Can I grant a debt waiver to my subsidiary?
If the subsidiary is not experiencing financial difficulties:
If the subsidiary is not experiencing financial difficulties, then the parent company can waive a commercial debt, as long as:
- It does not constitute an abnormal act of management; and
- It is in the parent company’s commercial interest (for example a distribution centre/supply line).
In the above scenario, the debt waiver is tax deductible for the parent company.
If the subsidiary is experiencing financial difficulties:
If the subsidiary is experiencing financial difficulties, then the parent company can waive a commercial debt, as long as:
- It does not constitute an abnormal act of management.