(Decree nø 95 339, March 28, 1995)

The debt issuance costs, divided up in equal parts or in proportion to the remuneration accrued for the duration of the debt issued during this period, are deductible by binding and global option from the issuer for a period of two years (C.G.I., art. 39-1ø quater; L. fin. rectif. pour 1994, nø 94-1163, Dec. 29, 1993, art. 39).

In case of advance reimbursement of a conversion or exchange loan, the debt issuance costs which have not yet been deducted can be booked in the expenses account in proportion to the reimbursed converted or exchanged capital.

These provisions apply to debts issued during the accounting periods open as of January 1st, 1994. They do not apply to debts the reimbursement of which remains the sole initiative of the borrower.

This mechanism had been introduced in the French General Tax Code through Article 63 of the Law nø 94-679 dated August 8, 1994.

However, in order to respect the chart of accounts, the above-mentioned amended financial law for 1994 modified the original text by cancelling the possibility to depreciate the debt issuance costs over a shorter period than that of the loan.

The decree nø 95-339 dated March 28, 1995 gives the following precisions:

-	the binding and global option of the issuer for a period of two years is exercised by the first booking in the accounts of the debt issuance costs as deferred expenses;

-	the two years period accrues from the first day of the accounting period during which the option was exercised;

-	the option is renewed by tacit agreement for periods of two years and it is binding during this period.

In order to renounce the option, the company must expressly notify its choice to the Tax Authorities by enclosing such a choice with the income tax return filed for the accounting period following the period for which the option was exercised or tacitly renewed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. For additional information contact Claire Acard on 33/(1)/55 61 10 10 or Lionel Benant on 33/ The members of Archibald Andersen Association d'Avocats (S.G. Archibald and Arthur Andersen International) are registered with the Hauts-de-Seine Bar and the Lyon Bar.
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