Federal Ministry of Finance issues interpretation letter regarding interest limitation rules

The interest limitation rules (also known as the interest barrier), which significantly restrict the deductibility of interest, are part of the 2008 Tax Reform Act. These new rules are applicable to businesses of all legal forms, irrespective of whether these businesses are owned by resident or non-resident persons, and all interest-bearing debt is covered, regardless of whether such financial instruments are held by shareholders (partners) or by related or non-related parties. To eliminate these uncertainties, the Federal Ministry of Finance issued an Interpretation Letter to the interest limitation rules which was published on 4 July 2008 (Interest Barrier Letter).