, governed or contractually bound — incorporation, fundraising, M&A, restructuring, shareholder agreements, or major commercial contracts. Earlier engagement always costs less than later remediation.

A notary (notaire) is a public officer who authenticates specific deeds (mainly real-estate transfers and certain family-law acts). A corporate lawyer (avocat) advises on strategy, negotiates and drafts company documents, and represents you in disputes. The two roles complement rather than overlap.

Yes — most of our clients are foreign suppliers, investors or holding entities. We bridge the gap between French law and your home jurisdiction's expectations and deliver everything bilingually.

The SAS (Société par Actions Simplifiée) is the default choice for most international structures: flexible governance, single shareholder allowed, no minimum capital, and works cleanly with foreign holding entities. We assess SARL, SA, SCI on the merits when the situation calls for it.

Yes — communications with a French avocat are protected by the secret professionnel (Article 66-5 of the Law of 31 December 1971). This protection is broader than the common-law attorney-client privilege and applies to written and oral exchanges.

We work on fixed fees for clearly scoped engagements (incorporation, contract drafting, audits) and on monthly retainers for ongoing advisory. Hourly billing is the exception, not the default. You always know the cost before work starts.

Typical timeline is 2–3 weeks from KYC kick-off to RCS registration, assuming standard documentation. Holding-company structures, foreign-shareholder identification or in-kind contributions can extend this — we flag the gating items at the first meeting.

Absolutely. We routinely coordinate with your in-house counsel, expert-comptable or notaire — pragmatic collaboration is the norm, not the exception. We send them everything they need to do their part without duplicating work.

Mariela Petrova

Mariela Petrova

Avocate au Barreau de Paris

Toque #C2396

15+ Years In Corporate Practice

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Communications protected by professional secrecy — secret professionnel de l'avocat, Article 66-5 of the Law of 31 December 1971.

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