The Finnish Ministry of Finance proposed to amend the restriction rules on deduction of interest payments for corporate tax purposes, which is mainly based on the EU ATAD. The objective is to enhance the prevention of the tax evasion caused by large interest deductions.
In the current Finnish tax law, the restriction on interest payment deduction is only applied to limited companies, open companies and limited partnerships. Besides, such restriction only applies to the interest payments for the loans between related entities. If the net interest expenses for certain tax year is EUR 500,000 or less, the interest payments can be fully deducted. If the net interest expense for a tax year exceeds EUR 500,000, interest deduction is limited by 25% of the earnings before interest, taxes and depreciation (EBITD).
The amended rules extend the restriction to loans between unrelated entities. The calculation of interest income or expense is the same as the current one. The only difference is the threshold of the net interest expense under which the interest payments can be fully deducted before tax.
The new restriction shall not apply to loans issued before 17 June 2016 and the interest payments which shall be subjected to tax before 1 January 2019.
Source: Finnish Ministry of Finance
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