The question of the deductibility of interest on debt has not yet been clearly clarified. Rather, debt interest rates are divided into several areas and determined by this classification, the operating expenses deduction. In a two-stage test, it must first be determined whether and to what extent debt interest rates are part of the operating expenses. In a further step, it must be checked whether the deduction of operating expenses must be limited by so-called ” overdrawals “. Several decrees have already been published on the question of the debtor interest.
Debt interest is assigned to either the acquisition or the private sphere based on the actual purpose of the loan. Thus, interest rates resulting from private accounts are not deductible as operating expenses. Loans for the purpose of financing non-operational purposes, in particular to finance withdrawals, are not required for operational purposes. On the other hand, due to the financing of operating assets such as tools, machinery or vehicles, loan interest is fully deductible as an operating expense and therefore reduces the company’s profit. The tax authorities have no objections to the management of a so-called “two-accounts model”, so that the interest on debt from this model is completely deductible.
Example for two-account model:
Entrepreneur A maintains an account from which only his business expenses are paid. All operating income is paid into a second account. A withdrawal of money would thus be made from the “operating income account”. Through this model, the accrued interest on the operating income account is fully deductible. However, this model should not only be reviewed from a tax point of view, but also reviewed from a financial and banking perspective.
Examination of overdraft
The deduction of operating debt interest rates is limited if overdrafts occur. This is basically the case if the withdrawals are higher than the sum of profits and deposits of the marketing year.
Source: BMF letter of 22 May 2000 (BStBl I 2000, p. 588)
Example of overdrawings:
The entrepreneur maintains a single corporate giro account that records revenue and expenses. In the financial year 01 the entrepreneur withdrew 70,000 EUR, the profit of the year 01 was found with 50,000 EUR in the profit and loss account (P & L). Deposits were made in the amount of EUR 2,500. The reported interest on debt amounts to EUR 16,000, according to the income statement of the year 01. Of these, the loan interest for the financing of fixed assets in the amount of EUR 13,500 is operational.
Calculation of overdraft
Calculation of remaining interest on debt
Typically, excess withdrawals are recorded at 6% of the determined excess withdrawal amount. The resulting amount of EUR 1,050.00 (EUR 17,500.00 x 6%), but not more than EUR 450.00 (EUR 2,500 less EUR 2,050.00) less the base amount of EUR 2,050 ) is recorded increasing the profits.