The #InterestBarrier – The Elephant in the Room When Considering Financing
👉 What matters are the after-tax financing costs!
The negative effects of the interest barrier affect far more companies than one might expect:
🔹 Large corporations (including well-known, publicly listed companies in the DAX, MDAX, etc.), often because their value creation largely takes place abroad and is taxed there, while holding and financing expenses are allocated in Germany,
🔹 Restructuring and turnaround companies,
🔹 Real estate and "infrastructure" companies, as well as
🔹 of course Leveraged Buyouts (#LBO),
since in the last 3 examples, the higher use of debt financing is already part of the definition.
The affected companies cannot fully deduct their interest burden from taxable income for tax purposes.
This means that the tax liability turns out to be higher than the pre-tax result under commercial law would suggest, and that interest-bearing financing instruments such as loans, bonds, private debt, etc. are significantly more expensive than anticipated.
Dear CFOs,
Dear Treasurers,
if your company is subject to the interest barrier, you should evaluate financing alternatives based on their after-tax costs!
The solution is quite simple:
👉 Leasing is not affected by the interest barrier and offers – among other advantages – very attractive financing terms.
Let's talk!
P.S. The tax disadvantage faced by many companies due to the interest barrier, as well as the benefits of leasing, are rarely discussed in trade media or in public…
The elephant in the room...
#PrivateEquity #CFO #Treasury
The #InterestBarrier – The Elephant in the Room When Considering Financing
