The taxation of company distributions in respect of hybrid instruments in South Africa: Lessons from Australia and Canada
| Autor: | Tredoux, LG, Linde, KE van der |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2022 |
| Předmět: |
Debt bias
Nonshare equity Hybrid equity instrument Non-equity share non-share equity Term preferred share Third-party backed share Collateralised share Taxation of equity investment hybrid debt instrument Taxable preferred share Tax avoidance Hybrid instrument hybrid equity instrument third-party backed share non-equity share nonshare equity term preferred share guaranteed share collateralised share dividend rental agreement taxable preferred share taxation of equity investment taxation of debt instruments debt bias economic double taxation tax avoidance Guaranteed share Taxation of debt instruments Dividend rental agreement Economic double taxation |
| Zdroj: | Potchefstroom Electronic Law Journal/Potchefstroomse Elektroniese Regsblad; Vol. 24 No. 1 (2021) Potchefstroom Electronic Law Journal (PELJ), Volume: 24, Issue: 1, Pages: 1-36, Published: 2021 |
| ISSN: | 1727-3781 |
| Popis: | Tax legislation traditionally distinguishes between returns on investment paid on equity and debt instruments. In the main, returns on debt instruments (interest payments) are deductible for the paying company, while distributions on equity instruments (dividends) are not. This difference in taxation can be exploited using hybrid instruments and often leads to a debt bias in investment patterns. South Africa, Australia and Canada have specific rules designed to prevent the circumvention of tax liability when company distributions are made in respect of hybrid instruments. In principle, Australia and Canada apply a more robust approach to prevent tax avoidance and also tend to include a wider range of transactions, as well as an unlimited time period in their regulation of the taxation of distributions on hybrid instruments. In addition to the anti-avoidance function, a strong incentive is created for taxpayers in Australia and Canada to invest in equity instruments as opposed to debt. This article suggests that South Africa should align certain principles in its specific rules regulating hybrid instruments with those in Australia and Canada to ensure optimal functionality of the South African tax legislation. The strengthening of domestic tax law will protect the South African tax base against base erosion and profit shifting through the use of hybrid instruments. |
| Databáze: | OpenAIRE |
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