Grandfathered Bond

A A A

DEFINITION

A classification for bonds in the European Union that excludes the payments made on these bonds from retention taxes. For a bond to fall into this classification it has to have been issued before March 1, 2001, or had its prospectus certified before this date, and has not had any re-issues at any point after February 28, 2002.

INVESTOPEDIA EXPLAINS

The retention tax, which became effective on July 1, 2005 when the European Union Savings Tax Directive was implemented, is a withholding tax on interest payments. The retention tax starts out at 15%, but will be raised to 20% on July 1, 2008 and 35% on July 1, 2011. This tax simply withholds some of the interest and the ultimate amount taxed on the interest will depend on several factors including the individual's overall income. This tax only applies to the residents of an EU member state and does not affect the interest payments made to non-EU residents. It also covers savings accounts, fiduciary deposits and investment funds.


RELATED TERMS
  1. Income

    Money that an individual or business receives in exchange for providing a good ...
  2. Interest

    1. The charge for the privilege of borrowing money, typically expressed as an ...
  3. Bond

    A debt investment in which an investor loans money to an entity (corporate or ...
  4. Savings Account

    A deposit account held at a bank or other financial institution that provides ...
  5. Private Investment Fund

    A type of financial investment company which meets either of these criteria:a) ...
  6. Short-Term Investment Fund - STIF

    A type of fund that invests in short-term investments of high quality and low ...
  7. European Union - EU

    A group of European countries that participates in the world economy as one ...
  8. Eurasian Economic Union (EEU)

    An economic union created in 2014 by a treaty signed by Russia, Kazakhstan and ...
  9. Average Cost Basis Method

    A system of calculating the cost basis on mutual fund positions held in a taxable ...
  10. Indentured Servitude

    The condition of European immigrants to the American colonies who worked for ...
Related Articles
  1. Capital Gains Tax 101
    Taxes

    Capital Gains Tax 101

  2. How International Tax Rates Impact Your ...
    Forex Education

    How International Tax Rates Impact Your ...

  3. Changes In Tax Legislation And Regulation
    Taxes

    Changes In Tax Legislation And Regulation

  4. Filling Out The W-9 Form
    Taxes

    Filling Out The W-9 Form

  5. The Purpose Of The W-9 Form
    Taxes

    The Purpose Of The W-9 Form

  6. The Purpose Of 1099 Forms
    Taxes

    The Purpose Of 1099 Forms

  7. Filling Out 1099 Forms
    Taxes

    Filling Out 1099 Forms

  8. What is IRS Form W-2 used for?
    Taxes

    What is IRS Form W-2 used for?

  9. The Purpose Of The IRS W-4 Form
    Taxes

    The Purpose Of The IRS W-4 Form

  10. Filling Out Your W-4 Form
    Taxes

    Filling Out Your W-4 Form

comments powered by Disqus
Hot Definitions
  1. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  2. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  3. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  4. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  5. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  6. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
Trading Center