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Debt equity bias reduction allowance (DEBRA)

Taxation

This initiative aims to encourage companies to finance their investment through equity contributions rather than through debt financing. Over-indebtedness could threaten the stability of the financial system and increase the risk of bankruptcies, which would in turn increase unemployment. The initiative will introduce an allowance for equity-financed new investments to mitigate debt bias. The whole scheme will incorporate a number of robust anti-tax avoidance rules to ensure tax fairness.

Links

Public consultation

ID: 12995

Lobbying Activity

38 responses

AmCham EU urges EU to avoid limiting debt interest deductions

American Chamber of Commerce to the European Union, 29 Jul 2022

The organization supports equity allowances but opposes new restrictions on interest deductions. They request exemptions for third-party debt and simpler compliance rules for tracking equity.
These changes would preserve financial flexibility and reduce administrative costs for American firms.
Small businesses and capital-intensive sectors lose access to affordable financing for long-term projects.

EuroCommerce urges balance in EU debt-equity tax reform

EuroCommerce, 28 Jul 2022

EuroCommerce welcomes equity deductions but opposes further restrictions on interest deductibility for debt. They seek simplified compliance rules and a grandfathering clause for loans signed before the regulation.
Retailers would maintain the financial flexibility needed to manage seasonal cash flow fluctuations.
Smaller companies lose out as restricted interest deductions disproportionately harm those with limited equity access.

French business group MEDEF opposes EU debt deduction limits

Mouvement des Entreprises de France, 26 Jul 2022

MEDEF opposes new interest deduction limits and argues that debt and equity are complementary financing sources. They request higher equity allowance rates and a safe harbor for small businesses.
Preserving debt financing flexibility helps companies maintain liquidity and manage current economic crises.
European companies face higher borrowing costs and reduced competitiveness against non-EU rivals.

Fortum warns EU tax rules could stall green investments

Fortum Oyj, 29 Jul 2022

Fortum insists that financing decisions should depend on business factors rather than tax regulations. They argue that both debt and equity are essential for energy projects.
This preserves their ability to use efficient financing for billion-euro investments.
Capital-intensive industries risk double taxation and significantly higher costs of capital.

Consultation response

Association Française des Entreprises Privées / French Association of Large Companies, 8 Jul 2021

Afep, the French Association of Large Companies, represents the interest of over 110 of the largest corporations operating in France. Afep members welcome the opportunity to provide feedback on the inception impact assessment regarding a potential legislative proposal from the Commission to address…

Invest Europe seeks revisions to DEBRA tax equity proposal

Invest Europe, 29 Jul 2022

The organization calls for more proportionate anti-abuse rules and better coordination with existing tax laws. They warn that the current plan for limiting interest deductions is counterproductive and overly complex.
These changes would help private equity investors maintain flexible financing options and avoid increased tax costs.
High-risk start-ups would struggle to secure funding if internal group financing is restricted.

Consultation response

Invest Europe, 12 Jul 2021

Invest Europe welcomes the European Commission’s initiative to look into possible options to mitigate a potential debt-equity bias induced by taxation, and would like to share the following points, which we believe are important to take into account when designing such a system. First and foremost,…

Italian Banking Association Urges Withdrawal of EU Tax Proposal

Associazione Bancaria Italiana, 29 Jul 2022

The association argues the proposal should be shelved to avoid raising borrowing costs. They also request that banks be included in the new tax allowance for equity.
Including banks in equity incentives would lower their capital costs and improve loan pricing.
European businesses would face higher borrowing costs and more administrative complexity under the proposal.

PwC Urges Better Cohesion in EU Debt-Equity Tax Proposal

PwCIL, 28 Jul 2022

PwC requests better alignment with existing tax frameworks to avoid legal uncertainty. They specifically call for clarification on how the rules interact with global minimum tax standards.
Cohesive rules would reduce administrative complexity and prevent unintended tax increases for businesses.
Start-ups and smaller firms face higher costs due to a lack of regulatory protections.

Co-operative banks seek broader exemptions from debt-equity tax rules

European Association of Co-operative Banks, 29 Jul 2022

The organization requests that entire consolidated tax groups led by a bank be exempted from the rules. They also advocate for including leasing companies in the financial undertaking exemption. Finally, they fear limiting interest deductions could make bank loans less attractive to clients.
This would protect the competitiveness of bank lending and simplify group tax compliance.
Corporate borrowers face higher net costs due to restricted interest tax deductions.

EFAMA urges EU to drop new interest deduction limits

European Fund and Asset Management Association, 29 Jul 2022

EFAMA proposes introducing an equity allowance without additional interest deduction limitations. They suggest making these rules optional to provide flexibility and avoid burdensome compliance. The group also wants the definition of equity extended to include more financial instruments.
This approach preserves EU competitiveness and allows firms to avoid complex new tax reporting.
Investors lose out if strict interest restrictions reduce the profitability of their holdings.

Consultation response

CAISSE DES DEPOTS, 12 Jul 2021

As a promoter of long-term investment, Caisse des Dépôts (CDC) welcomes the Commission's initiative to promote the development of equity investment. Nevertheless, CDC group considers that some of the proposed measures may be counterproductive and would not ultimately generate new investments. They…

KPMG warns EU debt-equity bias proposal risks administrative overreach

KPMG, 29 Jul 2022

The organization requests the equity allowance be optional for taxpayers to balance administrative costs against benefits. They also urge the removal of the new interest limitation rule, suggesting it makes the initiative impracticable.
These changes would lower compliance costs and help firms avoid new penalties on existing debt financing.
Member State tax authorities may face higher administrative burdens and complex auditing challenges.

Luxembourg fund industry urges optional application of DEBRA rules

Association Luxembourgeoise des Fonds d'Investissement, 29 Jul 2022

ALFI calls for these rules to be optional rather than mandatory for certain taxpayers. They also advocate for interest deduction exceptions that align with current tax avoidance directives.
This allows firms to avoid new compliance costs and maintain legal certainty.

Investment Association seeks DEBRA tax exemptions for fund subsidiaries

The Investment Association, 29 Jul 2022

The group requests that the definition of financial firms be updated to exclude fund subsidiaries. They want these entities carved out to maintain consistency with other European tax directives.
Excluding these subsidiaries would protect the tax-free nature of fund structures and prevent new costs.

European Family Businesses urge stronger equity tax incentives

European Family Businesses, 26 Jul 2022

The group cautions against restricting interest deductibility since debt financing remains critical for business operations. They recommend including a larger portion of equity and clarifying complex anti-abuse rules for company groups.
Broader allowances would lower tax bills and provide stronger incentives for long-term growth.
EU Member States would lose significant tax revenue if equity deductions are expanded further.

Irish Funds warns DEBRA adds complexity and harms investment

Irish Funds Industry Association CLG, 29 Jul 2022

Irish Funds requests that DEBRA be balanced with existing measures and include exemptions for investment funds and small enterprises. They suggest addressing concerns through a review of existing interest limitation rules instead of layering on new regulations.
This would avoid significant administrative costs and prevent a reduction in the competitiveness of EU-based businesses.
Small and family-owned businesses face a significant compliance burden and potential penalties on their dividend income.

French finance group rejects EU debt-equity tax proposal

Association Française des Marchés Financiers, 22 Jul 2022

The group opposes linking new equity allowances with restrictions on interest deductions. They request a higher risk premium to provide a genuine investment incentive. If interest limits remain, they should be optional and introduced gradually.
This allows companies to lower tax bills without increasing external borrowing costs.
National treasuries lose tax income if interest limits are removed or weakened.

Consultation response

Sonae SGPS, S.A., 29 Jul 2022

Sonae welcomes the opportunity to provide feedback to this public consultation. Please find our feedback in the attached document.

Consultation response

Bundesverband Deutscher Leasing-Unternehmen e. V., 12 Jul 2022

As Bundesverband Deutscher Leasing-Unternehmen we represent the interests of the German leasing industry. We are convinced that a broad diversity of financing instruments leads to considerable benefits for the economy as a whole. It facilitates companies’ access to financing and puts it on a…

France Invest warns debt-equity rules will penalize small businesses

FRANCE INVEST, 29 Jul 2022

France Invest calls for an SME safe harbor and higher allowance rates. They argue the proposal creates a double penalty on interest deductions.
Maintaining current tax rules would prevent increased borrowing costs for venture capital portfolios.
Small firms face increased borrowing costs and potential financial distress during economic downturns.

Consultation response

DIE FAMILIENUNTERNEHMER, 22 Jul 2022

DIE FAMILIENUNTERNEHMER have for decades advocated an interest adjustment of the profit tax base with an indexed, increasing flat interest rate for the reasons mentioned above. In this respect, the initiative of the EU Commission presented in 2021 under the title DEBRA met with approval in…

ETAF warns DEBRA interest limits could harm small businesses

European Tax Adviser Federation, 27 Jul 2022

ETAF requests exemptions for smaller companies and flexibility to prove reasons for business decisions. They also question the necessity of harmonizing interest deduction rules at the EU level.
Their clients would avoid tax increases and enjoy more flexible rules for business restructurings.
Small firms lose because they cannot easily access equity markets to replace debt financing.

French Construction Federation opposes limits on debt interest deductibility

Fédération Française du Bâtiment, 29 Jul 2022

The federation demands the removal of proposed limits on interest tax deductions. They argue that construction firms and small businesses depend on loans rather than capital.
This allows construction firms to avoid higher production costs and maintain investment capacity.
Business owners face higher costs when transferring company ownership through debt-financed buyouts.

German auditors urge DEBRA simplification to protect corporate investment

Institut der Wirtschaftsprüfer in Deutschland e.V., 28 Jul 2022

IDW requests removing rules on negative equity allowances and clarifying documentation requirements for anti-abuse measures. They also suggest a three million euro threshold to decrease the administrative burden on taxpayers.
These changes would lower compliance costs and prevent excessive bureaucratic hurdles for companies.
The public interest in tax fairness might suffer if anti-abuse rules are weakened.

Consultation response

European Association of Corporate Treasurers, 27 Jul 2022

The European Association of Corporate Treasurers (EACT) welcomes the European Commission's proposal for a Debt-Equity Bias Reduction Allowance (DEBRA), notably the implementation of a harmonised notional interest deduction regime for EU companies. Nevertheless, EACT anticipates that, for the…

French public works federation urges infrastructure tax exemptions

Fédération Nationale des Travaux Publics, 29 Jul 2022

The federation requests an exclusion for long-term public infrastructure projects from interest deduction limits. They also want rules to account for national tax integration regimes.
This would protect project profitability by ensuring the continued deductibility of high borrowing costs.
The green transition could stall if debt-funded projects become too expensive under new rules.

Consultation response

Confédération Fiscale Européenne, 29 Jul 2022

CFE Tax Advisers Europe has issued an Opinion Statement on the European Commission Proposal for a Council Directive on debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes (“DEBRA”). CFE Tax Advisers Europe welcomes the work of the…

Consultation response

Association Nationale des Sociétés par Actions, 28 Jul 2022

Lors de la consultation publique organisée en septembre-octobre 2021 sur un tel sujet, à laquelle elle a participé, l’ANSA a pris parti en faveur de mesures équilibrées, réalistes et aux effets budgétaires réduits Aussi, les mesures présentées sous l’égide de la Commission dans la proposition de…

Consultation response

AMF Italia - Associazione Intermediari Mercati Finanziari, 29 Jul 2022

ASSOSIM desidera ringraziare la Commissione per l'opportunità di fornire le allegate osservazioni in risposta alla consultazione pubblica sulla proposta di direttiva Debt-Equity Bias Reduction Allowance - “DEBRA”.

Consultation response

European Business Initiative on Taxation, 29 Jul 2022

Please find enclosed the feedback from the Members of the European Business Initiative on Taxation (EBIT).

Consultation response

European Association for Investors in Non-Listed Real Estate Vehicles, 27 Jul 2022

INREV - the European Association for Investors in Non-Listed Real Estate Vehicles appreciates the European Commission's efforts to further neutralise the bias against equity financing and welcomes the carve out granted to financial undertakings. We appreciate the opportunity to respond to this…

Consultation response

Groupe VYV, 27 Jul 2022

Groupe VYV (Harmonie Mutuelle, MGEN, MNT, Mutuelle Mare-Gaillard etc.), created in 2017, is the leading mutual health and social protection player in France. With its three business lines (Insurance, Care and Support, Housing), it has nearly 11 million people protected, 69,000 corporate customers…

Consultation response

American Chamber of Commerce in Italy, 29 Jul 2022

American Chamber of Commerce in Italy (AmCham Italy) is the organization representing the transatlantic interests in Italy. Advocacy activities, developed through 21 Committees, have the aim to strengthen transatlantic relationship and to increase the Italian attractiveness for U.S.…

Consultation response

Tax Executives Institute, Inc., 29 Jul 2022

Please find attached comments of Tax Executives Institute, Inc. ("TEI") regarding the proposed debt-equity bias reduction allowance directive.

Consultation response

Association Française des Trésoriers d'Entreprise, 27 Jul 2022

The AFTE, representing 900+ non-financial companies with very diverse profiles, welcomes the amendments to the initial regulation proposed by the European Commission, notably the implementation of a harmonized notional interest deduction regime for the EU companies. Nevertheless, the AFTE…

Consultation response

Commercial Real Estate Finance Council Europe, 26 Jul 2022

We support initiatives to encourage productive and sustainable investment in the European economy, but we do not think the debt-equity bias is as real or pervasive as the Commission appears to believe, and while we express no opinion about the proposed allowance on new equity, we have serious…

Consultation response

Commercial Real Estate Finance Council Europe, 12 Jul 2021

There is a fundamental difference between equity and debt investments which justifies the different tax treatment of payments made to equity investors and to lenders. An equity investor is an owner of the undertaking who hopes to profit from that ownership. A lender provides a service for a price,…