SECURITY TOKEN OFFERINGS: EQUITY OR DEBT?
HOW FINANCIAL STATEMENTS ARE AFFECTED

A. INTRODUCTION

B. CLASSIFICATION OF SECURITY TOKENS (STO) AS FINANCIAL INSTRUMENTS

C. CLASSIFICATION OF SECURITY TOKENS — DEBT OR EQUITY INSTRUMENTS?

a. Characteristics of Equity Instruments

b. Characteristics of Debt Instruments

Illustration 1 — Asset backed security token offering

Classification

Illustration 2 — Equity security token offering

Classification

Conclusion

D. ACCOUNTING TREATMENT OF SECURITY TOKENS

a. Issuance of Security Tokens

b. Return of profits to the Investors

c. Final redemption of Security Tokens

E. TAX AND VAT IMPLICATIONS ON THE INITIAL ISSUANCE OF SECURITY TOKENS IN CYPRUS

a. Corporation Tax implications

b. VAT implications

F. DISCUSSION

Mr. Kinanis is a practicing Lawyer in Cyprus with 35 years experience in the Law profession. Author of various articles on Legal and Tax matters.