Corporate interest deductions for multinationals

Corporate interest deductions for MNCs

Introduction

This article discusses a rather unexpected move by the Australian Treasury to tighten tax rules on multinational corporations operating in the country.

Specifically, the Treasury has proposed changes to the way that companies can deduct interest expenses incurred in capitalizing or buying foreign subsidiaries.

The current position

Under current rules, Australian companies can deduct interest on money borrowed onshore to invest in foreign subsidiaries or acquire shares in other companies.

However, the proposed changes would remove the ability to deduct interest expenses for investments that generate non-assessable, non-exempt (NANE) income.

This would effectively repeal a provision that has been in place for the past 20 years.

New proposals

The proposed changes are part of a wider effort to combat profit-shifting by multinational corporations, and are designed to prevent excessive levels of debt being carried by Australian operations.

The changes were unexpected, as they were not part of previous policy proposals or announcements. They are likely to have significant implications for multinational corporations operating in Australia.

Conclusion

Overall, the article provides a comprehensive overview of the proposed changes and their potential impact on multinational corporations operating in Australia.

If you have any queries about this article, or Australian tax issues or tax matters in general, then please do not hesitate to get in touch.

The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.