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The taxation of repos: Key tax risks and how to manage them

Author

Listed:
  • Walker, Martin

    (Director of Banking and Finance at the Center for Evidence-Based Management and Head of Product Management for Securities Finance and Collateral Management, Broadridge Financial Solutions, UK)

Abstract

Tax risks arise in connection with repo transactions, specifically the transfer of securities by way of collateral. These tax risks, including withholding tax, capital gains tax and transfer tax, have the potential to exceed commercial profits arising from a repo transaction and so should be fully understood and carefully managed. These tax risks can arise in the jurisdiction where the repo parties are based and in the market where the repo securities are issued, and are exacerbated by the fact that at the heart of every repo transaction is a tax ownership tension, with the result that it is not always clear whether the repo seller or buyer is the tax (or beneficial) owner of the securities posted as collateral and any income arising on those securities during the term of the repo. At the same time, tax authorities are increasingtheir scrutiny of financial market transactions and imposing new taxes on them. This article outlines the key tax risks arising in connection with repo transactions and how to manage them effectively in practice.

Suggested Citation

  • Walker, Martin, 2014. "The taxation of repos: Key tax risks and how to manage them," Journal of Securities Operations & Custody, Henry Stewart Publications, vol. 6(4), pages 325-333, June.
    • Handle: RePEc:aza:jsoc00:y:2014:v:6:i:4:p:325-333
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    More about this item

    Keywords

    repo; collateral; tax; risk; beneficial ownership; withholding tax; FTT;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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