INTEREST ON CREDITS TO BE TAXED AGAIN
The interest on bank loans paid by companies shall be liable to regulation in cases of poor capitalization, which means that they might be taxed again. Surprisingly, this has been stipulated by the final draft of amendments to the Corporate Income Taxation Act, circulated by the Finance Ministry to the members of the National Council on Taxation Policy. Levying a tax on bank credits in fact reinstates the situation prior January 1, 2002, until when the ceiling on expenses for interest on loans from banks and third persons, and on financial leasing, could not exceed 75% of the profit. However, the charge now concerns only contracts, closed after January 1, 2002. In other words, if the bank credit is dated December 29, 2002, the interest paid on it shall not be liabale to taxation. No tax will be levied either on the interest on credits, agreed in 2000, although they should have been regulated till 2002.Interest on credits or financial leasing won't be taxed either if the borrower is a sole trader. The reason is that he has no capital and poor capitalization (ratio between equity and attracted capital less than 2:1) it cannot be ascertained.The bill on amendments to the Corporate Income Taxation Act turned out much more bulkier than the initial drafts of the Deputy Finance Minister Gati Al Djeburi since May when the main priniciples of the new taxation policy were formulated. However, nothing has been left of Mr. Al Djeburi's promise that the taxation legislation won't be redrafted because of the new accounting standards.The unclear question regarding the provisions as receivables which no more exist has been settled as well. Under the new standards there will be provisions for liabilities only and the liabilities shall be entered as depreciation of the standard for financial instruments. This depreciation shall not be acknowledged as expenditure either, and will be calculated in the amount liable to taxation. And if the receivables are not collected anyway, they shall be entered as proceeds that shall not be liable to taxation.