The Debt-Equity Conundrum
The general report provides a summary and conclusions of the branch reports concerning the cross-border aspects of debt-equity distinction. Branch reporters cover the subject in six sections. The first section provides an introduction to relevant business, financial and legal considerations. In the second section, branch reports describe the key tax considerations in the subject jurisdiction that affect the issuer's decision regarding the type of instrument to issue. The third section describes the principles used to classify instruments as debt or equity in the subject jurisdiction. The fourth section discusses specific provisions that have been adopted by the subject jurisdiction to modify the treatment that results from application of the rules in the third section. The fifth section discusses strategies that may have been developed in the subject jurisdiction, or in cross-border situations, to achieve desired tax effects despite possible constraints described in the preceding sections. The sixth section is devoted to a discussion of any radical or structural proposal to address the difficulties posed by the debt-equity distinction that had been adopted or given serious consideration in the subject jurisdiction.
Cahiers de Droit Fiscal International, vol. 97b
Patricia A. Brown, The Debt-Equity Conundrum (2012).