Embedded Files
Governments and international organisations have introduced various measures to limit excessive interest deductions and prevent profit shifting through debt financing.
OECD BEPS Action 4 limits deductible interest to a fixed percentage of EBITDA to reduce base erosion and profit shifting.
Excessive debt compared with equity may be restricted.
Limits excessive interest deductions.
Related-party loans must follow arm's length principle.
đź’ˇ Key Takeaway
Governments use interest limitation rules, debt-to-equity restrictions, and transfer pricing regulations to ensure that interest deductions remain reasonable and do not erode the tax base through excessive debt financing.Â
OECD (2015). Limiting Base Erosion Involving Interest Deductions and Other Financial Payments (Action 4 Final Report).
Page updated
Google Sites
Report abuse