Abstract
Abstract : There has been a remarkable increase in the use of Hybrid Financial Instruments in cross-border transactions. This has in turn brought about immense uncertainty as to the tax treatment thereof. Investors and tax authorities are yet to remedy the situation. Internationally there is inconsistency in the tax treatment of Hybrid Financial Instruments. Global clarity and consensus is required to answer the question; what is defined as a Hybrid Financial Instrument? Ideally, the answer should be unanimous and unambiguous in nature. In order to achieve the latter; policies and Double Tax Agreements should be penned such that they eliminate the subjectivity and the unintended consequences resulting in double non-taxation and tax avoidance. The present paper aims to bring to the reader’s attention policy and legislation to address these identified hybrid mismatch arrangements. The researcher examined the South African tax legislation and its subsequent developments to ascertain whether South Africa was in line with certain international practices. The conclusion comprises of findings and recommendations to add to the body of knowledge in relation to the tax considerations of Hybrid Financial Instruments. The discoveries demonstrate the exigency for the persistent quest for a remedy to find conclusive and internationally acknowledged best practice. Universal synchronisation and an endorsement of further research into the identification of mismatches as a principle and not so much on the substance of the instrument itself is recommended.
M.Com. (International Taxation)