Securitisation and derivatives markets (2024)

Monday 8 April 2024

Report on a session at the 13th annual IBA Finance & Capital Markets Tax Conference in London, Monday 15 January 2024

Session Chair

Rebeca Rodríguez Martínez, Cuatrecasas, Madrid


Adam Blakemore, Cadwalader, Wickersham & Taft, London

Olivier Dauchez, Gide Loyrette Nouel, Paris

Mark H Leeds, Mayer Brown, New York

Michael Nordin, Schellenberg Wittmer, Zürich  

Karin Spindler-Simader, Wolf Theiss, Vienna


Daniel Kropf, Schindler Attorneys, Vienna 


The panel examined the latest trends on securitisation transactions from a tax perspective in various jurisdictions. The presentation focused on new case law on securitisation funds, US rules for withholding on structured notes, the European Union’s Faster and Safer Relief of Excess Withholding Taxes (FASTER) proposal, derivative taxation in the UK and, finally, beneficial ownership and the payment of dividends and interest in various European countries.

Panel discussion

Rebeca Rodríguez Martínez started the discussion by introducing the speakers and providing important details on new case law concerning the value-added tax (VAT) status of securitisation funds in Spain.

Traditionally, the Spanish tax administration considered that securitisation funds were entrepreneurs for VAT purposes, subject to the formal and material obligations derived from this VAT status. In 2021, however, the Central Economic Administrative Court changed the criteria regarding pension funds and collective investment funds. The Spanish tax authorities (General Directorate of Taxes, ‘GDT’) used the criteria mentioned by the Court and issued new tax rulings regarding private equity funds and securitisation funds. The GDT considers that securitisation funds have the purpose of providing, directly or indirectly, financing to companies, but without assuming the risk linked to the business activity. Nevertheless, the wording of the rulings leaves room to argue that such funds perform a business activity (by granting loans on a permanent basis).

In 2012, a general interest limitation rule (based on EU Directive 2016/1164) was included in the Spanish corporate income tax legislation and, in 2014, Law 27/2014 on corporate income tax excluded its application to securitisation funds (with the same treatment applicable to insurance and credit entities). Last year, however, this exception was eliminated by Law 13/2023.

Adam Blakemore Cadwalader continued with an introduction to the securitisation regime and recent developments (including related to Pillar 2 and beneficial ownership) in the United Kingdom.

The UK’s regime for securitisation companies has, since 2006, been governed by a set of regulations called the Taxation of Securitisation Companies Regulations or ‘TSCRs’. The legislation is succinct and established a specific taxation regime for companies that are engaged in securitisation activities. The issuer of securitisation notes is taxed on the fee or financing margin that it receives in return for participating in the securitisation and any other amounts that form part of its retained profit.

Companies that fall within the UK securitisation tax regime can only undertake certain prescribed activities. Aside from incidental activities, the securitisation company must be involved in acquiring, holding and managing financial assets as security for the issued notes.

Amendments were made to the TSCRs in 2022, which incorporated some changes to streamline the regime. These included some changes to the test of control for securitisation company purposes, reducing the threshold for the size of capital market investments that qualify for securitisation (from £10m to £5m) and the provision of additional exemptions regarding stamp taxation in the context of securitisation.

Mark Leeds continued by discussing important rules for withholding in regard to structured notes in the United States. The US Tax Code imposes a 30 per cent withholding tax on payments of US-source dividends. Unless a special rule applies, payments on an equity or other derivative (such as an equity swap) are generally not subject to withholding. Swap payments are otherwise sourced according to the residence of the payee.

The Internal Revenue Service (IRS) has proposed, with respect to structured products, the so-called delta concept, which provides a useful ratio for the correlation between the underlying range of equity and the structured product. The delta is generally the ratio of the change in the fair market value of the contract according to a small change in the fair market value of the underlying equity. US tax regulations provide that the withholding tax generally applies to long US equity-linked derivative positions that have a ‘delta’ of 0.8 or greater. For contracts entered into before January 2025, the delta threshold is one.

Karin Spindler-Simader then provided an overview of the new EU FASTER proposal (the proposal for a Council Directive on Faster and Safer Relief of Excess Withholding Taxes) that was issued in 2023, with a proposed application from 2027.

The new regime aims: (1) to create more efficient and harmonised procedures concerning cross-border cases of relief from withholding taxes; and (2) to prevent tax fraud and abuse. The new rules would apply to income from holding publicly traded securities (dividends on equities and interest on bonds).

The scope of the proposed directive covers: (1) the mandatory register and standardised reporting obligations of large financial intermediaries; and (2) harmonised tax relief procedures and a digital EU tax residence certificate for taxpayers (investors).

The key features and procedures set out in the proposal can be summarised under the following four ‘Rs’:

  1. residence certificate: a digital EU tax residence certificate to be issued within one day via an online portal and which should be valid for at least one year;
  1. register: for certified financial intermediaries (large institutions and withholding tax agents, whereas non-EU and smaller EU financial intermediaries may register on a voluntary basis);
  1. report: by certified financial intermediaries regarding the payment of dividends or interest to the relevant tax administration in the registered state (and any withholding tax agent if relief at source is possible); and
  1. relief: certified financial intermediaries may care for relief if mandated by the investor and if due diligence has been conducted (residence certificate, tax rate, beneficial ownership confirmation), with two main options, namely relief at source or a quick refund system within 50 days.

Olivier Dauchez spoke about the latest developments regarding beneficial ownership and derivatives in France.

In general, there is no withholding tax on interest in France. In line with the landmark Danish cases, the French tax authorities discovered that they no longer need to characterise an abuse of law and have started to use beneficial ownership to deny the application of the EU Parent–Subsidiary Directive (Directive 2011/96) and to deny the application of treaty benefits.

In a triangular situation, where a French source payment is made to a primary recipient acting (in substance) as an agent or conduit for another party who qualifies as the beneficial owner of the payment, the provisions of the double tax treaty between France and the country where the beneficial owner is a resident may apply, despite the interposition of the agent or conduit. This piece of case law can be used as a fallback defence in case of reassessment.

In addition, in February 2023, the French tax authorities published a modified revenue ruling indicating that withholding tax applies if the dividends are beneficially owned by a non-resident.

Finally, Michael Nordin talked about similar discussions regarding beneficial ownership and Swiss withholding tax in cross-border cases.  

In general, interest payments on federal bonds are subject to Swiss withholding tax and a withholding tax refund to a non-resident is only possible based on a double taxation treaty.

Interest from a Swiss source to a beneficial owner resident in another state may only be taxed in the other state. Switzerland may levy withholding tax at source, but must refund this withholding tax upon request (no relief at source). However, recent decisions by the Swiss Federal Administrative Court on forwarding obligations and beneficial ownership have led to increased legal uncertainty: for beneficial ownership, the risk assumption should be an indication, but with (1) the interest rate risk eliminated through cross-currency swaps; (2) the currency and exchange rate risk fully hedged; and (3) the default risk for gilt-edged federal bonds non-existent, there seems to be no (significant) bond-specific risks left.