Interest Rate Swaps Taxation in France and Italy: the Arcelor Mittal Case

Are the costs incurred by an operative (non-financial) company upon termination of an interest swap agreement deductible from its corporate income tax basis? The Italian Supreme Court answers negatively, because the contract does not have a hedging purpose and the company is producing goods in the field of metals and steel. As such, no correlation is discernible between the loss deriving from the contract and the positive components deriving from the core business activity. The French view might be opposite. This asymmetry in the deduction of the cost from the (likely) taxation of the profits of the company engaged in the transaction might jeopardize EU fundamental rights, including the free movement of capital (Article 63 TFEU). Tax asymmetries are always dangerous and distortive – whatever the statutory regulation shall be, it needs to be taken in an EU harmonized framework.