Debt equity bias reduction allowance (DEBRA)

National Foreign Trade Council Comment Letter on the Debt-equity bias reduction allowance (DEBRA) The National Foreign Trade Council (the “NFTC”) is pleased to provide written comments on the European Commission’s (the “EC”) adoption document – Debt-equity bias reduction allowance (DEBRA) published on May 13, 2022 (the “Adoption Document”). The NFTC, organized in 1914, is an association of U.S.

American Chamber of Commerce in Italy (AmCham Italy) is the organization representing the transatlantic interests in Italy. Advocacy activities, developed through 21 Committees, have the aim to strengthen transatlantic relationship and to increase the Italian attractiveness for U.S. investors.

Invest Europe commends the Commission for making efforts to increase investments in European businesses. Balancing the treatment of debt and equity financing in a more equitable way is a daunting task and whilst addressing a perceived “bias” seems logical, it is worth noting there are many valid legal, regulatory and commercial reasons for use of debt.

1 The EU ILR rules are complex, broadly targeting what might be described as "highly leveraged" companies with a tax deductible interest expense in excess of 30% of "earnings" (or more precisely EBITDA). 2 Those EU ILR rules then have an overlay of certain reliefs, such as for small and medium sized business (SMEs) and also for groups of companies that are traditionally highly leveraged.

EPRA welcomes the opportunity to provide feedback on the DEBRA proposal. We encourage EU-policymakers to consider the different characteristics of public equity and debt markets when undertaking capital markets regulatory initiatives.

France Invest is delighted to contribute to the EU initiative of the public consultation on proposal directive on laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes (DEBRA). As a general comment, we are not in favor of this proposal directive for followings reasons detailed in the file attached.

The Fédération Française du Bâtiment supports the European Commission’s objective of putting the financing of companies on an equal footing, whether from equity or debt. However, it questions the implementing arrangements introduced in the proposal for a Directive. Indeed, some measures are likely to have a counterproductive effect and penalise firms in a context of inflationary and rising interest rates.

Filed in French · English published by the European Commission

We are pleased to respond on behalf of the Deloitte firms in Europe to the European Commission Public Consultation on the Proposal published by the European Commission on 11 May 2022 for a Council Directive on laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes and welcome the opportunity for debate on this topic.

Comment letter on the European Commission’s proposal for a Council Directive on laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes (COM(2022)216) We have taken note of the proposal for a Council Directive from the European Commission (referred to as “DEBRA” or “ the Directive”) that aims to address the disparity in treatment…

Although the FNTP is in favour of measures that could improve equity financing — in particular for SMEs and mid-cap companies — it considers that the proposed DEBRA Directive is likely to have negative consequences, especially in the current economic context.

Filed in French · English published by the European Commission

The EBF agrees with the over-arching goal of mitigating the tax induced debt-equity bias in corporate investment decisions to render financing more accessible to EU business and to promote the integration of national capital markets into a genuine single market. However, in order to promote economic growth and achieve the goals of the proposal, we recommend the following changes.

The members of the EACB gladly take the opportunity to comment on the European Commission’s proposal for a directive on laying down rules on a Debt-Equity Bias Reduction Allowance (DEBRA) and on limiting the deductibility of interest for corporate income tax (CIT) purposes. The EACB appreciates the fact that credit institutions - as defined in Art.

KPMG member firms in the EU (hereafter ‘we’) are pleased to provide comments on the European Commission’s (EC’s) proposal for a Council Directive on laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purpose (the Directive or DEBRA proposal).

The Luxembourg Capital Markets Association (LuxCMA) welcomes the opportunity to respond to the European Commission’s feedback request on the suggested “Debt-equity bias reduction allowance (DEBRA)” and is pleased to hereby provide comments on the Proposal for a Directive published on 11 May 2022 (“the Proposal”).

CFE Tax Advisers Europe has issued an Opinion Statement on the European Commission Proposal for a Council Directive on debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes (“DEBRA”).

The Irish Debt Securities Association, IDSA, is an industry organisation established with the aim of promoting and developing the environment and infrastructure to support the global structured finance, debt securities and the specialist securities industries in Ireland.

Irish Funds welcomes the opportunity to provide comments on the proposal for a Council Directive on laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes (‘DEBRA’) and have set out our members comments in the attached appendix.

Opinion of the Federal Chamber of Tax Advisors on the proposal for a Council Directive laying down rules on an allowance to reduce the tax advantage of debt over equity financing and to limit the deductibility of interest for corporate tax purposes.

Filed in German · English published by the European Commission

The Association of the Luxembourg Fund Industry (ALFI) is the representative body of the Luxembourg investment fund community. ALFI appreciates the opportunity to provide its views on the debt-equity bias reduction allowance (DEBRA) as proposed by Council Directive laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes (the draft…

EFAMA fully supports this initiative and the Commission’s efforts to encourage more companies to finance their investment through equity contributions rather than debt financing. The Commission decided to follow a policy option that will enable the deductibility of an allowance on equity financing costs complemented by a rule to limit the deductibility of interest on debt financing instruments.

In the public consultation held in September-October 2021 on this topic and in which it participated, ANSA was biased in favour of balanced, realistic measures with reduced budgetary effects. Therefore, the measures presented under the aegis of the Commission in the proposal for a directive of 11 May 2022 (COM (2022) 216 final) give rise to the most complete misunderstanding on our part, as they combine financing…

Filed in French · English published by the European Commission

Ferrovial Group, one of the world's leading infrastructure operators, welcomes the opportunity to express their views on the proposed DEBRA Directive. Whereas we value the Comission’s purpose of promoting recapitalization of EU entities, we do believe that a careful reconsideration of some of the dispositions of this draft must be made, in order to better reach this common goal.

The AFTE, representing 900+ non-financial companies with very diverse profiles, welcomes the amendments to the initial regulation proposed by the European Commission, notably the implementation of a harmonized notional interest deduction regime for the EU companies.

The European Association of Corporate Treasurers (EACT) welcomes the European Commission's proposal for a Debt-Equity Bias Reduction Allowance (DEBRA), notably the implementation of a harmonised notional interest deduction regime for EU companies.

The European Tax Adviser Federation is a European umbrella organisation for tax professionals whose activities are regulated by law. It is set as an international not-for-profit organisation (AISBL) governed by Belgian law, based in Brussels and was launched in 2015. ETAF represents more than 215,000 regulated tax professionals from France, Germany, Belgium, Romania, Hungary and Austria.

The DFCG does not subscribe to the assumption expressed in the draft directive that companies chose debt financing for tax reasons. Moreover, the proposed mechanism does not provide an actual incentive towards equity financing.

The American Chamber of Commerce in Belgium (“AmCham Belgium”) has studied the Proposal for a Council Directive on laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes (the “Proposal”) and would like to courteously submit the following comments and observations (“Feedback”).

INREV - the European Association for Investors in Non-Listed Real Estate Vehicles appreciates the European Commission's efforts to further neutralise the bias against equity financing and welcomes the carve out granted to financial undertakings. We appreciate the opportunity to respond to this important proposal. Please see our detailed views in the attached document.

Groupe VYV (Harmonie Mutuelle, MGEN, MNT, Mutuelle Mare-Gaillard etc.), created in 2017, is the leading mutual health and social protection player in France. With its three business lines (Insurance, Care and Support, Housing), it has nearly 11 million people protected, 69,000 corporate customers in health and provident insurance, more than 26,000 local authorities and 11 ministries and public institutions.

We are pleased to provide the following comments with respect to the European Commission’s initiative on debt-equity bias reduction allowance, which aims to encourage companies to finance their investment through equity contributions rather than through debt financing.

We support initiatives to encourage productive and sustainable investment in the European economy, but we do not think the debt-equity bias is as real or pervasive as the Commission appears to believe, and while we express no opinion about the proposed allowance on new equity, we have serious concerns about the proposed limitation to interest deductions.

Below are some suggestions for possible improvements or clarifications that we believe should be included in the proposal for a Directive (“DEBRA”). ONE.- It is not clear from the wording of the proposal for a directive how the reduction will be calculated in the case of entities belonging to a tax group.

Filed in Spanish · English published by the European Commission

European Family Businesses (EFB) welcomes the effort and work of the European Commission in its attempts to tackle the Debt and Equity Bias. EFB would like to propose the following: 1. In relation to the provisions that would restrict the deductibility of interest from debt, whilst we recognise the reasoning behind the inclusion of such provisions, EFB would caution against this approach.

the draft directive could have an advantage for small and medium-sized enterprises through the deduction of notional interest. On the other hand, for large groups, it is mainly aimed at penalising debt financing, while it is up to markets or banks to play this role as a regulator.

Filed in French · English published by the European Commission

Although AMAFI welcomed the Commission’s initiative in 2 021, it is now compelled to express its disagreement with the proposal for a DEBRA Directive, mainly because of the overlap between ‘capital allowance/limitation of interest deduction’ and the low notional interest rate chosen.

Filed in French · English published by the European Commission

DIE FAMILIENUNTERNEHMER have for decades advocated an interest adjustment of the profit tax base with an indexed, increasing flat interest rate for the reasons mentioned above. In this respect, the initiative of the EU Commission presented in 2021 under the title DEBRA met with approval in principle from DIE FAMILIENUNTERNEHMER.

As Bundesverband Deutscher Leasing-Unternehmen we represent the interests of the German leasing industry. We are convinced that a broad diversity of financing instruments leads to considerable benefits for the economy as a whole. It facilitates companies’ access to financing and puts it on a broader basis. It also increases the resilience of the financial system and lowers the cost of capital.

As a promoter of long-term investment, Caisse des Dépôts (CDC) welcomes the Commission's initiative to promote the development of equity investment. Nevertheless, CDC group considers that some of the proposed measures may be counterproductive and would not ultimately generate new investments. They would merely lead to a change in the current financing structure of companies.

Invest Europe welcomes the European Commission’s initiative to look into possible options to mitigate a potential debt-equity bias induced by taxation, and would like to share the following points, which we believe are important to take into account when designing such a system.

There is a fundamental difference between equity and debt investments which justifies the different tax treatment of payments made to equity investors and to lenders. An equity investor is an owner of the undertaking who hopes to profit from that ownership. A lender provides a service for a price, namely the loan of capital in return for a financing charge.

As AMAFI has always encouraged equity financing for companies, AMAFI supports the introduction of an efficient mechanism to reduce the debt bias. The swift adoption of this type of measure should allow for a strengthening of the capital base that is particularly needed in the aftermath of the COVID-19 crisis.

Filed in French · English published by the European Commission

Afep, the French Association of Large Companies, represents the interest of over 110 of the largest corporations operating in France. Afep members welcome the opportunity to provide feedback on the inception impact assessment regarding a potential legislative proposal from the Commission to address the debt-equity bias.

In theory, Dansk Erhverv takes the view that it is positive that debt and equity are treated in the same way for tax purposes. Ideally, this balance can be achieved in many ways, it would certainly be to reduce corporate tax or to abolish it altogether, as corporation tax is the most productivity-inhibiting tax.

Filed in Danish · English published by the European Commission