The German Ministry of Finance on March 24, 2025, published final guidance on the application of the German interest deduction limitation rules, which have recently been aligned with the EU Anti-Tax Avoidance Directive (ATAD).
The guidance contains clarifications and examples regarding the application of the rules, including:
- Clarifications and examples in respect of the term “loan” (e.g., profit-participating loans, typical silent partnerships, profit-sharing bonds and other profit-participation rights, which are classified as debt for income tax purposes)
- Clarifications and examples in respect of the terms “interest expense” and “interest income” (e.g., borrowing costs as defined in article 2 (1) atad, expenses relating to discounting and compounding, expenses for interest rate swaps, indemnities for early repayment of loans, and commitment interest)
- Clarifications on the treatment of transparent entities, fiscal unities, and public private partnerships
- Clarifications on the requirements, application, and limitations of exceptions to the interest deduction limitation rule (e.g., standalone clause, group equity ratio test)
Read an April 2025 report prepared by the KPMG’s EU Tax Centre