Partner's current account: deductible interest, maximum rate and partner taxation

Interest paid by a company into a shareholder's current account is a deductible expense if the company's share capital is fully paid up. The interest rate is capped by a maximum rate: if the agreed rate exceeds this limit, only the portion of interest corresponding to the excess is not deductible. For individual shareholders, this interest is subject to a flat tax rate of 31.4% (%), or, by option, to the progressive income tax scale.

This page deals with interest: its deductibility, rate, and taxation. It does not cover social security contributions.

Conditions for the deduction

A condition and a limit apply to the company that pays the interest:

• The capital is fully paid up. The condition is not met until the capital contributions are paid in full.
• The rate is capped by the limit rate. This rate is published by the tax authorities. It depends on the fiscal year-end date. If the agreed rate is higher, the excess interest is not deductible; however, all interest is not excluded.

Each current account is assessed separately. A company with several partners whose current accounts accrue interest therefore examines each account individually.

The limit rate: a published average, which changes with the closing price

The maximum rate is the annual average of the average effective rates charged by credit institutions. It applies to variable-rate loans to businesses with an initial term of more than two years.

It changes depending on the fiscal year-end date. For example, Service-public cites 4.34 % for fiscal years ending between May 31 and June 29, 2026 (see the table of maximum rates by closing date). This figure is only valid for that closing period: the rate applicable to your company can be found in the table published for your closing date, before setting or modifying current account interest.

Loan declaration

An annual loan declaration must be filed (form cerfa n° 10142). It must be filed no later than the date of filing the income statement.

Taxation of the individual partner

The interest received is considered investment income. It is taxable:

• to the single flat-rate levy (PFU) of 31.4 %; ;
• or, by option, to the progressive income tax scale.

The increase in the CSG applies from January 1, 2026 for investment products (administration brochure on new income for 2025), which brings the PFU to 31.4 % (public service).

Three books to avoid

1. To retain a rate without its closing date. The limit rate changes with the fiscal year-end date. A figure quoted without this date is meaningless.
2. To think that the deduction is automatic. It assumes fully paid-up capital, and the portion of interest that corresponds to a rate higher than the limit rate is not deductible.
3. Forget about declaring loans. It is annual and must be filed no later than the date of filing the income statement.

Numerical example (fictitious profile)

Situation. A managing partner of his company leaves €100,000 in a current account (hypothetical scenario). The share capital is fully paid up. The company's twelve-month fiscal year ends on June 15, 2026, a period for which the maximum rate cited by the French tax authority (service-public.fr) is 4.34%. The company pays him interest at a rate of 4% (hypothetical scenario) for the year.

Issue. The manager wants to know what rate the company can withhold, and what he will receive after tax.

Strategy. The firm reviews with the manager the rate, the closing of the financial year and the declaration of loans, before setting the remuneration of the account.

Result.

The rate of 4 % remains below the limit rate of 4.34 %. Therefore, no portion of the €4,000 of interest exceeds the limit: a maximum of €4,340 at the limit rate.

This profile is fictitious. It assumes that the capital is fully paid up and does not compare the flat-rate tax with the option for the standard tax brackets. It does not show any results for your company.

What changes depending on your situation

• The closing date of the financial year, which sets the limit rate.
• The level of capital release.
• The current account balance and the expected interest rate.
• The choice between flat-rate tax and tax scale for the partner.
• The number of partners with a current account.

These factors determine what applies to your situation. No results are guaranteed: the rule will be verified on your case.