The German Ministry of Finance has released updated guidelines on the interest deduction limits, known as the “interest barrier.” on 24 March 2025.
These changes follow amendments made by the Secondary Credit Market Promotion Act to Sections 4h of the Income Tax Act (EStG) and 8a of the Corporate Income Tax Act (KStG). The new rules will apply starting from the 2024 assessment period.
Earlier, the German upper house of parliament (Bundesrat) endorsed the Growth Opportunities Act on 22 March 2024, following the lower house’s (Bundestag) approval on 23 February 2024. Initially proposed as the corporate tax reform since 2008, the bill has been scaled back to a minor stimulus package. Key highlights of the Act include the introduction of stringent interest deduction limitation rules for cross-border intercompany financing, which will be subject to comprehensive tests to ensure transparency and fairness.
