AM Tax Conferencewebserver.pwc.lu/StaticContent/ClientsSurveyDOC/AM_Tax... · 2013-10-11 · • PwC has conducted an industry survey of 30 global asset managers on the key aspects

AM Tax Conference

10 July 2013

www.pwc.lu

PwC

Agenda

Operational Taxes

FATCA / Savings Directive

Capital gains and withholding taxes

Update on German Tax Reporting

Financial Transaction Tax

Focus on the Asset Manager

Conclusion and outlook – What is coming next?

Slide 2

July 2013 AM Tax Conference

PwC

Operational Taxes

The asset manager’s new normal: Responding to tax risks and transparency

Slide 3


PwC

Operating in the “New Normal”

Social • Customer Behaviors

Social Networking

Customer Expectations

Risk Awareness

Financial Sophistication

• Talent Drain

• Stakeholder Trust

• Corporate Social Responsibility

Technology • Information & Analytics

• Devices & Accessibility

• Software & Applications

• Stakeholder Expectations

• More with less

Economic • Urbanization

• New Growth Opportunities

• Taxes/Fiscal Pressure

• Inflation/Deflation

• Risk Sharing & Transfer

• Social Security & Benefits

• Currency instability

• Sovereign risk

• Balance of Power

Environmental

• Climate Change

• Sustainability

• Corporate Responsibility

Political • Regulatory Reform

• Geo-political Risk

• Rise of State-Directed Capitalism

• Terrorism

• Islamic Finance

Slide 4


PwC

The impact on the fund model

Reporting to tax authorities on investors e.g. FATCA, UK & German tax reporting

Reporting to investors e.g. UK and German tax reporting

Fund residence Fund tax compliance Fund

New domestic and EU wide financial transaction tax

Scrutiny of eligibility for treaty rates by non-EU countries e.g. Korea

Increasing applicability of capital gains taxes

EU withholding tax

Investments

Slide 5


PwC

Prioritising product tax risk … Why now?

Risks Slide 6


PwC

Our view of operational taxes

Fund

Investments

Investment Manager Exemption monitoring

Permanent Establishment risk management

Fund tax compliance

Monitoring fund residence

Compliance with special funds regime

Fund indirect taxes

Withholding tax management

Transactional taxes

Non-resident capital gains taxes

EU Savings Directive

FATCA

Investor tax reporting

Slide 7


PwC

Background to the PwC operational taxes survey

• Since the 2008 financial crisis there has been influx of new tax and regulatory legislation that is changing the operating models of asset managers and increasing the complexity of doing business.

• We have been working with the industry to determine how asset managers are dealing with the operational tax consequences of these changes.

• PwC has conducted an industry survey of 30 global asset managers on the key aspects of operational taxes management in order to understand the current environment.

• Our aim is to feed back our findings from the survey to help you develop more effective management of operational taxes.

Slide 8


PwC

The industry view of operational taxes

Fund

Investments

0%

20%

40%

60%

80%

100%

Compliance with special funds

regime

Monitoring fund residence

Investment Manager Exemption

monitoring

Permanent establishment risk

management

Fund tax compliance

0%

20%

40%

60%

80%

100%

Investor tax reporting EU Savings Directive FATCA

0%

20%

40%

60%

80%

100%

Withholding tax management

Transactional taxes Non-resident capital gains tax

Fund indirect taxes

Percentage of respondents that consider this to be an operational tax

Slide 9


PwC

Exercising oversight over operational taxes

External audit compliance visits

Technology based solution(s)

Internal audit compliance visits

Self certification / management declaration from the business units

None of the above

0% 10% 20% 30% 40% 50%

Percentage of respondents that selected response

Respondents were asked to tick all options that applied

Slide 10


PwC

• Respondents ranked rapidly changing tax environments as the most prominent challenge expected to affect how their organisations manage operational taxes. Given the rate of change witnessed over the past five years since the financial crisis, this is entirely understandable.

• In PwC’s recent 16th Annual CEO survey the top business threat cited by asset management CEOs was ‘increasing tax burden’. This correlates with our survey results.

• ‘Reliance on third party providers’ ranked highly. This is not expected given all rely to a greater or lesser extent

• In our experiences service levels vary, and there is an inherent need to actively manage that relationship to get a quality service and management information.

Challenges affecting operational taxes management

Response popularity

0% 10% 20% 30% 40% 50% 60% 70% 80%

Requirement for greater transparancy

Growing regulatory scrutiny

Lack of awareness of sales force on the impact of operational taxes

Increasing demands from institutional investors

Technical skills/ knowledge

Increasingly complex business models

Resource constraints

Lack of awareness of portfolio managers / traders of the …

Reliance on third party providers

Rapidly changing tax environments


Slide 11


PwC

What operational tax resources do asset managers have?

In-house team with at

least one person

dedicated to operational

taxes

30%

In-house team with no

dedicated resources -

shared responsibility

for operational

taxes

30%

No in-house operational tax resource

23%

Single in-house

specialist covering all

areas

17%

Slide 12


PwC

Sources for keeping up to date with developments on operational tax changes

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Subscriptions to databases

Other service provider

Custodians

Professional services firms


Percentage of respondents that selected response

Slide 13


PwC

….how are you managing your operational tax risks?

Poor Fit for

purpose Needs

improvement

Leading class

Strong

Issue management

and resolution

Education and advisory

Design and specification

Proactive oversight

Te

ch

nic

al

co

mp

ete

nc

y

Ris

k M

an

ag

em

en

t

The majority

Key capabilities

The minority Desired state

Slide 14


PwC

An ever-changing environment…

Increase in WHT rates

FTT; Increase in WHT rates; Stamp duty

New reporting requirement

rules

Offshore fund reform

FATCA

DT agreements

Change to IOF

FTT, Increase in WHT rates

FTT; New WHT/ Capital Gain Tax

rates

FTT; New fund

reporting New Capital

Gain Tax GAAR; Capital

Gain Tax

Investment Manager

Regime

Capital Gain Tax

New WHT rules /

practices

Capital Gain Tax

G-Tax reform

FTT; Tax discrimination

Slide 15


Thank you!

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the

information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the

accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers, Société coopérative, its

members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or

refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2013 PricewaterhouseCoopers, Société coopérative. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers, Société coopérative

Luxembourg, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

Oliver Weber Partner– PwC Luxembourg

400, Route d‘Esch L-1014 Luxembourg

Telephone: +352 49 48 48 3175 E-Mail: [email protected]

PwC

FATCA/ Savings Directive

1. U.S. FATCA

2. European FATCA

3. Savings Directive 2.0

Slide 17


PwC

U.S. FATCA

Slide 18


PwC

10 April 2013: Luxembourg will allow automatic exchange of information as from 1st January 2015 based on the EU Directive 2003/48/EC.

14 May 2013: Luxembourg agrees to mandate the European Commission in order to negotiate with Switzerland, Liechtenstein, Andorra, Monaco and San Marin.

21 May 2013: Luxembourg government decides to go for Model I with the USA which means that there will be an exchange of information between Luxembourg authorities and the IRS.

U.S. FATCA Luxembourg’s IGA intentions

Slide 19


PwC

U.S. FATCA The urgent matters for asset managers to consider

Registration Process “Responsible Officer” IGA considerations

Controls Framework

Updating Onboarding procedure/documents

Slide 20


PwC

European FATCA

Slide 21


PwC

“European FATCA” Automatic exchange of information (“AEOI”) between EU Member States

What is it?

Proposed Directive to combat tax evasion by expanding the scope of the AEOI between EU Member States on “dividends, capital gains, all other financial income and account balances”

What is the timeframe?

January 2015 related to the taxable period from 1 January 2014 (concurrently with FATCA)

Slide 22


PwC


In more detail

• So far, 25 EU countries share information with each other under the EU Savings Directive

• For tax years as from 1 January 2014, AEOI on certain other items (Directive on administrative cooperation in the field of taxation, 2011/16/EU)

• On 9 April 2013, France, Germany, Italy, Spain and the UK announced plans to extend the scope of the AEOI using FATCA as a model; since then, 12 additional countries have announced their intention to join this initiative

• Requiring a mutual exchange of information between all 27 EU Member States

• Information required to be shared under the proposed Directive would be more extensive than that which is required under FATCA

• Decision on these enhancements is expected in the coming months, and no later than the end of this year

Slide 23


PwC


Impact for Asset Managers

• Most likely to the extent that they distribute funds in the EU

• Full impact is still to be determined as it is unclear whether exchange of information will be based only on residence or also on nationality (EUSD vs. FATCA)

Slide 24


PwC

Savings directive 2.0

Slide 25


PwC

“Savings Directive 2.0” Amended EUSD

What is the status?

• 2008 Amending proposal: aims to close loopholes of initial text e.g by expanding to interest received through Non UCITS funds and other intermediary vehicles, life insurance and structured products.

• 2012 Report of EUSD: use of offshore jurisdictions for intermediary entities, out of scope of products with comparable return to debt claims, extension not only of EUSD but also third party/associated territories agreements.

• EUSD and Directive on automatic exchange of information in the field of taxation will co-exist – but HOW?

Slide 26


PwC

Amended Savings Directive - Timeline

Jul y 2005

Jul 2013

EUSD Entry into Force

Revised EUSD

First amending proposal

Nov 2008

May 2013

Commission proposes EOI within EU and amendment of

EUSD

Jun 2013

March 2012

Dec 2014

Entry into Force EUSD?

Today

Report to Council

(Second Review)

Ecofin gives mandate to

Commission to propose

amendment of EUSD

Entry into Force EOI?

Jan 15

Slide 27


Thank you!








Begga Sigurdardottir Partner– PwC Luxembourg



Kerstin Thinnes Partner– PwC Luxembourg



PwC

Capital gains and withholding tax

1. Emerging challenges for Investment Funds

2. News on “Fokus Bank” reclaims

Slide 29


PwC

Emerging challenges

Slide 30


PwC

Emerging challenges - Setting the scene Some situations that may generate unpredicted tax risks for investment funds

• Increase of tax regulations;

• Governments seeking additional revenues;

• Competition from other countries offering new opportunities;

• International pressure for more tax transparency.

• Uncovered tax exposure;

• The beneficial ownership of the fund may be challenged;

• A permanent establishment may be inferred in the source country;

• Transfer pricing policy may be scrutinized;

• Use of treaty based structures may be challenged due to the lack of substance.

• Failure to adequately identify and manage tax risk can result in additional tax costs, harm the reputation and put strains on investor relations;

• Do not rely on the service providers to be aware of and manage all potential tax risks;

• Ensure that internal control is accurate, adequate and current.

CONTEXT POTENTIAL RISK BE AWARE

Slide 31


PwC

The importance of managing residency, PE and substance risks

• Risk that an entity considered tax resident or having a permanent establishment outside of its jurisdiction of incorporation

• Important aspects that fund promoters need to carefully manage:

Board meetings attendance

Use of sub-advisors and investment managers

• Consequences are severe – fall within the tax net of another jurisdiction and denial of treaty benefits

• Many investment funds now employ treaty-based structures.

• The use of special purpose vehicles to obtain treaty protection is coming under ever increasing scrutiny by tax authorities, notably Germany and the UK.

• If there is ‘insufficient’ substance an investee jurisdiction taxing authority could deny treaty benefits and impose source country tax on capital gains, dividends and/or interest

Slide 32


PwC

Withholding tax and capital gain tax risks

Withholding tax and capital gain

tax risks

Registration risks: Often registration is needed as qualified investor, otherwise the full rate of WHT/CGT is applicable (Brazil,

Taiwan, South Korea,...)

Compliance risks: Often quarterly or yearly filing of returns is necessary

(India, Spain,...)

Local representative risks: Often there is a requirement to have a local

agent to appointed (Australia, India, Colombia, Romania...)

Business income risks: Capital gains could be considered as

business revenue and taxable as such (Singapore, Australia, New

Zealand,...)

Beneficial ownership risks: The use of intermediary entities to obtain treaty benefits is targeted more and more (South Korea, Australia,

Indonesia,...)

Slide 33


PwC

Increased attention of tax authorities

• USA: The IRS ramped up efforts to become smarter, more efficient, and more aggressive at recognizing instances of noncompliance under IRC sections 1441, 1442, and 1443 (WHT on outbound).

• Korea: Lone Star case: Obtaining treaty benefits (capital gains) by use of Belgian intermediary.

• Australia: Capital gains obtained by PE fund considered as business revenue taxable in Australia, Lamesa case: focus on beneficial ownership.

Withholding tax and capital gain tax risks

Slide 34


PwC

Withholding tax and capital gain tax risks Questions to ask

Withholding tax

Do you have an arrangement with your custodian to automatically apply relief

at source whenever possible?

Have you discussed with your custodian if it offers any other

opportunities for you to recover some of the withholding taxes paid on

your investment income?

If tax has been paid in breach of EU law and you cannot benefit from a 0% DTT rate, have you considered filing for a reclaim to recover the tax paid?

Have you discussed with your custodian if it can help you recover the

taxes paid in breach of EU law?

If it cannot, we would be pleased to assist you.

Capital gain tax

Have you identify the countries where your funds may have a

potential risk and exposure to capital gain tax?

If appropriate, have you filed the required tax returns or appointed

a tax agent?

Have you booked a provision for realized (and unrealized) gains in countries where capital gains tax

is not automatically deducted from the sales proceeds?

If tax has been deducted, have you considered whether you have opportunities to recover some of

the tax paid?

Slide 35


PwC

News on “Fokus Bank” reclaims

Slide 36


PwC

Discrimination according to EU Law

Resident Fund

Distributing Company

Dividend 100 No WHT

Non-Resident Fund

*For non EU Fund, more opportune to consider DTT countries

Example: Dividend 100 – treaty rate of 15% = Net received 85

The taxation of the non-resident fund in this case is not in accordance with EU Law if this fund cannot credit or utilise a foreign tax credit in its home country.

Investment funds, like Luxembourg SICAVs and FCPs, may be entitled to a full reclaim of dividend withholding taxes following decisions by the European Free Trade Association (EFTA) Court (Fokus Bank ASA, E-1/04) and the European Court of Justice (ECJ) (Aberdeen, C-303/07; Santander and others, C-338/11 to C-347/11) where it was held that the withholding tax suffered by non-resident investors was not in accordance with: • the free movement of capital guaranteed by EU law (Article 63 TFEU); nor • the freedom of establishment (Article 49 TFEU).

because national/domestic funds do not suffer WHT in a comparable situation.

*

Slide 37


PwC

• The Dutch Tax Authorities are currently performing a detailed comparability study to see whether non-resident investment funds are comparable to Dutch funds.

• A number of court cases are pending before Dutch courts on this specific issue.

News update in a nutshell

CHALLENGES

• France has started refunding foreign UCITS SICAVs, including Luxembourg ones. • The 30% withholding tax applied on dividends paid to non-resident investment funds that are

comparable to French OPCVM (CIV) has been replaced with a new tax of 3% for all investors. The French custodians are waiting for guidelines before accepting to apply the exemption at source.

France

Netherlands

Belgium

• The Belgian tax authorities have issued a Practice Note on the “Fokus Bank” claims stating that these claims will be treated with priority. Some limitations apply.

• The Court of Appeal issued positive decisions for Luxembourg SICAVs. The Supreme Court refused to grant leave to appeal to the Swedish Tax Agency.

• For the FCPs, the Swedish Tax Agency is now arguing that the unit holders (and not the funds) are the beneficial owners. To be seen whether the Supreme Court will grant leave to appeal to the Tax Agency.

Sweden

• According to a ruling issued by the Finnish Central Tax Board, the key characteristics of a Luxembourg UCITS-FCP receiving dividends from Finnish publicly listed companies are comparable to the key characteristics of a Finnish investment fund. Based on that ruling which has now gained legal force, these dividends are not subject to Finnish withholding tax.

Finland

• The legislative changes on 1 March 2013 dealing with taxation of portfolio dividends do not have a direct impact on Fokus Bank claims for investment funds as the discrimination of these has still not been abolished.

• The issue of which Tax Office is competent for Fokus Bank claims is still not resolved. Germany

Slide 38


Thank you!








Sidonie Braud Director – PwC Luxembourg



PwC

Update on Tax Reporting

1. German Tax Reporting

2. UK Tax Reporting

3. Danish Tax Reporting

Slide 40


PwC

German Tax Reporting

Slide 41


PwC

Taxation of dividends ECJ verdict dated 20 October 2011 (284/09)

Foreign corporate entity

German corporate entity

< 10%

• WHT on dividend payments to EU/EEA resident corporate entities holding a participation of <10% of the distributing entity infringement of the freedom of movement of capital

• Decision of the German Upper House of Parliament dated 1 March 2013 regarding share holding of <10%

Dividends become fully taxable at the level of German and foreign shareholder

Capital gains continue to be tax exempt

Dividend minus 25% WHT and solidarity surcharge

Slide 42


http://upload.wikimedia.org/wikipedia/commons/b/ba/Flag_of_Germany.svg

PwC

Taxation of dividends Impact on investment funds

Public Mutual Fund

Tax exemption for corporate

investors does not apply any

longer

Specialized Investment

Fund

Tax exemption requires indirect

qualifying participation

Corporate-like Investment Company



Partnership-like Investment Company



Tax exemption requires indirect qualifying participation

Impacts on daily figures ? WM Daten reporting ? Article 5 Publication? Losses carried forward?

Slide 43


PwC

AIFMD Fund or

not fund?

Indirect expense allocation

Substance distribution

Slide 44


PwC

Qualification as a fund Impact of AIFMD implementation

• Legislation reforming the German Investment Tax Act (“InvTA”) in view of the implementation of the Alternative Investment Fund Managers Directive

• Definition of an investment fund according to the InvTA Eligible assets + new criteria such as right to redeem, passive asset administration, ownership percentage, leverage, etc.

The investment strategy has to be disclosed in the terms and conditions or the articles of association of the AIF

• Entry into force of the new legislation as per 22 July 2013

The time frame allowing an implementation of the new legislation at the

level of fund managers and administrators will be very limited.

Slide 45


PwC

Qualification as a fund When does a non-UCITS fund fall into the scope of the InvTA?

UCITS Fund?

Corporation-like Investment Company

InvTA is not applicable. Taxation under general tax rules

=> Asset type needs to be analyzed in more detail: e.g. corporate, partnership, certificate, bond.

Partnership-like Investment Company

Investment Fund

AIF pursuant to German regulatory requirements

Criteria of Sec. 1 paragraph 1b InvTA cumulatively fulfilled

Transparency reporting

Taxation of distribution, lump sum taxation on accumulated profits

Annual partnership tax reporting

Yes No

Yes*

No

Yes

No

* UCITS have to fulfil the same criteria as AIFs, but according to the current status of the UCITS directive, UCITS should always be in scope

No

Slide 46


PwC

Expense allocation Legislative change following the AIFMD implementation

Now Fiscal year starting after 31

December 2013

Attribution to direct expenses

No change

Attribution to tax exempt Real Estate income

No change

10% non deductible expenses

Change in favour of the investors: Not applicable anymore

Dividend expense ratio

No change

Attribution to ordinary income (“DDI”)

Change in disfavour of the investors: Split of expenses based on the ratio

ordinary income / capital gains

Slide 47


PwC

Expense allocation Performance fees

Tax administration (Bundeszentralamt für Steuern):

• Allocation of performance fee based on the investment strategy

• If investment strategy aims at generating gains from the disposal of securities, performance fees should also be allocated to realized gains and losses

German Ministry of Finance:

• No need to adjust tax relevant data published before 1 July 2013, but publications might still be challenged (tax audit)

ALFI:

• Request submitted end of 2011 for not applying that rule.

• This request has been rejected by the German Ministry of Finance

Slide 48


PwC

New double tax treaty Germany/Luxembourg

Background

• On 23 April 2012, Germany and Luxembourg signed a double tax treaty (“DTT”) in order to replace the original treaty dating back to 1958.

• This new treaty is aligned on the OECD model.

• Luxembourg investment funds having the legal form of a SICAV/SICAF/SICAR are eligible to claim DTT benefits, leading to a WHT of 0% on interest and 15% on dividends.

• For FCP, the tax claim is possible to the extent that the FCP is held by residents of the territory where the fund is set up.

Entry into force

The provisions of the new DTT will apply to income derived on or after 1 January 2014.

Slide 49


PwC

UK Tax Reporting

Slide 50


PwC

Offshore funds regulation amendments What is it about?

1. Distribution

Total amount distributed (for the period) deducted from total TRI (vs. deducted on a per share basis)

2. Equalisation

For funds that do not operate equalisation but make adjustments on the basis of reportable income: TRI per computation period (vs. annual TRI)

3. Full equalisation

Investors can offset the return of capital against their tax bill in the first reporting period (more flexible)

When is it applicable?

• 1 & 2 above, any reporting periods ending after 28th of June

• For 3 above there are different transitional provisions

Slide 51


PwC

Danish Tax Reporting

Slide 52


PwC

New rules as of 1 January 2013 Funds subject to minimum taxation

• “Tax reporting status” is in practice a prerequisite for non-Danish funds to enter the Danish retail marked.

• The tax reporting status is in principle only relevant for Danish individuals (retail market) and primarily for equity based funds (>50% invested in equities).

• As of 1 January 2013 the tax reporting rules were simplified aiming at removing the tax barriers for non-resident funds to enter the Danish retail market but there are still some bumps on the road, e.g. the tax reporting status is not a possibility for investment funds with hedged share classes.

• A non-Danish investment fund is normally regarded as a so called “investment company” unless it has elected to be treated under the rules for “funds subject to minimum taxation” (previously “distributing fund”).

Slide 53


PwC

New rules as of 1 January 2013 Funds subject to minimum taxation

Reporting to the Danish tax authorities

• Notification that the fund has elected status as a fund subject to minimum taxation

• Calculation of the minimum income in accordance with Danish principles

Split between equity income and capital income

Reconciliation to the annual report including specifications and tax adjustments

Distributed amount - if any

Number of fund units included in the calculation of the minimum income

Slide 54


Thank you!








Oliver Schachinger Partner– PwC Luxembourg



Anne-Sophie Etienne Partner– PwC Luxembourg



PwC

Regulatory Reporting Germany

1. There is more then tax reporting...

2. Reporting as a marketing tool

Slide 56


PwC

Regulatory Reporting Reporting cycle, drivers and key aspects

Reporting obligations Institutional investors and investment funds have been hit by a wave of regulatory reporting requirements (e.g. Germany)

VAG Versicherungsaufsichtsgesetz

GroMiKV Groß- und Millionenkreditverordnung

SolvV Solvabilitätsverordnung

...

EU Directive 2006/49/EG

Solvency II directive

Future trends Economic uncertainty and an increasing correlation of risk factors in financial crises lead regulatory entities to modify regulations and become more specific and even stricter in their oversight.

Restrictive reporting obligations in EU countries (e.g. Germany, Austria,...);

European Solvency II Framework will substantially impact the institutional asset management industry.

Facing challenges Regulatory Reporting is on it’s way to become more and more restrictive, complex and comprehensive and turns out to be a real challenge for investment funds.

(Human) Resources;

Language barriers;

Short deadlines;

Increasing number of reporting requests and investor queries;

Constantly changing legal environment over the past 3 years and expected changes in the future;

Market pressure.

Reporting cycle

Supervision Authority

Institutional Investor

Investment Fund

Reporting

Reporting

New Opportunities Publication of regulatory reports is increasingly used for marketing reasons and to attract institutional investors (especially in the ETF market).

Supervision

Reporting requests

Page 57

July 2013

PwC

Regulatory Reporting Overview – Reporting obligations in Germany

Supervision Authority

Institutional Investor

Investment Fund

quarter end quarter end + x

Reporting Reporting

VAG Reporting

Insurance companies holding units of investment funds:

Classification and breakdown of assets as per VAG;

Determination of the ten largest debtors of the fund;

Special fund’s reporting.

Solvency Reporting

Institutions as defined in the SolvV:

Calculation of solvency ratio and breakdown of foreign currency positions;

Issuance of a certification as defined in the SolvV.

GroMiKV Reporting

Credit institutions holding units of investment funds:

Large exposure reporting due to reporting thresholds and limits for the issuance of large loans to single borrower units.

Other...

Regulatory reporting related to investment funds and investments of institutional investors:

Value at Risk reporting;

Cashflow reporting;

etc.

Page 58

July 2013

PwC

VAG Report

GroMiKV Report

SolvV Report

Fonds-Report

Cashflow Report

VaR Backtesting Report

Amundi

Blackrock

BNP

ComStage

DB X-Trackers

ETFlab

ETF Securities

Invesco

Lyxor

RBS

Source Markets

Regulatory Reporting Market analysis – Focus on ETFs

11,5 Credit Suisse

10,1 Zürcher Kantonalbank

7,6 UBS

6,0 Amundi

5,7 ComStage

5,3 Source Markets Source: websites of the different ETF trader

... and what about traditional UCITs funds?

32,2 DB-X Trackers

72,6 iShares

24,2 Others

27,5 Lyxor

Top Ten ETF traders August 2012

Assets under Management (in billion euro)

Source: Blackrock

Snapshot Reg Reporting July 2013

Regulatory reports publicly available of selected ETF traders

Page 59

July 2013

Coffee break

www.pwc.com

PwC

Financial Transaction Tax

1. From practical experience, what have we learned?

2. Latest status of EU legislation

Slide 61


PwC

Financial Transaction Tax From practical experience, what have we learned?

Slide 62


PwC

Financial Transaction Tax What have we learnt from the French FTT

• Failed introduction of the FTT in France

- Average fall of 15% in volume for taxed French stocks

- Arbitrage made by some investors - Underweighting of French stocks in favour of non-taxed European firms in equity portfolios

- Increasing number of derivatives transactions with taxed stocks as underlying assets

FTTs raise only a fraction of what governments have expected in revenue, are costly and difficult to implement and enforce (EFAMA

source)

Slide 63


PwC

Financial Transaction Tax What have we learnt from the French FTT

1st reporting on November 9, 2012 (period August-October 2012)

• Financial establishments correctly comply with obligations/collections

- Reporting obligations on broker securities account holder (custodian) even if not located in France

◦ Both EU and non EU parties filed reports and transmitted payments to Euroclear

◦ Uncertainties remain on identification of the liable party where different brokers are involved

• Uncertainties in relation to the computation of the net buying position,

- FTT possibly levied twice or more (need for regularization)

• Complexity arising on reporting of Exempt transactions (repo) and corporate actions

Slide 64


PwC

Financial Transaction Tax latest status of EU legislation

Slide 65


PwC

Where do we stand?

€

€ €

€

€

€

€

€

€

€

€

€

€

€

€ €+

€+

€+

€+

€+ €+

€ €

French FTT on certain French equities and certain activities in France from 1 August 2012 (ADRs within scope from 1 December 2012)

Spanish FTT – Currently on hold

Portuguese FTT – Currently on hold

Italian FTT on securities from 1 March 2013 and derivatives from 1 September 2013

Ukrainian FTT from 1 January 2013

Hungarian FTT from 1 January 2013

11 countries Opt-ins for the EU FTT via ECP

1 country For an EU FTT via ECP subject to conditions

10 countries Not intent on implementing an EU FTT via ECP

5 countries Potential ‘swing states’ in favour of an EU FTT

€ Euro zone country €+ Euro Plus Pact country

Slide 66


PwC

EU FTT – where do we stand?

Draft Directive

Enhanced Cooperation Procedure

Member State

discussions

Commission responses to

questions

EU Parliament

support

UK legal challenge

Slide 67


PwC

Road to an EU FTT – the next steps

Finalise Directive

EU11 Vote Pass in

Domestic Law

Reporting? Collection?

Understand scope of final

directive

Impact assessment

Comply with EU-11

Domestic Laws

11 monthly country reports?

Collection?

EU Commission and EU-11

Impact on institutions

Slide 68


PwC

Start date?

“If agreement is found before the end of 2013, and... speedy transposition into national law by the participating Member States, this common framework for an FTT could still enter into force towards the middle of 2014.”

EU Commission, 20 June 2013

January 2014?

July 2014?

January 2015?

July 2015?

January 2016?

Slide 69


PwC

Where will it end up?

Will we have an EU FTT under enhanced cooperation?....

Yes? No?

Slide 70


PwC


Implementation...

Phased approach?

Big Bang?

Slide 71


PwC


Both?

Establishment...

Slide 72


PwC


Scope...

Out of scope?

Sovereign Debt?

Repo transactions?

Slide 73


PwC


Exemptions...

Exemptions

Market Makers?

Group Relief?

Slide 74


Thank you!








Virginie Louvel Loréal Partner– Landwell & Associés

Crystal Park 61, rue de Villiers F-92208 Neuilly-sur-Seine Cedex Telephone: +33 1 56 57 4080 E-Mail: [email protected]

Patricia Songnaba Senior Manager– PwC Luxembourg

400, Route d‘Esch L-1014 Luxembourg Telephone: +352 49 48 48 5149 E-Mail: [email protected]

PwC

Focus on the Asset Manager

The fiscal thunderstorm hitting the asset managers - The corporate citizenship

Slide 76


PwC

Pre-Crisis - Enhanced Cooperation

Slide 77


PwC

Tax Authorities Rethink Enhanced Cooperation

Slide 78


PwC

Negative media attention for Google, Amazon and Starbucks doesn’t seem to have affected share price

PAC appearance

Google

Amazon

Starbucks

Slide 79


PwC

PAC appearance

Time

Media stories on tax break in UK

Index o

f wheth

er p

eople

have h

eard

good o

r bad

new

s

But what about brand perception? Mixed reactions in the UK after the tax avoidance story broke

Slide 80


PwC

PwC

Tax law vs. the higher moral imperative

Reputation and good corporate citizen status

Tax risk evolving into business risk

The moral dimension of tax

Voluntary vs. involuntary

The new reality of taxes

How does

this factor into your

decision making process?

Slide 81


PwC

Base erosion and profit shifting

Today’s global intangible business and yesterday’s rules

BEPS effect on advisors, funds and investors

BEPS application to Asset Managers

Unintended consequences of BEPS

Influencing the debate

How does



Slide 82


PwC

Best practices in dealing with external stakeholders, including media

External stakeholders and their influence

Sharing the “message” with leadership

Setting the media tax strategy

Engage or be engaged

How does



Slide 83


PwC

Introduction Areas of focus

for FS

New approaches

How to respond?

Increased Scrutiny for FS

Coordination between fiscalities

Public dimension

Criminal action

Penalties

Strategy

Controls

Communications

Substance

Various technical areas

Organisation AND the owners

Slide 84


Agenda

PwC

Substance

Residence, TP, PE

Why be concerned?

What is substance?

BEPS

What are the areas where

relevant?

Beneficial ownership

Slide 85


PwC

Other areas of focus

Trading strategies

Income shifting

Deferral planning

Foreign Tax Credit management

Repatriation

Cradle to grave approach (the business AND its owners)

Slide 86


PwC

New approaches

Intergovernmental Cooperation

Public dimension

What Tax Authorities are

doing

Why new?

• Economic pressures to raise revenue

• Unprecedented public profile

• Naming and Shaming

• Transparency: Country by Country reporting

• Interest groups

• US Senate Sub Committee, UK Public Accounts Committee

• L e a k s , E n c o u r a g e m e n t o f w h i s t l e b l o w i n g

• Tax on the Boardroom Agenda

• Horizontal monitoring”, enhanced engagement

• More aggression

• Massively increased intergovernmental co-operation [OECD FTA]

• Exchange of Information, JITSIC

• Joint Audits

Slide 87


PwC

Response to changed environment? Best Practices

Preparation should begin before challenge...

Be clear about TAX

STRATEGY

Have CONTROLS in place to deliver

Prepare COMMUNICATIONS

to all stakeholders

Slide 88


PwC

“The Future, it ain’t what it used to be” Preparation is key to avoiding...

Slide 89


Thank you!








Laurent de La Mettrie Partner– PwC Luxembourg



PwC

Conclusion and outlook What’s coming next?

1. MiFID

2. Transfer Pricing for Asset Managers

3. AIFMD

Slide 91


PwC

What is coming next – MiFID II, AIFMD and Co

Fee structures are changing around Europe as a result of ...

• European jurisdictions introducing inducement bans and/or transparency rules: UK, Netherlands, Switzerland.

• MiFID II will also result in increased transparency on fees paid within asset management groups.

• AIFMD is causing asset managers to review and amend their existing operating models resulting in a move of functions cross-border and profits shifting between countries.

Slide 92


PwC

Distribution fee structures are changing….

All this impacts your transfer Pricing!

• Observed lack of clarity for investors

• Inherent conflict of interest potentially widespread (50% of EU banks and investment firms are licensed for portfolio management or investment advice)

• Problem partially recognised by legislature and courts of some member states (e.g. UK, Italy, Netherlands, Switzerland)

Context

• Ban or restrictions on retrocessions to related parties may lead to a change in fee structures of particularly banks offering internal fund products

• New fee arrangements (e.g. 0 fee share classes)

• Increased transparency in the market on distribution fees

Changes

• Change in the profitability of Luxembourg Management Company

• “One company does the work, the other gets the fees” – cross financing of services within the group.

• Increased transparency will also benefit tax authorities and allow them to compare.

Impacts

Slide 93


PwC

Example

Fund

Management company

Fund Admin

Third Party Providers:

Legal / Audit / Marketing materials

Management fee

Fee

Group entity Third-party

Distribution, Investment Management, other?

Admin fees

Custodian bank

Other fees

Head Quarter/

Other

Slide 94


PwC

AIFMD is changing operation set-up of manager and its products

• Transfer and changes to group structure as a result of implementation of AIFMD rules within asset management groups will trigger tax questions like exit taxes, transfer pricing and permanent establishment issues.

• New products are being set-up by Non-EU managers for EU clients.

• Products set-up increasingly driven by transparency trend.

Slide 95


Thank you!








Begga Sigurdardottir Partner– PwC Luxembourg



Documents

AM Tax Conferencewebserver.pwc.lu/StaticContent/ClientsSurveyDOC/AM_Tax... · 2013-10-11 · • PwC has conducted an industry survey of 30 global asset managers on the key aspects