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Austria Gazettes Law For New Interest Deduction Limitation

Friday, January 1, 2021

Austrian lawmakers have signed off on the introduction of new limits on the deductibility of interest expenses for multinational corporations.

The provisions are required to be added to Austrian law as the European Commission considers that Austria's existing measures limiting the deduction of interest expenses do not meet the standard required under the first Anti Tax Avoidance Directive. The European Commission previously launched infringement proceedings against Austria, and also Ireland, and issued a reasoned opinion to Austrian authorities in November 2019.

The new provisions limit interest deductions to 30 percent of earnings before interest, taxes, depreciation, and amortization (EBITDA), as recommended by the OECD as part of its tax base erosion and profit shifting (BEPS) Action Plan. Excess interest deductions may be carried forward for up to five years, and exceeding interest costs will be deductible up to EUR3m.

The change was approved by the lower house on December 10, 2020, and by the upper house on December 17, 2020. The changes will be effective for fiscal periods beginning after December 31, 2020.