The undertaking by a tradesman of the interests of loans granted to his clients by a credit institution concerning commercial operations of free credit is, even if it is made in only one payment at the time of the release of the funds, the remuneration of loans granted to the purchasers, and not the remuneration of a service immediately rendered by the credit institution to the seller by granting of a free credit to the purchaser, insofar as:

  • even if the obtaining of such a credit allows the conclusion of the sale, the loan thus granted to the purchaser constitutes a service which is personally rendered to the latter;
  • the duration of this service is equal to the period of time during which the purchaser reimburses the principal of the loan and at the same time enjoys the good thus acquired;
  • finally, the profit withheld from the operation by the credit institution, equal to the difference between the credit interests resulting from the loan granted to the client and the debit interests due owing to the refinancing of this loan, does not appear as of the release of the funds, but is released as the loan duration passes.

As a consequence, the sums thus received at the time of the release of the funds by the credit institution must, according to article 38-2 bis of the French General Tax Code, be taken into account as the continuous service thus remunerated is operated (Administrative Court of Paris, February 6, 1996 no. 91-12774, 2e ch. SA Cie financiere des Nouvelles Galeries - COFINOGA).


Some big stores offer frequently "free credits" to their customers. In the present case, the French Tax Authorities considered that the payment modalities of the interests to the credit institution, paid at one go and by the store, revealed the existence of a service with immediate execution performed for the benefit of the latter which could thus conclude the sale. However, for the Administrative Court of Paris, insofar as firstly, the undertaking of the interests by the seller is external to the relationship existing between the borrower and the purchaser, and secondly, the grant of the loan constitutes first a service rendered to the customer, the service involved must be considered as spreading over the reimbursement duration of the loan. Therefore it is continuous and the requesting company had the right to apply the provisions of article 38-2 bis of the French General Tax Code.

With this position, the Administrative Court deviates from the solution retained by the French High Court in a decision dated February 1st, 1995 which considered that a guarantor's fee remunerates a service with immediate execution constituted by the grant of a guarantee allowing its beneficiary to sign a loan agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be brought about your specific circumstances.

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