Because of debt financing, it is necessary to pay interest to the debtor, and the interest paid is a fee.

When calculating the pre-tax profit of an enterprise, we should deduct expenses from the income, thus reducing the pre-tax profit. This step can also be considered as a reduction in corporate income tax. (see income statement)

Therefore, the debt financing cost actually paid should be deducted from the income tax. This has achieved the effect of reducing income tax.