New BMF letter on the interest barrier: What companies need to know now

Background of the interest barrier

The interest barrier was introduced to limit the tax deductibility of interest expenses and thus prevent aggressive tax planning through excessive debt financing. It applies to companies whose net interest expenses exceed 30% of so-called taxable EBITDA. An exemption limit of € 3 million also applies. On 22.12.2023, far-reaching legal changes to the interest barrier were passed, which extended the application of the interest barrier and at the same time restricted the exemptions.

Important changes and clarifications

The new BMF circular makes some significant changes to the original draft:

• Extended definition of interest expenses: The BMF has expanded the definition of interest expenses in order to meet the requirements of the Anti Tax Avoidance Directive. This now also includes capitalized interest, such as construction period interest, which was capitalized in the production costs. However, it does intervene. Grandfathering provision. Interest expenses from compounding or discounting must now also be taken into account.
• Forfaiting and factoring: In the final letter, genuine forfaiting or factoring is no longer classified as the provision of debt capital, meaning that neither interest expenses nor interest income arise from this.
• Exchange rate effects: Only exchange rate gains and losses relating to interest and capital procurement costs are treated as interest expenses and income within the meaning of the interest barrier.
• Equity escape: The new letter clarifies the application of the escape clause, which states that the interest barrier does not apply if the equity ratio of the company does not fall below the equity ratio of the group by more than two percentage points.
• Stand-alone clause: The regulations on the stand-alone clause, which have been significantly tightened with the amendment to the law, have remained unchanged.
• Timing of application: The new letter is to be applied for the first time for financial years beginning after December 14, 2023 and not ending before January 1, 2024.

Conclusion and recommendation

The new BMF circular brings both simplifications and tightenings. Companies should examine the changes carefully in order to keep an eye on the effects of the interest barrier on the tax burden and to reconsider financing strategies. In particular, the extended definition of interest expenses and the regulations on forfaiting and factoring can have a significant impact.

We will be happy to assist you in reviewing the consequences of the interest barrier. 

BMF letter dated 24.3.2025