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Cross-border Intra-group Hybrid Finance and International Taxation

Eberhartinger, Eva and Pummerer, Erich and Göritzer, Andreas (2010) Cross-border Intra-group Hybrid Finance and International Taxation. Discussion Papers SFB International Tax Coordination, 33. SFB International Tax Coordination, WU Vienna University of Economics and Business, Vienna.

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Abstract

In intra-group finance hybrid instruments allow for tailor-made form of finance. Hence hybrid finance is often used for international tax planning in multinational groups. Due to a lack of international tax harmonization or tax coordination qualification conflict can arise. A specific hybrid instrument is classified as debt in one country, and as equity in the other country. This may lead to double taxation. In the reverse case, double non-taxation can arise. Against this legal background one might expect that cross-border hybrid intra-group finance is advantageous in comparison to classical debt finance in case of double-non-taxation while it can be expected to be disadvantageous in the case of double taxation of the yield. Previous studies do not include qualification conflicts. Thus the question arises how qualification conflicts are affecting an intra-group finance decision. We examine effects of such qualification conflicts, resulting from the use of cross-border, intra-group hybrid finance, on the tax-advantageousness as compared to classical debt finance. The analysis is based on a binomial simulation model including economic and legal uncertainty. We show that the results of our analysis under uncertainty vary significantly when compared to the more obvious results under economic and legal certainty. (author´s abstract)

Item Type: Paper
Keywords: hybrid finance / cross-border intra-group finance / qualification conflicts / simulation
Classification Codes: RVK QL 530 ; JEL G32, H21, H25, H26, M41
Divisions: Departments > Finance, Accounting and Statistics > Accounting and Auditing > Betriebswirtschaftliche Steuerlehre
Departments > Volkswirtschaft
Departments > Öffentliches Recht und Steuerrecht > Österr. und Internat. Steuerrecht
Depositing User: Repository Administrator
Date Deposited: 10 Feb 2010 09:10
Last Modified: 13 Jun 2015 07:41
URI: http://epub.wu.ac.at/id/eprint/618

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