This ruling is issued pursuant to the authority granted under section 84 of the Tax Administration Act (Law Number 3/2010) as amended by Law Number 14/2011. All legislative references are to the Business Profit Tax Act (Law Number 5/2011) unless otherwise stated. This ruling is legally binding.

Introduction

1. This ruling applies in respect of section 11(a)(5).

2. Section 11(a) states:

“Without prejudice to the generality of Section 10(a), in computing a Person’s taxable profits for a tax year, a deduction shall not be allowed in respect of:
…

(5) interest if and to the extent that it is payable at a rate exceeding 6% (six percent) per annum except interest payable to a bank or financial institution approved by the MIRA”.

(emphasis added)

3. This ruling explains the term “bank or financial institution approved by the MIRA” in section 11(a)(5).

Ruling

4. For the purpose of section 11(a)(5), a bank or financial institution approved by the MIRA refers to:

(a) A bank or financial institution licensed by the central bank of the country of operation of that bank or financial institution; and

(b) The following international financial institutions (IFIs) and agencies controlled by such institutions:

(1) World Bank;

(2) International Monetary Fund (IMF);

(3) Asian Development Bank (ADB);

(4) Islamic Development Bank (IDB);

(5) European Investment Bank (EIB);

(6) European Bank for Reconstruction and Development (EBRD);

(7) Nordic Investment Bank (NIB);

(8) OPEC Fund for International Development (OFID);

(9) Deutsche Investitions- und Entwicklungsgesellschaft (DEG);

(10) Groupe Agence Française de Développement (AFD).

5. Taxpayers shall request in writing to the Commissioner General of Taxation to add to the list of approved banks and financial institutions.

6. The Commissioner General of Taxation may, at his discretion, add to the list of approved IFIs in paragraph 4(b) of this ruling by publishing such additions on the official website of the MIRA.

7. Taxpayers shall apply section 11(a)(5) and paragraphs 4 and 5 this ruling in a tax year only if the relevant IFI was approved on or before the due date for filing their Business Profit Tax return for that year.

8. The list of approved IFIs shall be published on the official website of the MIRA.

Date of Effect

9. This ruling shall take effect from its date of issue.

10. This ruling supersedes Tax Ruling number 220-PR/TR/2011/7 dated 21 December 2011.