Zinsabzugsbeschränkung

Zinsabzugsbeschränkung refers to a legal provision in German tax law that limits the deductibility of interest expenses for corporations. This regulation, primarily found in Section 8a of the German Corporate Tax Act (Körperschaftsteuergesetz - KStG), aims to prevent companies from artificially reducing their taxable income through excessive interest payments, particularly in cases of intra-group financing.

The core principle of the Zinsabzugsbeschränkung is that net interest expenses exceeding a certain threshold are generally not deductible. This threshold is calculated based on a company's taxable income before interest expenses and depreciation, often referred to as "EBITDA-proxy" (Earnings Before Interest, Taxes, Depreciation, and Amortization). Specifically, if net interest expenses exceed 30% of this EBITDA-proxy, the excess amount becomes non-deductible.

There are several exceptions and nuances to this rule. For instance, a de minimis threshold allows for the deduction of net interest expenses up to EUR 3 million annually, regardless of the EBITDA-proxy. Additionally, if a company can demonstrate that its own equity ratio is at least as high as the equity ratio of comparable independent companies, or if it can prove that its equity ratio is at least 4.5%, the Zinsabzugsbeschränkung may not apply. Furthermore, interest expenses related to equity financing are typically not subject to these limitations. The aim of this complex regulation is to ensure a fairer tax burden and to curb base erosion and profit shifting strategies.