At the European level, the Anti-Tax Avoidance Directive (ATAD) introduced an interest limitation rule. The European legislature followed the recommendations of the Organization for Economic Cooperation and Development (OECD), according to which interest limitation rules are a suitable instrument to address schemes that aim to shift profits to other jurisdictions and thereby erode tax bases of Member States. The existing German interest limitation rule and the case law of the European Court of Justice (ECJ) had a tremendous impact on the drafting of the European rule and thus the European legislature decided to expose both cross-border and purely domestic interest payments to the interest barrier. The article shows that the extension of the interest limitation rule to purely domestic situations violates the European principle of equal treatment. Against this background, the article proves that the European internal market allows the application of a European interest limitation rule only in cross-border situations.