The UK government, on December 5, published draft clauses for a tax law that will limit the interest deductions of large corporations, to be included in the 2017 Finance Bill.
The proposal, designed to be consistent with OECD/G20 base erosion profit shifting (BEPS) plan “best practices,” has been the subject of consultations held in October 2015 and May 2016. The draft clauses were included in a summary of responses to the May consultation.
The release includes most of the draft language for the proposed interest dedution rule. The government expects to publish the balance of its proposal and and updated version of the draft legislation by January.
The UK intends to adopt a fixed ratio rule that limits multinational group interest deductions to 30% of the group’s taxable earnings before interest, taxes, depreciation, and amortization (EBITDA). An optional group ratio rules allows a greater deduction based on the net interest to EBITDA ratio for the worldwide group.
The existing UK debt cap legislation would be replaced with a modified debt cap, so that the net UK interest deduction does not exceed the total net interest expense of the worldwide group.
The rules are proposed to apply to net interest expense in excess of £2 million and would be effective from April 1, 2017.
See:
Related MNE Tax articles:
Be the first to comment