Page 21 - Quarterly Q1-Q2 2018

Deducted Interest in Interest Deductions
Presented with this scenario of both cheap cash abound and potential economic boom in the horizon, one would assume that businesses would be quick to join the growing ranks of borrowers hungry to finance their investments. European regulation, however, has found itself a sizeable spanner in these future works, as the European Union’s Anti-Tax Avoidance Directive (ATAD) is
to obligate the Union’s Member States to limit
the deductibility of interest expenses. Provisions in the ATAD extend far beyond the initial goal of curbing tax base erosion and profit shifting (BEPS) in multinational corporations, mandating Member States to also reduce the deductibility of interest expenses even to third parties.
The rationale of regulating such external debt without any tax planning aims has been called
into question, and rightly so. Alas, businesses navigating the present uncharted economic waters amid simultaneous legislative turmoil have no choice but to get used to perpetually rethinking their financing conventions and business models. With signs of the new normal still awaiting discovery, the winning formula may just be to make the very best of the abnormal.
Juha-Pekka Mutanen
Partner, Head of Finance & Capital Markets
Hanna-Mari Manninen
Partner, Head of Corporate Advisory, Compliance & CSR
Kai Holkeri
Partner, Head of Tax & Structuring
Micke Lindholm
Associate
TAGS
Interest rates Transaction Finance Structuring