Singapore And Hybrid Instruments In The Post BEPS Era

For decades, hybrid instruments such as preferred stock, convertible bonds or perpetual securities have troubled tax authorities around the world. Exhibiting the characteristics of both debt and equity, they are commonly used as part of international tax planning strategies adopted by multinational enterprises in order to exploit differences in tax treatment of each instrument under the respective domestic laws of two or more jurisdictions. Specifically, the nature of the hybrid instrument may result in mismatched classifications by tax authorities at domestic law levels, thereby causing deductions to be allowed in one jurisdiction while leaving income in the other jurisdiction and, in some instances, double non-taxation, including long-term tax deferrals, may even result.