Sources inform ''Globes'' that the Israel Tax Authority is considering whether to levy taxes on companies that buy back their bonds. The practice of buying back bonds has become widespread among companies that held large offerings during the market boom, but are now struggling to meet payments on them.
A bond buyback results in a difference between the issue price and the purchase price, which is much lower as a result of the market slump. The question arises whether this difference should be taxed, since companies can recognize it as income or a capital gain.
Adv. Tal Atsmon, partner at the Goldfarb, Levy, Eran, Meiri & Co. law firm, and head of its tax department, said that the tax issues relating to bond buybacks are very murky, and a clear decision was desirable. He added that buybacks created a significant financial advantage, and signaled to investors that the firm is sound, has financial wherewithal, and is confident in its future.
Published by Globes [online], Israel business news - www.globes-online.com - on December 31, 2008
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