On 13 December 2013, the newly proposed Norwegian interest deduction limitation rules were adopted by the Norwegian Parliament and the reduction of the corporate income tax rate from 28 to 27 % was adopted.
The interest deduction limitation rules are also applicable to external loans guaranteed by a related party of the borrower (tainted debt). According to the proposal, the following circumstances will not be covered by the interest deduction limitation rules:
- When an external loan obtained by a parent company (the borrower) is secured or guaranteed by a subsidiary (upstream guarantees), provided the borrower directly or indirectly owns at least 90% of the shares in the subsidiary and the subsidiary can be based in or outside Norway.
- When an external loan obtained by a company (the borrower) is secured by a negative pledge granted by a company in which the borrower has a direct or indirect ownership interest.
- When an external loan obtained by a company (the borrower) is secured by a pledge in the shares of the borrower held by another company.
The regulation is indicated to enter into force at the same time as the interest deduction limitation rules, i.e., with effect from the income year of 2014.
