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  • Tax implications of Inter-bank Offered Rate reform

    We’re seeking feedback on a discussion paper we’ve released which outlines the common tax consequences of changes made to financial arrangements driven by Inter-bank Offered Rate (IBOR) reform.

    Interest rate benchmarks, including the London Inter-Bank Offered Rate (LIBOR), the Euro Inter-bank Offered Rate, the US Effective Federal Funds Rate, and other IBOR benchmarks are at various stages of reform and transitioning to alternative Risk Free Rates (RFRs).

    Relevantly with respect to LIBOR, the UK Financial Conduct Authority has announced that most LIBOR settings will cease to be quoted from 31 December 2021.

    We understand that transitioning to RFRs will be a complex process for the financial services industry as RFRs are structurally different from IBORs and it’s expected most financial arrangements such as loans, bonds and derivatives that provide for IBOR based payments will need to be modified to accommodate this transition.

    We’re seeking your input on the tax implications arising from IBOR reform (including the cessation of LIBOR) so that we can provide you with relevant advice and guidance to assist you in complying with your tax obligations.

    The most common tax consequences that may arise are illustrated in this discussion paper through a number of non-exhaustive examples. Comments on the discussion paper can be submitted until 10 September 2021.

    See also:

    Last modified: 17 Aug 2021QC 66663