Tax & Legal

According to a ruling of the Supreme Tax Court published on 10 March 2022, where a financial company acquires a convertible bond with the intention of achieving a short-term proprietary trading profit and sells the shares received as a result of the conversion, this meets the conditions of Section 8b (7) sentence 2 Corporation Tax Act.

Interest received by a US limited liability company from convertible bonds issued by a German debtor is subject to German withholding tax pursuant to Sec. 49 (1) No. 5 letter a Income Tax Act. This also applies if partial debentures were issued for these bonds. With its decision, the Supreme Tax Court put an end to the existing discussions and differing opinions in the professional literature regarding the correlation of two provisions in the Income Tax Act on that subject.