Can I Claim Schuldzinsen und Finanzierungskosten (Interest and Financing Costs) as a Business Expense in Germany?
Yes — interest on business loans and financing costs are generally deductible as Betriebsausgaben. For large businesses, the Zinsschranke (interest barrier rule) under §4h EStG limits deductibility of net interest above €3 million to 30% of tax EBITDA. Most SMEs fall below this threshold and can deduct all business interest.
What Federal Central Tax Office (BZSt) & Finanzämter says
§4h EStG (Zinsschranke): net interest expenses above €3m threshold deductible only to 30% of tax EBITDA. §8a KStG applies the rule to corporations. Below the €3m threshold, interest is fully deductible under §4 Abs. 4 EStG.
When you can claim
- Interest on bank loans used for business purposes — fully deductible for SMEs below the Zinsschranke threshold
- Leasing charges (operating leases) as period costs — fully deductible, though a Hinzurechnung adjustment applies for Gewerbesteuer
- Factoring fees and trade credit facility charges for working capital
- Overdraft interest on a business current account
When you cannot claim
- Interest on private loans used for personal purposes — even if the loan account is in the same name as the business
- Deemed interest on shareholder loans that are re-characterised as equity under thin capitalisation or substance-over-form rules
- Interest accrued but not yet paid when using accruals accounting — only the portion relating to the accounting period is deductible
Good to know
Pro tip: For SMEs, the practical Zinsschranke risk only arises with very large debt loads — a net interest expense of €3m implies approximately €60m of debt at 5% rates. However, structuring shareholder loans carefully is important: shareholder loans must be at arm's length rates and properly documented to avoid re-characterisation.
Important: Gewerbesteuer applies an additional Hinzurechnung adjustment: 25% of net interest payments are added back to the Gewerbeertrag before calculating GewSt. This means GmbHs pay some Gewerbesteuer on debt interest that is deductible for KSt purposes — a nuance worth noting for highly leveraged businesses.
Related expenses
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