Type comparison for the qualification of dividends of a foreign company

The qualification of foreign companies and the specific form of participation play an important role in tax structuring and tax compliance. While income from debt capital is usually fully taxable, equity income is usually taxed at a preferential rate. With its decision of May 18, 2021, the Federal Fiscal Court clarifies important questions regarding the distinction between equity and debt capital for tax purposes. The decision is of particular importance for the structuring of so-called preference shares and other hybrid financial instruments.