European Commission Proposes Debt Equity Bias Reduction Allowance to Promote Equity Investment

The European Commission has announced its Proposal for a Council Directive introducing a debt-equity bias reduction allowance (DEBRA), which was consulted on in 2021. The allowance is meant to incentivize equity investment, rather than debt, by providing that increases in a taxpayer's equity from one tax year to the next will be deductible from its taxable base, similar to what happens with debt. Further details are provided in a Q&A issued with the announcement.

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Questions and A…