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Vol 23 No 3 March/April 2018

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Taxation of Derivatives

ISBN13: 9789041159779
Published: August 2015
Publisher: Kluwer Law International
Country of Publication: The Netherlands
Format: Hardback
Price: £148.00

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The exploding use of derivatives in the last two decades has created a major challenge for tax authorities, who had to develop appropriate derivatives taxation rules that strike a balance between allowing capital markets to function effectively by removing artificial tax barriers and at the same time protecting their countries’ tax base from tax avoidance schemes that utilise these instruments.

Derivatives exist in a vast variety and complexity and new forms or combinations of existing forms appear ad hoc as new risk categories emerge and companies seek to invest in or hedge these risks.

This very thorough book discusses and analyses taxation issues posed by derivatives used in domestic as well as in cross-border transactions. In great detail the author presents approaches that can be adopted by tax legislators to solve these problems, clarifying her solutions with specific reference to components of the two most important domestic tax systems in relation to derivatives in Europe, those of the United Kingdom and Germany.

Examples of derivatives transactions and arbitrage schemes greatly elucidate the nature of derivatives and how they can be effectively taxed. The following aspects of the subject and more are covered:-

  • basic economic concepts in the context of derivatives such as replication, put-call-parity, hedging and leverage;
  • designing a suitable definition of derivatives in domestic tax law;
  • achieving coherence in domestic tax rules by applying a ‘special regime approach’ versus an ‘integrative approach’ and the distinction of income and capital, equity and debt;
  • alignment of accounting standards and taxation rules and the application of fair value accounting for tax purposes;
  • how to tax hedged positions and post-tax hedging schemes;
  • taxation of structured financial products and hybrid instruments with focus on bifurcation and integration approaches and the recent BEPS discussion drafts on hybrid mismatch arrangements;
  • refining the ‘beneficial ownership’ – concept in domestic law and in tax treaties and an analysis of recent case law;
  • withholding taxes in the context of domestic and cross-border dividend tax arbitrage schemes; and
  • tackling derivatives tax arbitrage effectively in anti-avoidance legislation.

By providing an in-depth analysis of corporate taxation issues that arise in domestic as well as in cross-border derivatives transactions, this book is not only timely but of lasting value in the day-to-day work of tax lawyers and tax professionals in companies, banks and funds, and is sure to be of interest to government officials, academics and researchers involved with financial instruments taxation.

Banking and Finance, Taxation
About the Author.
Reference Sources and Effective Date Acknowledgements.
List of Abbreviations.

CHAPTER 1 Introduction.
CHAPTER 2 Basic Economic Concepts of Derivatives.
CHAPTER 3 Problems in the Context of Taxing Derivatives Transactions.
CHAPTER 4 Problem 1: Defining Derivatives for Tax Purposes.
CHAPTER 5 Problem 2: The Special Regime Approach versus the Integrative Approach and the Distinction of Income and Capital, Equity and Debt.
CHAPTER 6 Problem 3: Accounting Standards and Derivatives Taxation.
CHAPTER 7 Problem 4: The Taxation of Derivatives in the Context of Hedging Transactions.
CHAPTER 8 Problem 5: Taxation of Structured Products and Hybrid Instruments.
CHAPTER 9 Problem 6: Derivatives in a Cross-Border Context.
CHAPTER 10 Problem 7: Derivatives Tax Arbitrage Schemes and the Effectiveness of Anti-avoidance Legislation.
CHAPTER 11 Conclusion.

Table of Cases and Decisions.
Table of National Legislation.
Table of Statutory Instruments, Legislative Material and Other Official Documents.
Table of Double Taxation Conventions, OECD and UN Model Conventions and Other OECD Materials.
Table of Financial Accounting Standards and Other Materials.
Table of ISDA Documents.

Series: International Taxation

Customs Valuation and Transfer Pricing 2nd ed ISBN 9789041161345
Published November 2017
Kluwer Law International
The International Tax Law Concept of Dividend 2nd ed ISBN 9789041183941
Published June 2017
Kluwer Law International
Tax Sovereignty in the BEPS Era ISBN 9789041167071
Published June 2017
Kluwer Law International
Taxation and Migration ISBN 9789041161369
Published October 2015
Kluwer Law International
The VAT/GST Treatment of Public Bodies ISBN 9789041146632
Published January 2013
Kluwer Law International
Science, Technology and Taxation ISBN 9789041131256
Published July 2012
Kluwer Law International
Immovable Property under VAT: A Comparative Global Analysis ISBN 9789041131263
Published May 2011
Kluwer Law International
Transfer Pricing and the Arm's Length Principle in International Tax Law ISBN 9789041132703
Published September 2010
Kluwer Law International
Systems of General Sales Taxation: Theory, Policy and Practice ISBN 9789041128324
Published August 2009
Kluwer Law International
Taxpayers Rights: Theory, Origin and Implementation ISBN 9789041126504
Published September 2007
Kluwer Law International
Tax Treaty Law and EC Law ISBN 9789041126290
Published August 2007
Kluwer Law International
Tax Investment Incentives in Foreign Direct Investment ISBN 9789041122285
Published April 2004
Kluwer Law International
Customs Valuation and Transfer Pricing ISBN 9789041198884
Published December 2002
Kluwer Law International
International and Comparative Taxation: Essays in Honour of Klaus Vogel ISBN 9789041198419
Published September 2002
Kluwer Law International