Structuring the acquisition and disposal of distressed debt

This chapter aims to provide an overview of some of the tax issues affecting investments in distressed debt of borrowers resident in the European Union. References are made throughout the chapter to the tax laws of certain EU jurisdictions, although space does not allow for an examination of any one EU jurisdiction's tax laws in detail.

Investments in distressed debt can take valious forms. This chapter, therefore, looks at tax issues arising in the context of some of the more common forms of distressed debt investment.

In section 2 we discuss tax issues arising in relation to investments in distressed loans; while the discussion in section 3 focuses on investments in distressed bonds. In section 4 we explore some of the additional tax considerations relevant to investors investing in a portfolio of non-performing loans. In section 5 we then deal with debt restructuring and the particular tax concerns of investors and borrowers that participate in those restructurings. In section 6 we look at the continuing impact of the Organisation for Economic Cooperation and Development's (OECD) base erosion and profit-shifting (BEPS) project, including some of the BEPS "actions" that may be of particular relevance to investors in distressed debt. Lastly, we examine the changing nature of substance requirements in section 7 in line with trends in EU and international policy aimed at preventing the misuse of shell entities for tax purposes.

See complete chapter at: Investing in Distressed Debt in Europe. The TMA Handbook for Practitioners, Second Edition. Globe Law and Business, 2023.