Beskatning af hybrid kernekapital: Set fra udsteders perspektiv

Abstract

anish financial companies are subject to increased regulatory capital requirements, which means they must continually adjust their capital base to match the scale of their operations. In this context, Additional Tier 1 Capital, also referred as AT1, which is a hybrid between equity and debt capital, plays an important role, as it provides the flexibility that financial companies need. AT1 is easier and cheaper to issue than equity capital.
When the regulations regarding AT1 were introduced and incorporated into the Danish Banking Act in 2002, an initiative for a special tax regulation for AT1 was also taken. This is because the capital, with its terms of indefinite maturity, does not meet the tax criteria for debt. The special tax rules were implemented effective from 2004 and were in force until 2019. This meant that investors treated the investment as a regular bond investment and were taxed on the returns as capital income. It also allowed the issuing financial companies to treat their coupon payments as tax-deductible interest expenses.
The special tax rules were repealed effective January 1, 2020, because the European Commission deemed the special rules to be in violation of EU state aid rules. The repeal of these rules has created greater uncertainties for investors and financial companies, as lawmakers chose to shift the taxation to ordinary income rather than the more straightforward solution of transferring the taxation to the Act on Taxation of Capital Gains on Shares.
As a result, Danish companies can now raise equity capital through bond issuances, where the returns are neither interest nor dividends.
This Master's thesis has analyzed the tax implications of the above for financial companies. The current tax legal status has been found to be inappropriate, which is why lawmakers are encouraged to transfer the taxation of AT1 to the Act on Taxation of Capital Gains on Shares.