The Debt Equity Bias Reduction Allowance (DEBRA)

On the 11 May 2022, the European Commission published a proposal for a Directive, whose intended purpose is to reduce the present inequality which exists and which is the result of financing an enterprise through equity financing (thus no tax deductions are available) versus debt financing (wherein tax deduction for interest is available). This initiative aims to […]

Written By Stephen Balzan

On May 18, 2022
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On the 11 May 2022, the European Commission published a proposal for a Directive, whose intended purpose is to reduce the present inequality which exists and which is the result of financing an enterprise through equity financing (thus no tax deductions are available) versus debt financing (wherein tax deduction for interest is available).

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.

How can we help?  

For further information, please contact one of the firm’s tax partners, Stephen Balzan on [email protected] or Elaine Camilleri [email protected]. ACT can help you understand the changes to the tax rules and how these can impact your business.  

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on +356 21378672 or send us an email on [email protected].