CoCos not tax deductible anymore as from 1 January 2019
Contingent Convertibles (CoCos) are specific bonds that absorb losses when the capital of a bank or insurer declines below a certain level. The coupon on these specific bonds will not be tax deductible anymore as from 1 January 2019.
This was decided by the government on Friday. The abolition of the measure will be included in the 2019 Tax Plan. This will result in about € 150 million in extra revenues. In August a decision will be taken on how the proceeds are used.
The decision is in line with the government policy for a sound financial sector, whereby banks and insurers are stimulated to hold more equity. This is in line with international agreements and recommendations that have been made since the financial crisis in order to make banks more resilient. The deductibility does not align with the pursued government policy anymore.
Moreover, by abolishing the measure the state aid concerns by the European Commission will be met. The European Commission intends to address concerns in all European member states with comparable specific measures.