With 35 votes in favour, 8 against and 9 abstentions, the MEPs of the European Parliament’s Committee on Economic and Monetary Affairs (ECON) adopted, on Tuesday 28 November, their opinion on the ‘DEBRA’ Directive on a tax deduction to reduce the tax distortion in favour of indebtedness and on the limitation of interest deductibility for corporation tax purposes.
The aim of this legislation is to give companies easier access to the financing they need, by introducing a tax exemption that will give equity capital the same tax treatment as debt. Thus, increases in a taxpayer’s equity from one tax year to the next will be deductible from the tax base, as is the case for debts.
In their compromise amendments, which EUROPE has obtained, MEPs advocate greater proportionality according to company size (see EUROPE 13301/21).
The equity allowance is deductible, for ten consecutive tax periods, from the tax base of any small or medium-sized enterprise (SME) or ‘medium-sized group’ subject to corporation tax, up to a maximum of 30% of earnings before interest, tax, depreciation and amortisation (‘EBITDA’). For large companies, the number of consecutive tax periods will be limited to seven.
To see the compromise amendments: https://aeur.eu/f/9s6 (Original version in French by Anne Damiani)