A Zebra or a Donkey? the European Commission's Proposal for a Debt-Equity Bias Reduction Allowance (DEBRA)

ABSTRACT

Ismer discusses the European Commission's proposal for a Debt-Equity Bias Reduction Allowance (DEBRA). As part of its Communication on Business Taxation for the twenty-first Century, the European Commission announced that it would propose a DEBRA. On 11 May 2022 the European Commission has indeed presented a corresponding proposal for such a Directive (in the following referred to as the DEBRA Directive). The Commission intends to create incentives for the re-equitization of companies which have become financially vulnerable because of the Coronavirus disease 2019 (COV1D-19) crisis. The draft Directive would apply to all taxpayers that are subject to corporate income tax in one or more EU Member States, including EU permanent establishments of non-EU entities. Though still a rare animal, the debra may in the future well take the place of the 2022 ifa Berlin teddy bear and become the heraldic animal of the dawning new tax age.