Impact on WAM Structures
The new interest limitation rules may significantly impact the tax position of asset managers, asset holding companies and downstream investment structures. The interest limitation rules limit both intragroup interest and third-party interest. Application of the new interest limitation rules has the potential to materially increase the effective cost of investment funding through higher effective tax rates by limiting the deductibility of net borrowing costs in a given year to a maximum of 30% of EBITDA. This could particularly impact regulated fund (i.e. QIAIF) and S.110 structures.