Specific Interest Deduction Limitation Rule – Article 31 – Corporate Tax Law

Article 31 – Specific Interest Deduction Limitation Rule

1. No deduction shall be allowed for Interest expenditure incurred on a loan obtained, directly or indirectly, from a Related Party in respect of any of the following transactions:

1. A dividend or profit distribution to a Related Party.
2. A redemption, repurchase, reduction or return of share capital to a Related Party.
3. A capital contribution to a Related Party.
4. The acquisition of an ownership interest in a Person who is or becomes a Related Party following the acquisition.

2. Clause 1 of this Article shall not apply where the Taxable Person can demonstrate that the main purpose of obtaining the loan and carrying out the transaction referred to under Clause 1 of this Article is not to gain a Corporate Tax advantage.

3. For the purposes of Clause 2 of this Article, no Corporate Tax advantage shall be deemed to arise where the Related Party is subject to Corporate Tax or a tax of a similar character under the applicable legislation of a foreign jurisdiction on the Interest at a rate not less than the rate specified in paragraph (b) of Clause 1 of Article 3 of this Decree-Law.