Limiting Base Erosion Involving Interest Deductions and Other Financial Payments,
Action 4 - 2015 Final Report
The mobility and fungibility of money makes it possible for multinational groups to
achieve favourable tax results by adjusting the amount of debt in a group entity.
The recommended approach ensures that an entity’s net interest deductions are directly
linked to its level of economic activity, based on taxable earnings before deducting
net interest expense, depreciation and amortisation (EBITDA). This approach includes
three parts: a fixed ratio rule based on a benchmark net interest/EBITDA ratio; a
group ratio rule which allows an entity to deduct more interest expense in certain
circumstances based on the position of its worldwide group; and targeted rules to
address specific risks. A country may choose not to introduce the group ratio rule,
but in this case it should apply the fixed ratio rule to multinational and domestic
groups without improper discrimination.
Published on October 05, 2015Also available in: German, French, Korean
In series:OECD/G20 Base Erosion and Profit Shifting Projectview more titles