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What is The Elements of hybrid mismatch arrangements?

Different types of hybrid mismatch arrangements are available for the underlying elements:

  1. Hybrid entities: In some countries, the entities are considered as transparent for tax while in other countries it is treated as non-transparent.
  2. Hybrid instruments: Tax instruments which are used in several countries for tax purposes as either equity or debt.
  3. Hybrid transfers: In some countries, it is treated as a collateralized loan and not as part of the tax structure while in other countries it is treated as a transfer of ownership for the assets of a company for tax purposes.
  4. Dual residence entities: Entities holding two residencies in two different countries for tax purposes.

 

Effects of hybrid mismatch arrangements

The hybrid mismatch arrangements aim to achieve one of the below results as given below:

  • Dual deduction schemes: Arrangements in which the deduction is made for the same contractual obligation in income tax in two different countries.
  • Schemes of no deduction or inclusion: Arrangements in a deduction of interest made in one country in order to avoid any kind of deduction income tax occurrence of any other country.
  • An international tax credit from generation: Certain arrangements that aid to generate international tax credits that are availed – without the actual eligibility or the same level of international income.

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