INTERNATIONAL TAX PLAZA - The European Commission opened a consultation on its proposal for a Council Directive regarding a Debt-Equity Bias Reduction Allowance (DEBRA)

On May 11, 2022 the European Commission published its proposal for a Council Directive on laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes. The proposal introduces an equity allowance and the proposal also introduces a reduction of debt interest deductibility by 15% (in other words only 85% of the interest remains deductible (Article 6, Paragraph 1 (“Limitation to Interest Deduction”)). More information on the proposed Council Directive can be found in our article from May 11, 2022.

On May 13, 2022 the European Commission opened a public consultation regarding the aforementioned proposal for a Council Directive. The Consultation period will run until July 8, 2022 (midnight Brussels time). Interested party that would like to give input should be aware that in order for being able to contribute you'll need to register with the European Commission or login using your existing social media account.

With respect to this consultation the European Commission has released the following documents:

· The proposal for a Council Directive on laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes, which can be downloaded here;

· Staff working document - SWD(2022)144 (“COMMISSION STAFF WORKING DOCUMENT - Subsidiarity Grid Accompanying the document Proposal for a COUNCIL DIRECTIVE on laying down rules on a debt-equity bias reduction and on limiting the deductibility of interest for corporate income tax purposes”), which can be downloaded here;

· Summary of the impact assessment report - SWD(2022)146 (“COMMISSION STAFF WORKING DOCUMENT - EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT Accompanying the document Proposal for a Council Directive on laying down rules on a debt-equity bias reduction and on limiting the deductibility of interest for corporate income tax purposes”), which can be downloaded here;

· Impact assessment report - SWD(2022)145 (“COMMISSION STAFF WORKING DOCUMENT - IMPACT ASSESSMENT REPORT Accompanying the document Proposal for a COUNCIL DIRECTIVE on laying down rules on a debt-equity bias reduction and on limiting the deductibility of interest for corporate income tax purposes”), which can be downloaded here; and

· Opinion on impact assessment - SEC(2022)204 (“REGULATORY SCRUTINY BOARD OPINION - Proposal for a Council Directive on laying down rules on a debt-equity bias reduction and on limiting the deductibility of interest for corporate income tax purposes”), which can be downloaded here.

A link view which you can contribute to this public consultation can be found here under the header “Commission adoption” on the website of the European Commission. (NB you have to scroll a bit down)

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