Until very recently, the German tax characterization (debt or equity) of so-called Additional Tier 1 Capital instruments issued under the new regular capital framework for banking institutions (the so-called Basel III framework) was uncertain. On March 13, the German tax authorities announced that they plan to address this issue in a circular that will confirm the debt treatment. This clarification is in line with the practice in a number of other important tax jurisdictions and has been well received by the German financial institutions.
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