On 21 March 2018, the Ministry for Finance presented a proposal regarding new legislation within the corporate sector. The proposal comprises new rules on re interest deductions, financial leasing and a reduced corporate tax rate. The proposal is mainly based on the Ministry of Finance’s consultation on a proposal that was issued 20 June 2017.
The main proposals includes:
- The existing corporate income tax rate of 22% would be reduced to 21.4% in 2019 and then further reduced to 20.6% in 2021.
- Under the new general interest limitation rules, the deductibility of net interest expense would be limited to 30% of earnings before interest, tax, depreciation and amortization (EBITDA).
- The proposal brings greater neutrality in the taxation of own and borrowed capital and contains exemption rules favoring small and medium-sized enterprises. Only 1% of businesses is expected to be subject to the restriction rules, while small and medium-sized companies receive a tax cut.
- Introduction of tax rules regarding financial leasing.
- Introduction of accelerated depreciation on tenement buildings.
- Increased standardized income on tax allocation reserves.
- Introduction of standardized income on contingency reserves for non-life insurance companies.
- The proposed new rules are due to enter into force on 1 January 2019.
