Business taxation

Published on Dec 23, 2013 by LPG

Deducting loan interest

Deducting loan interest with respect to the debt ratio

In Romanian tax law, interest charges are integrally deductible provided that the debt ratio is less than 3.
The debt ratio is the ratio of total debt and total assets (averaging the values from the beginning and the end of the financial year).

→ If the debt ratio is less than three, all interest charges are deductible;

→ If the debt ratio is greater than three, the interest charges (just as expenses related to exchange differences relating to loans) are not deductible.

The exception to this rule: interest charges (just as expenses related to exchange differences relating to loans) can be deducted if they come from the following institutions:

  • An international development bank
  • a credit institution
  • a non-bankiing financial institution which offers loans in conformity with the law
  • a loan guaranteed by the state.

Deductible interest rates

  • The deductible interest rate is limited by the reference rate of interest set by the Romanian National Bank for loans in RON (5.25%)

or

  • 6%, for loans in other currencies (these rates can be updated by the government).

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