Oct 03, 2017 · Legislation has recently been introduced effective for income years commencing on or after 1 July 2014 (the 30 June 2015 tax year for 30 June taxpayers) which amend the thin capitalisation rules such that: the maximum statutory debt limit (safe harbour debt limit) has been reduced from 3:1 to 1.5:1 (on a debt-to-equity basis) for Read More... The ED changes and draft TDs require careful analysis. It is important to note that where safe harbor calculations are adversely impacted, the thin capitalization arm’s-length debt test remains available and may be a potential option for some.
Based on this definition of “gearing”, it states that the thin capitalisation regime “will limit the amount of debt ... where an entity’s debt to equity ratio exceeds certain limits”.17 The limit is breached under the safe harbour debt test when “the amount of debt ... is greater than that permitted by the safe harbour gearing limit of May 03, 2016 · Thin capitalisation – the multinational tax avoidance strategy the budget forgot ... The limits are determined by reference to what is known as the “safe harbour” debt amount, an “arm’s ...
The thin cap rules are designed to limit the amount of otherwise tax deductible debt related expenses. The ‘old’ thin cap rules (for inward investors) The ‘safe harbour’ limit: The maximum debt limit is 3:1 on a debt-to-equity basis. Thus, the interest is only fully deductible if the total relevant debt is less than three times the equity. Thin capitalisation rules. It is important to calculate your thin capitalisation percentage correctly. The safe-harbour threshold for New Zealand taxpayers owned or controlled by a non-resident is 60%. The safe-harbour threshold for New Zealand residents that have offshore investments is 75%. Exceeding the thresholds results in interest deductions being denied.
Based on this definition of “gearing”, it states that the thin capitalisation regime “will limit the amount of debt ... where an entity’s debt to equity ratio exceeds certain limits”.17 The limit is breached under the safe harbour debt test when “the amount of debt ... is greater than that permitted by the safe harbour gearing limit of
Thin Capitalization and Interest Deduction Rules: A Worldwide Survey by Stuart Webber T he United States faces budget deficits that are among the largest in its history. According to the Congressional Budget Office (2009), the current year’s deficit will total $1.6 trillion, which is 11.2 percent of GDP, the highest percentage since World War ...
Apr 09, 2016 · Safe harbours. It is not uncommon for overseas tax regimes to have ‘safe harbour’ rules for thin capitalisation, even when they apply the arm’s length principle for transfer-pricing purposes. Although the IN is still in draft format, section 31 of the Income Tax Act has been with us for some time now. We would therefore recommend that before finalising any new funding arrangements as envisaged in the draft IN, you consider whether it would stand up to scrutiny from SARS’ proposed interpretation of the thin capitalisation laws.
May 28, 2014 · The Thin Capitalisation rule does not currently apply to New Zealand trusts, even in the case of a trust being settled by non-residents. However, one of the proposed changes to the Thin Capitalisation rule is the extension of the rule’s application to trusts where 50% or more of the trust is settled by an entity subject to the inbound Thin ... Non-ADI general inward investment vehicle Step 1: Calculate the adjusted average debt. Step 2: Calculate the safe harbour debt amount. Step 3: Calculate the arm's length debt amount. Step 4: Calculate the worldwide gearing debt amount. Step 5: Calculate the debt deductions disallowed. In the case of an ADI, there is no disallowance of debt deductions under the thin capitalisation provisions where, broadly, the ADI's ‘average equity capital’ does not exceed the ADI's ‘minimum capital amount’. The minimum capital amount is the lesser of the ‘safe harbour capital amount’, the ‘arm's length capital
The thin cap rules were changed effective the assessment year starting on or after April 1, 2012, and the new requirements became part of the general transfer pricing provisions. The 3:1 debt-to-equity safe harbor was eliminated and instead the new rules introduced the arm's length standard for related party financing transactions.
b. Thin Cap regime Swiss federal and cantonal income tax rules provide for thin capitalisation safe harbour rules (or, more precisely, a maximum debt rule per asset class) as follows: Cash 100% Accounts receivable 85% Inventory 85% Other current assets 85% Bonds in CHF 90% Bonds in foreign currency 80% Quoted shares 60% Non-quoted shares 50% Dec 31, 2019 · Thin capitalisation. Swiss thin capitalisation rules are, in general, only applicable for related parties. In case of a thin capitalisation, the related party debts can be treated as taxable equity. The respective circular letter issued by the Swiss Federal Tax Administration provides for debt-to-equity ratios as safe harbour rules. The thin capitalisation rules act to limit the amount of debt deductions that an entity can otherwise deduct from their assessable income where the debt to equity ratios exceed the prescribed limits i.e. the entity is “thinly capitalised”.
Jul 28, 2001 · The government's initial response to the Ralph report was to accept the recommendation regarding thin capitalisation, including its inclusion of total debt, application to Australian multinationals and the 'safe harbour' and 'arm's length' tests.
Apr 09, 2016 · Safe harbours. It is not uncommon for overseas tax regimes to have ‘safe harbour’ rules for thin capitalisation, even when they apply the arm’s length principle for transfer-pricing purposes.