As part of the government's crisis management program, the Ministry of Finance has announced changes to the application of thin capitalization rules concerning the tax-dedutibility of financial interest and charges. In particular,

1.  interest on related-party loans made to non-financial businesses will be considered non-deductible above the ratio of 4x own capital, versus the previous 2x.

2. Back-to-back financing (where a third party contributes financing on condition of financing being provided by a related party) will now be considered as "related-person" loans.

3. Financial costs from related-party loans, so long as they are not linked to profitability of the company, will no longer be subject to the thin capitalization rules limited their deductibility.

For more information on how this impacts you, please review the office notice from the Ministry of Finance dated 16.04.2009 or contact CFO2GO.