Debt-equity bias reduction allowance and limiting the deductibility of interest for corporate income tax purposes
01020304
With the European Parliament.
Last active 16 Jan 2024
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What this bill does
In plain terms: what it changes and who it affects.
This proposal reduces tax incentives for companies to use debt instead of equity by allowing equity deductions and limiting interest deductions.
Who it affects
It affects companies subject to corporate income tax in EU Member States, especially non-financial companies and SMEs seeking financing. Financial undertakings are excluded.
Core of the proposal
- Creates a 10-year tax deduction for increases in net equity, capped at 30% of EBITDA.
- Uses a risk-free interest rate plus 1%, or 1.5% for SMEs, to calculate the allowance.
- Limits deductible exceeding borrowing costs to 85%, alongside existing ATAD interest-limitation rules.
- Adds anti-abuse rules for intra-group loans, transfers, cash contributions, asset valuations, and reorganisations.
Key provisions
- Takes effect
- The directive enters into force 20 days after Official Journal publication; Member States apply it from 1 January 2024.
- Transitional law
- Member States may defer application for existing national equity-allowance beneficiaries for up to 10 years, not beyond the national benefit period.
Latest update
26 May 2026The most recent development in this bill's progress.
Moved to European Parliament
Documents
2 recentSourcesOEIL