What is the OECD-recommended interest limitation rule?

BEPS Action 4 recommends limiting net interest deductions (interest income minus interest expense) to 10–30% of EBITDA. The EU Anti-Tax Avoidance Directive (ATAD) implemented a 30% EBITDA fixed ratio across EU member states, with a de minimis EUR 3 million threshold below which the rule does not apply.

Can disallowed interest be carried forward?

Yes. The OECD recommends that disallowed interest expense should be available for carryforward (and typically carryback in some jurisdictions) to prevent permanent double taxation. Unused interest capacity from prior years can also typically be carried forward to allow deduction when future EBITDA improves.

Thin Capitalization Interest Stripping Limit

Calculate the maximum deductible related-party interest under thin capitalization rules, typically limiting net interest deductions to 30% of EBITDA (OECD BEPS Action 4 recommended fixed ratio).

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate the maximum deductible related-party interest under thin capitalization rules, typically limiting net interest deductions to 30% of EBITDA (OECD BEPS Action 4 recommended fixed ratio). Use the thin cap interest limit result to inform your calculation.

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