Proposed and Final Regulations were issued addressing Section 163(j) interest.
Links are attached for reference
Final Section 163(j) business interest deduction limitation regulations will be released with newly proposed regulations that will address issues not covered by the coming final regulations.
The proposed regulations under Section 163(j) have not been sent to the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA) for review, which may delay the release of the final interest limitation regulations, already at OIRA.
The review of these regulations by the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) review is progressing, with over 500 pages of proposed regulations to be released publicly this week.
Lafayette G. “Chip” Harter III, Treasury deputy assistance secretary for international tax affairs, provided comments on Nov. 9 at the Federal Tax Conference sponsored by the University of Chicago Law School.
The business interest expense limitation, currently applied by many at the individual CFC level, would be determined on a look-through method, with net external interest calculated at the CFC group level and allocated to CFC’s, with a tiering-up approach.
The proposed Reg’s will be very complex and long, with over 500 additional pages of BEAT, FTC, etc. also to be issued later this month.
Finland is expanding its rules on interest deductibility, including additional breadth over the OECD/BEPS Actions. Finland is following many other countries, in disallowing such deductions while not providing a deferral/exemption of interest income in the related jurisdiction for interest income.
Additionally, US tax reform has also introduced new interest limitation rules, based upon a 30% tax adjusted EBITDA concept.
This is the ideal time to review one’s capital structure worldwide; is it achieving the economic interests that were in place? Most MNE’s will be affected in one or more countries from the BEPS, and expanded BEPS, actions by many countries. The expanded legislative framework dictates a new review of global capital structures.