Example of the application of the earnings stripping rules:
Example of the application of the earnings stripping rules:
Year 2015
€
EBITDA in 2015 20.0
Interest expense 8.0
Interest income 4.0
Net interest expense 4.0
Directly deductible interest expense 4.0
30% x EBITDA 6.0
Deductible net interest expense 4.0
Remaining EBITDA (EBITDA carryforward) 2.0
EBITDA in 2016 5.0
Interest expense 4.0
Interest income
0
Net interest expense 4.0
30% x EBITDA 1.5
+ EBITDA carryforward of year 2015 2.0
Deductible net interest expense 3.5
Non-deductible interest expense
(interest carryforward) 0.5
Escape clause: For businesses which are part of a controlled
group, a so-called escape clause applies. If the equity ratio of the
entity in question is equal to or greater than the equity ratio of
the controlled group, the earnings stripping rules will not apply.
There is a one percentage point safety cushion for the equity
ratio of the business in question. As of assessment period 2010,
the threshold was increased to two percentage points. As a
consequence, the escape clause is still met when the equity ratio
of the entity is 48% and the equity ratio of the controlled group is
50%. The escape clause applies only if the corporation proves that
remuneration on shareholder debt (see above) accounts for at most
10% of net interest expense.
Interest carryforward: Interest expense that is not deductible
in the period in which it arose has to be carried forward. It
increases interest expense in the following year, but is not taken
into account to determine tax EBITDA. Interest expense carried
forward will, however, be erased in reorganizations and where
the change-of-control rules apply.
EBITDA carryforward: In 2010, the possibility to carry forward
unused tax EBITDA was introduced, i.e. If 30% of EBITDA
exceeds the net interest expenses. Net interest expenses
which cannot be deducted according to the 30%-rule in a given
business year may be deducted up to the amount of the EBITDA
carryforward of former business years. Such tax EBITDA carry-
forward is limited to a maximum period of fve years.
EU Forecast
euf:ba.18g:17/nws-01