Limitaciones a la dedución de intereses: impacto en las operaciones de Private Equity

Limitaciones a la dedución de intereses: impacto en las operaciones de Private Equity

Abstract:

The entry into force of Royal Decree-Law 12/2012, including new wording for article 20 of the Revised Corporate Income Tax Law (TRLIS), represents a sea change in the philosophy of corporate income tax. Indeed, it jettisons the idea of thin capitalization
linked solely to indebtedness to related entities andmakes the deductibility of the interest on such debt subject to an objective limit, with the possibility of timing adjustments. The very same legislation also inserts a new letter h) into article 14.1 TRLIS, establishing the nondeductibility of finance costs incurred in a business group to acquire intragroup holdings. These measures, which are in line with the recent legislative trend in some neighboring countries and reflect the desire to resolve certain practices which were being disallowed by the tax authorities, have had a significant impact
on the leveraged acquisitions typical of the private equity industry, already hugely affected by the current crisis in the debt markets. This article analyzes from a practical standpoint the scope and effects of these changes on deals in the private equity industry.

Keywords: Corporate income tax, interest deductibility, finance costs, operating income.