On April 22, 2025, the FTA published notice 024-DVS-2025 regarding the determination of the maximum permissible conversion discount.
The explanations relate to traditional convertible bonds and traditional convertible loans.
In the previous tax assessment of convertible bonds and convertible loans, the following calculation was used to determine the maximum permissible conversion discount: A statistical average conversion premium of 15% was added to the market value of the participation right (100%), resulting in a conversion price of 115%. A conversion discount was granted on this market value of the participation right.
In future, the published administrative practice of waiving the examination of tax avoidance in the case of a conversion discount of up to 33 1/3% will be retained, but a new calculation will be made: the starting point is the market value of the participation right at the time the convertible bond is paid or the convertible loan is granted (100%). A maximum permissible conversion discount of 33 1/3% is deducted from this, resulting in a permissible conversion price of 66 2/3%.
This adjusted tax practice applies to ruling applications from May 1, 2025.
The communication is available here.
