Journal of Finance and Accounting

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Analysis and Discussion on the Tax Issues of Perpetual Bonds

Received: 13 April 2019    Accepted:     Published: 23 May 2019
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Abstract

From the perspective of issuers and investors, this paper analyzes the issue of corporate income tax and turnover tax related to perpetual bonds. From the perspective of tax planning, the tax-saving effect of perpetual bonds recognized as liabilities is considerable. However, there are duplicate tax issues for investors' income. In order to eliminate the problem of double taxation, this paper proposes that the investor's perpetual debt income should be treated as tax-free income. From the perspective of turnover tax, investors should pay VAT regardless of whether they can issue special VAT invoices. However, the issue fee and underwriting income of the issuer's interest expenses and financing are not deductible.

DOI 10.11648/j.jfa.20190702.14
Published in Journal of Finance and Accounting (Volume 7, Issue 2, March 2019)
Page(s) 56-59
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Perpetual Bonds, Issuer, Investor, Income Tax, Turnover Tax

References
[1] Wang Yongle. Securities Rating Department of Pengyuan Credit Rating Co., Ltd.
[2] Wu Hui. Discussion on the Problem of Perpetual Debt Attribute of Chinese Enterprises [J]. Finance and Accounting. 2017 (13): 28-30
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[4] Luo Qin. Discussion on the Confirmation of Perpetual Equity Tool [J]. Communication of finance and accounting. 2017 (13): 74-77
[5] Zhang Yingwei, Hu Kun. Research on Accounting Confirmation of Innovative Financial Instruments with Dual Attributes [J]. Public Finance Research. 2015 (7): 88-93
[6] Chen Yao. Case study on the classification of perpetual debt accounting attributes [D]. East China Jiaotong University 2017 master degree thesis.
[7] Shangguan Ming, Zhou Wei, Bai Meng meng. Analysis of Evergrande Real Estate Financial Report Based on the Perspective of Perpetual Bonds——Taking Evergrande Real Estate 2013 Annual Report as an Example [J]. Finance and Accounting Monthly: 2015 (04): 74-76
[8] Zong Wenjuan, Zhang Quansheng, Liu Di. Research on Financial Effect of Perpetual Debt Financing——Based on Financial Data of Listed Companies [J]. Communication of finance and accounting. 2017 (20): 45-47
[9] Gao Qian. Sustainable debt financing financial effect comparison [D]. Hangzhou University of Electronic Science and Technology 2015 master degree thesis.
[10] Lai Mengchao. Discussion on the treatment of perpetual debt taxation [J]. Communication of finance and accounting. 2018 (22): 73-77
[11] Ren Ming, Zhang Wei. The Impact of Perpetual Debt on Corporate Finance and Taxation [J]. Finance and Accounting. 2016 (22): 46-47
[12] Qiu Qiong et al. Will the use of derivative financial instruments increase corporate financial risk? [J]. Shanghai Finance. 2016 (8): 43-50
[13] Wang Zhiren.Study on financing preference and economic consequences of perpetual debt issuers [D]. Donghua University 2017 Master degree Thesis.
[14] Pei yue. Research on the division of financial liabilities and equity instruments [D]. Dongbei University of Finance and Economics 2016 master degree thesis.
[15] Wang Nan. Research on the Confirmation of Perpetual Debt Accounting in China Based on the Analysis of Financial Liabilities and Equity Tools [D]. Zhejiang Gongshang University. 2017 Master degree Thesis.
Author Information
  • Department of Accounting, Tongji Zhejiang College, Jiaxing, China

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    Hangying Shan. (2019). Analysis and Discussion on the Tax Issues of Perpetual Bonds. Journal of Finance and Accounting, 7(2), 56-59. https://doi.org/10.11648/j.jfa.20190702.14

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    Hangying Shan. Analysis and Discussion on the Tax Issues of Perpetual Bonds. J. Finance Account. 2019, 7(2), 56-59. doi: 10.11648/j.jfa.20190702.14

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    AMA Style

    Hangying Shan. Analysis and Discussion on the Tax Issues of Perpetual Bonds. J Finance Account. 2019;7(2):56-59. doi: 10.11648/j.jfa.20190702.14

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  • @article{10.11648/j.jfa.20190702.14,
      author = {Hangying Shan},
      title = {Analysis and Discussion on the Tax Issues of Perpetual Bonds},
      journal = {Journal of Finance and Accounting},
      volume = {7},
      number = {2},
      pages = {56-59},
      doi = {10.11648/j.jfa.20190702.14},
      url = {https://doi.org/10.11648/j.jfa.20190702.14},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.jfa.20190702.14},
      abstract = {From the perspective of issuers and investors, this paper analyzes the issue of corporate income tax and turnover tax related to perpetual bonds. From the perspective of tax planning, the tax-saving effect of perpetual bonds recognized as liabilities is considerable. However, there are duplicate tax issues for investors' income. In order to eliminate the problem of double taxation, this paper proposes that the investor's perpetual debt income should be treated as tax-free income. From the perspective of turnover tax, investors should pay VAT regardless of whether they can issue special VAT invoices. However, the issue fee and underwriting income of the issuer's interest expenses and financing are not deductible.},
     year = {2019}
    }
    

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    AU  - Hangying Shan
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    N1  - https://doi.org/10.11648/j.jfa.20190702.14
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    JO  - Journal of Finance and Accounting
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    AB  - From the perspective of issuers and investors, this paper analyzes the issue of corporate income tax and turnover tax related to perpetual bonds. From the perspective of tax planning, the tax-saving effect of perpetual bonds recognized as liabilities is considerable. However, there are duplicate tax issues for investors' income. In order to eliminate the problem of double taxation, this paper proposes that the investor's perpetual debt income should be treated as tax-free income. From the perspective of turnover tax, investors should pay VAT regardless of whether they can issue special VAT invoices. However, the issue fee and underwriting income of the issuer's interest expenses and financing are not deductible.
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