Norway: Swedish convertible bonds classified as derivative covered by exemption method (Tax Appeals Board decision)
Tax Appeal Board ruled that the bonds were entitled to tax-free treatment under the exemption method of Tax Act 2-38.
The Tax Appeals Board on June 12, 2024, held (SKNS1-2024-58) that Swedish convertible bonds were classified as a derivative covered by the exemption method.
Summary
The taxpayer, a Norwegian company, invested in convertible bonds issued by a Swedish company. The bonds did not provide for stated interest, there was no repayment obligation, the value of the bonds was linked to shares in the Swedish company, and only the issuer could choose conversion to shares or cash settlement. The taxpayer disposed of the bonds, realizing a profit, and treated the gain as tax-free income under the exemption method.
The Tax Appeal Board agreed with the taxpayer’s argument that the bonds were most similar to a derivative with a share as the underlying object and were thus entitled to tax-free treatment under the exemption method of Tax Act 2-38.
Read an October 2024 report (Norwegian) prepared by the KPMG member firm in Norway