Limitation of interest deduction on intra group loans

In this article we take a closer look at the provisions regarding limitation of deduction of interest expenses paid between related parties.

The interest deduction limitation rules first of all apply to interest on loans between related parties (internal loans). In order to be regarded as a related party, ownership or control of at least 50 per cent at some point during the year is regarded.

Note that external loans may also be affected by the rules if a related party has provided security for the loan. If so, the borrowing company's external loan may be reclassified/categorized by the tax authorities as an internal loan, and thus limit the interest deduction.

If the net interest costs exceed NOK 5 million the interest deduction limitation will apply in full. If the limitation rules apply, deduction of interest expenses exceeding 25 per cent of a specifically defined profit (tax EBITDA), is denied.

You can download the full article here.