In most European countries, the deductibility for tax purposes of finance costs, such as interest expenses, is restricted or denied in certain circumstances. While there are common approaches between jurisdictions when restricting deductibility, the detailed rules and ultimate impact on deductibility can differ considerably. In addition, the recent economic crisis has led to new rules on deductibility in many European countries, with a general shift from restricting only related party finance costs to a cap on deductibility for both internal and external debt. This article gives a general overview of the deductibility of finance costs in the major European jurisdictions.
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