The impact of thin capitalization rules on shareholder financing

Arbeitspapier

From a tax planner's point of view, it is often attractive to choose debt over equity financing. As this has led to an increase of debt financing of corporations, many countries have introduced thin capitalization rules to secure their tax revenues. We analyze the influence of section 8a of the German Corporate Tax Code on corporate capital structure decisions. Furthermore, the impact of the new interest barrier is taken into consideration. The existence of the Miller equilibrium as well as definite financing effects depend significantly on the fraction of long-term debt, of substantial shareholders and when capital gains are realized.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: arqus Discussion Paper ; No. 39

Classification and Topics

• Classification: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: business taxation ; capital structure ; interest barrier ; Miller equilibrium ; share holder financing ; thin capitalization rules

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Maßbaum, Alexandra ; Sureth, Caren
• Event: Veröffentlichung
• (who): Arbeitskreis Quantitative Steuerlehre (arqus)
• (where): Berlin
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/30877
• Last update: 10.03.2025, 11:42 AM CET