In reaching its recommended best practice approach – the fixed ratio rule - the OECD has put great work into comparative analyses of different metrics, definitions, existing practices and risks. In the Final Report it explains thoroughly how it arrived at fixed ratio rule as the most promising but still relatively non-complex metrics. First, many countries already use the general interest or debt limitation rule for the purpose of limiting the tax deductibility of interest expenses, therefore there already was experience to learn from. In analyzing the different routes – interest expense versus debt as a base, the OECD proposes the former because it would be less complicated to control. Second, the OECD analyses different metrics to measure the economic activity and proposes using earnings (EBITDA, or EBIT – earnings before interest and taxes - if the country prefers the latter), but discusses also the benefits of using asset values as the base
reporting period. Starting from 1 January 2011, 3-, 4-, and 5-star hotels are offered full CIT exemption for a period of 10 years. In addition, the same grace period for CIT purposes is granted to enterprises of consumer (textile, shoe) and ship and aircraft construction industries. Allowable deductions From a CIT perspective, most business-related expenses are deductible for tax purposes, except for expenses whose tax deductibility is limited (e.g., costs incurred for the renovation 40 of fixed assets; interest payable to related non-residents; royalties paid to non-residents) or disallowed (e.g., contractual penalties; costs of receptions, celebrations and similar events; expenses not connected with business activity). Fees paid to non-residents in deemed tax havens A restriction on tax deductibility applies to fees paid to non-residents in deemed tax havens.
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