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Tax audit risk

Easiness to justify
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Deducted by95% of independentsRecommended by0% of independentsDo you deduct this expense?Would you recommend this expense?

Good news, generally, interest is fiscally deductible.
When it is linked to your freelance activity, interest is deductible.

That said, there are 2 exceptions:

1 / excessive interest: for self-employed persons interest paid on advances by entrepreneurs, shareholders, their spouses or underage children is rejected (i) insofar as they exceed the market interest rate, or (ii) because the 1/1 ratio is exceeded.

The 1/1 ratio means that the interest-bearing loan cannot exceed the sum of:
• taxable reserves at the start of the taxable period;
• paid-in capital at the end of the tax period.

2 / Thin Cap: For companies, the credit on loans that exceed the debt or equity ratio of 1/5 is rejected if this surplus exceeds the total amount of the loans by the following amounts times 5:

• taxable reserves at the start of the taxable period;
• the paid-in capital at the end of this period.

Finally, no VAT is charged on interest, so it does not count.

⚠️ Since the 2020 tax year (i.e. taxable period from 1 January 2019) the administration has issued new rules regarding the deduction of interest. The new rules now limit the tax deduction for 'increased financing costs' to the highest of the following two limits: • 3 million euros (minimum threshold); • 30% of the (fiscal) EBITDA. So watch out for business groups and consolidated balance sheets ...

Check those related expenses that you could deduct tomorrow ✨

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