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EC proposals to tackle debt-equity bias

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The European Commission has published a draft directive on the debt-equity bias reduction allowance (DEBRA) initiative to address the asymmetry in the tax treatment of debt and equity. It will apply to all taxpayers that are subject to corporate income tax in one or more EU member states and is designed to encourage companies to finance their investment through equity contributions rather than through debt financing.

The proposal requires member states to provide yearly data to the commission to monitor the effects of the new rules and will include anti-abuse provisions to prevent tax-driven changes in equity levels.

The draft directive is likely to be subject to significant changes during negotiations as it requires unanimous adoption by all member states. The commission’s aim is for the rules to come into effect as of 1 January 2024.

Issue: 1576
Categories: News