The Resource Cross-border credit default swaps

Cross-border credit default swaps

Label
Cross-border credit default swaps
Title
Cross-border credit default swaps
Creator
Subject
Language
eng
Summary
Scenario 1: H Co. Protection Buyer is a Host Country financial institution that enters into a credit default swap with F Co. Protection Seller, a Country X investment bank that does not have an office or fixed place of business in H Co. Under the credit default swap, H Co. Protection Buyer agrees to pay F Co. Protection Seller annual premiums equal to the LIBOR interest rate on five-year obligations multiplied by a notional principal amount calculated by reference to the principal amount of an actual loan (the "Reference Instrument"), which may or may not be held by H Co. Protection Buyer. In turn, F Co. Protection Seller agrees that, in the event of an actual default on the payment of principal or interest on the Reference Instrument or certain other events, including the bankruptcy or insolvency of the obligor on the Reference Instrument or its failure to satisfy certain net worth covenants under the Reference Instrument documents (each such occurrence is a "Credit Event"), F Co. Protection Seller agrees to pay H Co. Protection Buyer the diminution in value of the Reference Instrument from the date of issuance to the date of the Credit Event. The credit default swap terminates after the earlier of five years or upon the occurrence of a Credit Event with respect to the Reference Instrument. F Co. Protection Seller is interested in the answers to the following questions: Taking into account the Host Country domestic law characterisation and treatment of credit default swaps and payments thereunder: - Will F Co. Protection Seller's participation in the credit default swap cause it to be subject to Host Country net income taxation by virtue of doing business in Host Country and, if a tax treaty applies, having a Host Country permanent establishment? - If F Co. Protection Seller is subject to Host Country net income taxation with respect to the credit default swap, how will H Co. Protection Buyer's payments to it and its payment to H Co. Protection Buyer be taken into account in calculating its actual or potential Host Country tax liability? - If F Co. Protection Seller is not subject to Host Country net income taxation with respect to the credit default swap, will H Co. Protection Buyer's payments be subject to Host Country withholding, VAT or excise tax? Scenario 2: F Co. Protection Buyer, a Country X financial institution with no office or fixed place of business in Host Country, enters into a credit default swap with H Co. Protection Seller, a Host Country investment bank, with terms similar to those set forth in Scenario 1. F Co. Protection Buyer is interested in answers to the following questions: Taking into account the Host Country domestic law characterisation and treatment of credit default swaps and payments thereunder: - Will F Co. Protection Buyer's participation in the credit default swap cause it to be subject to Host Country net income taxation by virtue of doing business in Host Country and, if a tax treaty applies, having a Host Country permanent establishment? - If F Co. Protection Buyer is subject to Host Country net income taxation with respect to the credit default swap, how will its payments to H Co. Protection Seller and H Co. Protection Seller's payment to it be taken into account in calculating its actual or potential Host Country tax liability? - If F Co. Protection Buyer is not subject to Host Country net income taxation with respect to the credit default swap, will H Co. Protection Seller's payment be subject to Host Country withholding, VAT or excise tax?
Citation source
In: Tax management international forum. - London. - Vol. 30 (2009),
http://library.link/vocab/creatorName
Malherbe, J.
Language note
English
http://library.link/vocab/subjectName
  • cross-border transaction
  • credit derivative
  • swap
Label
Cross-border credit default swaps
Instantiates
Publication
Contents
Belgium p. 4-8; Canada p. 9-13; Denmark p. 14-16; France p. 17-19; Germany p. 20-21; India p. 22-25; Italy p. 26-29; Japan p. 30-31; Netherlands p. 32-35; Spain p. 36-39; Switzerland p. 40-44; United Kingdom p. 45-47; United States p. 48-53
Label
Cross-border credit default swaps
Publication
Contents
Belgium p. 4-8; Canada p. 9-13; Denmark p. 14-16; France p. 17-19; Germany p. 20-21; India p. 22-25; Italy p. 26-29; Japan p. 30-31; Netherlands p. 32-35; Spain p. 36-39; Switzerland p. 40-44; United Kingdom p. 45-47; United States p. 48-53

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