The following Tax guidance note provides comprehensive and up to date legal information covering:
The rules comprising the corporate interest restriction are lengthy and complex. To assist the reader, this Practice Note starts with a background section and a short, high level summary of the rules. This is followed by a guide to some of the key concepts and principles that underpin the rules and a glossary of key definitions. The main operative provisions of the rules are then considered in more detail in the remaining sections of this Practice Note.
The order of contents is as follows:
High-level summary of the rules
Key concepts and principles
Glossary of key definitions
How the interest restriction is calculated and applied
The fixed ratio method of calculating the interest restriction
The group ratio method of calculating the interest restriction
Carry forward of disallowed interest
Carry forward of unused interest allowance
Provisions dealing with particular types of companies, businesses and transactions
Public infrastructure exemption
Regime anti-avoidance rule
Interest restriction returns
As part of the G20/OECD project to tackle Base Erosion and Profit Shifting (BEPS), the OECD published best practice recommendations for preventing erosion of the tax base by multinational businesses through the use of deductions for interest and other financial payments (Action 4).
The OECD report identified three basic scenarios in which BEPS involving interest and similar payments can arise:
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