February 28, 2023
The Tax Plan 2023 has introduced various changes in the tax legislation as per January 1, 2023. Part of the Tax Plan 2023 included changes to the conditions for the interest deduction on loans from affiliated entities.
The current limitation on interest deduction is extended to include further limitations:
The government has concluded that the definition of affiliated entity or individual has erroneously been set at an interest of 4%. This should have been 25% (1/4th part and not 1/25th part). Therefore, the government has published an announcement in the Official Journal of February 24, 2023to correct this percentage pending further legislative changes to avoid miscommunications when preparing the (preliminary) profit tax returns.
The announcement states that the definition of the affiliated entity and/or individual should be read as to only include entities and individuals that hold an interest, directly or indirectly in another of at least 25%.