13.2. Thin-capitalization and other Restrictions to Interest Deduction
The deductibility of interest on shareholder loans may be restricted or disallowed under two sets of rules. First, interest on shareholder loans is deductible only if the capital of the borrower is fully paid up. Secondly, interest on shareholder loans is deductible only if the interest is paid on a debt not exceeding twice the value of the taxpayer’s equity (effective 1 January 2019, previously, it was twice the value of the taxpayer’s capital) and at a rate not exceeding the Central Bank of Madagascar advance rate plus two points (the rate of the Central Bank of Madagascar is 9.5%).