The COVID-19 pandemic and measures taken by national governments to
restrict its spread have given rise to a whole host of issues. Although tax may not be at the forefront of the minds of creditors and debtors, the pandemic and national measures have thrown up a number of tax considerations.
Although immediate liquidity and cash management are currently at the forefront of minds, creditors and debtors are also being required to assess their debt positions and consider whether any debt needs to be restructured, which can be done in various ways.
It is important that the tax impact of debt restructurings is not overlooked both by creditors and debtors otherwise there could be adverse tax implications, including tax leakage, the loss of tax assets or ‘secondary tax liabilities’.
This article was originally published in Corporate Rescue & Insolvency Magazine, June 2020