The five steps an ADI outward investing entity takes to calculate if they have met the thin capitalisation rules are:
- Step 1: Calculate the adjusted average equity capital
- Step 2: Calculate the safe harbour capital amount
- Step 3: Calculate the worldwide capital amount
- Step 4: Calculate the arm's length capital amount
- Step 5: Calculate the debt deductions disallowed.
Summary flowchart
This flowchart summarises the steps an ADI outward investing entity follows to work out whether any of its debt deductions are disallowed and, if so, the amount of the disallowed deductions. Use this flowchart to help you work through the steps.
Flowchart 8: ADI outward investing entity's steps to work out if any of the debt deductions are disallowed