Thin Capitalization
Thin capitalization rules determine how to manage debt between entities at headquarters and across borders. The rules are designed to ensure that entities do not have the claim of deduction of interest on debt borrowed locally, which then provided to entities outside of borders.
While these rules try to address very specific issues that can often have consequences for normal commercial operation of a company with operations across borders, you need a knowledge of the rules and how to avoid paying more taxes than necessary . It is also necessary to ensure that the entity is not exposed to unnecessary risk.
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