By Asmus Mihm, partner, Allen &
On April 10 2014,
the German Federal Ministry of Finance issued guidance dealing
with the tax treatment of AT1 instruments. The guidance only
applies to certain instruments following model terms &
conditions prepared by the German Banking Association.
Instruments not in line with this model are explicitly not
covered by the guidance.
There are two sets
of model T&Cs. The first covers AT1 instruments with a
write-down feature at trigger. Those may be written up again
once the issuer has recovered. The second set is for AT1
instruments that convert into equity when the trigger is
ministry’s guidance addresses a couple of major
issues, including the treatment of AT1 instruments in terms of
withholding tax and interest deductibility, and taxation in the
case of a trigger event.
One important point not clarified by the guidance paper,
though, arises indirectly from...