Tax Treatment of AT1 Capital

The newly introduced article 29a of the Dutch Corporate Income Tax Act 1969 (CITA) deals with the Dutch tax aspects of Additional Tier 1 capital (AT1 capital). The purpose of article 29a CITA is to ensure that payments on AT1 capital are considered tax deductible at the level of the issuing party and that any income derived from AT1 capital will be taxed. The question is whether this classification is correct and whether the classification will hold in cross-border situations. The authors analyse and discuss the Dutch tax classification of AT1 capital issued by banks and insurance companies in the Netherlands.