According to § 4 paragraph 4a EStG, certain debt interest is not deductible for tax purposes. The prohibition of deduction comparable to paragraph 5 always applies in cases where an entrepreneur carries out so-called transfers. If this is the case, the legislator assumes that the borrowing of the loan was mainly for the financing of the private subsistence – and standardizes an off-balance-sheet addition for the corresponding share of interest. The amount to be added shall be upheld.

1st principle: When is an addition according to § 4 paragraph 4a EStG?

In § 4 paragraph 4a EStG, the legislature regulates the treatment of debt interest in the case of so-called transfers.

In principle, interest accruing in particular on bank loans is deductible as operating expenses if it is used to finance operating investments (§ 4 (4) EStG). The reason for this is that the direct connection with the respective company necessary for a deduction of operating expenses is usually given (for example BFH of 11.11.2022, VIII B 97/21).

If operating expenses are in the form of debt interest, they reduce the tax profit. The entrepreneur then bears the corresponding expenses, but saves on this also according to his tax rate income or corporate tax.

These principles may not apply by § 12 no. 1 EStG, the prohibition of the tax deduction of the expenses of private living, in the cases of a so-called transfer. According to § 4(4a) sentence 2 EStG, this is the case if the entrepreneur withdraws a higher amount than the sum of annual profit and deposits in the respective marketing year.

Example: The entrepreneur Max, who determines his profit according to § 4 paragraph 3 EStG, has generated a tax net income of EUR 100,000 in 2023. At the same time, he has withdrawn EUR 110,000 from operating assets, but has not made any deposits. Max has realized a takeover in the amount of EUR 10,000 here, as he has taken a total of EUR 10,000 more from the operating assets than he has transferred to him.

2 Calculation of Acquisitions and Non-Deductible Debt Interest

The amount of transfers is comparatively easy to calculate, as it simply corresponds to the difference between profit, deposits and withdrawals. However, it should be noted that transfers are to be cumulated in several successive marketing years. Only later, when the entrepreneur no longer undertakes a takeover, is a corresponding offset against the deposit or profit surplus.

In order to calculate the amount of the non-deductible debt interest, the entrepreneur proceeds according to § 4 subsection 4a sentence 2 the following EStG in the following order: