The deductibility of interest expense in real estate
Article 1 of Law 244/2007 (hereinafter "2008 Finance Act") in paragraphs 35 and 36 has made significant changes regarding the tax treatment of interest expense in joint stock companies, introducing, alongside the other specific cases of non-deductibility, a general ceiling on their deduction, calculated on the basis of the amount of the Gross Operating Result (ROL). With specific reference to real estate, a category which, among other things, would be particularly affected by the new regulations, the 2008 Finance Act moved in two directions:
- with an authentic interpretation of the provisions referred to in Article 90 paragraph 2 of the TUIR, it excluded the absolute non-deductibility of the financing interests, and their contribution to the ROL criterion;
- has provided for the deduction without any limit (not even the ROL) for interest expense relating to mortgage loans contracted for properties intended for leasing.
Precisely on this issue in the last year the Financial Administration has intervened on several occasions (CM 19/2009 and 37/2009) to clarify the specific cases of exemption and the consequent tax treatment.
Topics index
- General discipline: notes
- Real estate companies