thin capitalization

thin capitalization definition - business

thin capitalization

A financial structure heavily weighted toward debt, generally undertaken in order to gain the tax advantage of deducting interest expenses. The Netherlands proposed a “thin capitalization rule" that disallowed a tax deduction for interest expenses on excess debt. Excess debt was defined as the extent to which total debt exceeded three times total equity.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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