European Commission Releases DEBRA Directive Proposal

OUR INSIGHTS AT A GLANCE

• On 11 May 2022, the European Commission released a Directive Proposal to address Debt-Equity bias.
• The Proposal is one of the targeted measures announced by the European Commission in May 2021 in its Communication that promote productive investment and entrepreneurship and ensure effective taxation in the EU.
• The Proposal lays down rules on the deduction, for corporate income tax purposes, of an allowance on increases in equity and rules on the limitation of the tax deductibility of exceeding borrowing costs. These rules apply to taxpayers that are subject to corporate income tax in one or more Member States, including permanent establishments in one or more Member State of entities resident for tax purposes in a third country. However, financial undertakings are exempt from those rules.