The final proposal, contained in national budget measures, is substantially similar to the Ministry of Finance’s proposal in April 2013. The final budget proposal, however, includes measures pertaining to intra-group guarantees (a provision not contained in the initial April 2013 proposal). Third-party loans guaranteed by a group company will now be considered as intra-group loans, and thus would be subject to the new legislation.
The rules are proposed to be effective 1 January 2014.
In April 2013, the Norwegian Ministry of Finance proposed to amend the tax rules governing interest deductions on intra-group loans.
Today’s final proposal would limit intra-group interest expense deductions to an amount that is 30% of taxable ordinary income, as adjusted for the value of tax depreciation and net interest expenses for tax purposes. This value approximates “earnings before interest, taxes, depreciation and amortization” (EBITDA).
Hence, the calculation of the maximum deduction would be 30% of the taxable EBITDA (increased from the 25% limitation contained in the initial proposal in April 2013).
- The carryforward period would be 10 years (increased from the five-year period contained in the April 2013 initial proposal).
- The proposed rule would also apply for interest expense costs on certain short-term loans (such as cash-pool arrangements).
The interest expense limitation would be triggered only if the taxpayer has net interest expense costs (i.e., interest costs with respect to borrowings from both related and unrelated parties) of more than NOK 3 million. If the amount interest expense were to exceed this threshold amount, the limitation would apply to all related-party interest costs (i.e., the entire amount would be limited).
Application to petroleum sector is delayed
As initially proposed, the limitation would have applied to the petroleum sector. This application has been delayed, to allow the Ministry of Finance more time for a closer assessment of the implications of this proposed treatment.
Comments made in response to the April 2013 proposal for the petroleum sector apparently raised certain issues within the Ministry of Finance. Tax professionals in Norway believe that even if the rules were to be implemented with respect to the petroleum sector, it may be reasonable to expect changes would be made to the Finance Ministry’s initial proposal. Officials with the Ministry of Finance have stated that they intend to provide a revised proposal for the petroleum sector within a relatively short period of time.
For more information, contact a tax professional with the KPMG member firm in Norway:
47 4063 9032
47 4063 9183
47 4063 9395
Daniel L. Høgtun
47 4063 9437
47 4063 9188
Per Daniel Nyberg
47 4063 9265