FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF EQUITY AND POTENTIAL TAX IMPLICATIONS OF THEIR BOOKKEEPING
DOI:
https://doi.org/10.22561/cvr.v32i2.6186Keywords:
Hybrid Financial Instruments, Tax, Foreign Investments, Thin-capitalizationAbstract
The purpose of this paper was verified the tax effects of hybrid financial instruments bookkeeped as equity. More specifically, were analyzed debt/equity instruments due to the lack in accounting rules, as well as this category of hybrid, has been announced as a tool to perform aggressive tax planning. Through a logical approach, was verified that hybrid instruments can be used in cross-border investments aims that subsidiaries in one country receive tax benefits from interest expenses, while investors in another jurisdiction, could recognize this values as dividends and, consequently have tax advantages. In the same way, was concluded these instruments can be applied to reduce Thin-capitalization Index (ISC), moving away from the tax risks. In general terms, was conclude that under tax point of view, hybrid financial instruments have to be studied by international groups (e.g. BEPS), aiming to inhibit that such instruments are issued with intents to reduce effective tax rates through tools created over rules asymmetries.
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