LIMITATION OF INTEREST DEDUCTIONS IN RESPECT OF DEBT OWED TO PERSONS NOT SUBJECT TO TAX – PROPOSED SECTION 23M

Section 23M of the TLAB 2013 provides for a restriction of the deduction for interest incurred in respect of debt owed to a connected person if the creditor is not subject to tax. The concept of “subject to tax” is not defined in the proposed section 23M. The concept has been used in other sections of the ITA and in double taxation agreements (“DTAs”), but there is some uncertainty about its meaning.