A potential tax benefit is spurring US companies including PepsiCo Inc. and International Business Machines Corp. to sell bonds through their Singapore subsidiaries, fueling a record surge of sales from borrowers in the city state.
The tactic can allow companies to deduct interest expense from their taxable income in both the US and Singapore. That double deduction means that effective borrowing costs — after taxes — can be materially lower than they would be with a bond issued in the US.
The mechanics of qualifying for the benefit are complicated and a rule that emerged from the Organisation for Economic Cooperation and Development in December may wind up stopping firms from using the technique. But companies may be able to take advantage of it for at least the next three years.
As companies sell bonds, they are pushing debt sales volume from Singapore ever higher. Last year, corporates sold $51.5 billion of notes from the city state, more than double the previous year and an all-time record. That mainly came from Pfizer Inc.’s sale of $31 billion of bonds, one of the biggest corporate bond offerings on record, in May 2023 through a Singapore unit to help finance an acquisition.
The sales have continued this year: PepsiCo Singapore Financing sold $1.75 billion of bonds earlier this month, and IBM International Capital sold $5.5 billion of securities in late January.
A spokesperson for IBM declined to comment. PepsiCo and Pfizer did not respond to requests for comment.
New global tax rates are taking shape through the OECD to ensure minimum tax corporate rates are levied globally. Singapore domestic tax law allows a company, including a local subsidiary of a foreign corporation, to deduct interest payments on debt from their taxable income in the nation state. At the same time, the US tax code might allow companies to deduct a foreign branch’s interest expense from its US taxable income.
Copyright Bloomberg News
Goldman Sachs retirement survey finds 83% want guaranteed income, while the annuities providing that income increasingly hold private credit.
The AI meeting assistant's Advisor Intelligence plugin turns client conversation data into annual reviews, tax scans and attrition alerts.
Chuck Roberts and Stifel have been facing scrutiny due to sales of structured products and structured notes.
Among other updates, the proposals would let advisors to regulated funds earn performance fees and allow interval funds to offer monthly repurchases.
What will financial advice look like 20 years from now? Evan Vladem explores how AI may transform wealth management while reinforcing the enduring value of human guidance, trust, and empathy.
As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains