Article 37 of the 2013 Amending Finance Act, no. 2013-1279, of December 29, 2013, adjusts the general mechanism for limiting deductibility of financial expenses as enacted by Article 23 of the 2013 Finance Act with a new exception: “Financial expenses related to financing agreement of product inventory that is subject to a regulatory preservation requirement and whose rotation cycle is greater than three years.” are excluded from the amount of the net financial expenses to be added back to the taxable income of companies (Articles 212 Bis and 223 B Bis of the French Tax Code).
Indeed, for fiscal years beginning as of January 1, 2014, companies subject to corporate income tax are required to add 25% of the amount of net financial expenses (15% for fiscal years ended as from December 31, 2012) back into their taxable income. This limitation mechanism applies only when the total amount of financial expenses exceeds a threshold of 3 million euros and after previously taking into account the other mechanisms limiting deductions of financial expenses. The amount of net financial expenses is equal to the difference between the total amount of financial expenses incurred as a consideration for financing granted to the company and the total financial income received by the company in consideration for financing granted by the latter.
This new adjustment provided by the 2013 Amending Finance Act, which applies to fiscal years ended as of the Act’s entry into force (December 30, 2013), essentially targets companies that produce and market products that are subject to specific regulations, and notably to storage requirements, such as companies in the agricultural and wine-making industries. The tax authorities now have to clarify the scope of the concepts of “contracts for the financing of product inventory” and of “rotation cycle”.