Pepsi, IBM Sell Bonds Through Singapore to Reap Tax Benefit
- Debt sales allow companies to deduct interest expense twice
- Deals can lower borrowing costs, if authorities allow them
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.
Photographer: Lionel Ng/BloombergThis article is for subscribers only.
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.