roadshow - deloitte · roadshow. luxembourg l 16 march 2017. 2. agenda 1. germany 2. norway 3. ......
TRANSCRIPT
Pan European Fund Tax Reporting RoadshowLuxembourg l 16 March 2017
2
Agenda
1. Germany
2. Norway
3. UK Brexit
4. France
5. Switzerland
6. Austria
7. Belgium
8. Other countries and Operational taxes
9. Q&A
3
GermanyThe reform of the German Investment Tax Act
4
Agenda
1. Scope of the reformed German Investment Tax Act
2. Taxation of Investment Funds and their German investors
3. Taxation of Special Investment Funds and their German
investors
4. Transitional provisions
5. To-do list
5
Scope of the reformed German Investment Tax Act
6
Scope of the reformed German Investment Tax ActInvestment Funds / Special Investment Funds
Investment Funds
• The reformed GITA applies to „Investment Funds“ and their German investors
− Investment Funds are Investment Asset Pools as defined by the German Capital Investment Act (KAGB –the national law implementing the AIFMD); no necessity to comply with a certain set of criteria as under the current GITA (e.g. investment limitations, legal form)
− No distinction between UCITS and AIF required
− Sub-funds continue to represent independent Investment Funds
• Extension of the scope due to so-called „notional Investment Funds“
− Single-investor Investment Funds
− Tax-exempt companies established for wealth-management purposes and not subject to taxation
− Company-owned Investment Funds
• In particular the following vehicles do not fall into the scope of the reformed GITA
− Investment Asset Pools in the legal form of a partnership unless they qualify as UCITS, as pension plan assets or as separate property (Sondervermoegen)
− Securitisation vehicles
− Holding companies
Special Investment Funds
• In order to qualify as a Special Investment Fund additional requirements need to be fulfilled
7
Scope of the reformed German Investment Tax ActSpecial Investment Funds
Requirements to be fulfilled in order to qualify as Special Investment Fund
Exemption fromtrade tax
Legal structure(only relevant for German Investment Funds)
Investment conditions
• Objective business purpose is restricted to the investment and management of the assets for the collective account of the investors
• An active entrepreneurial management of the assets is basically ruled out
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Qualification as Investment Fund
• Separate property (Sondervermögen)• Investment stock corporation with variable capital
(Investmentaktiengesellschaft mit veränderlichem Kapital)
• Investment supervision• Redemption right of the investors• Principle of risk diversification• Permitted assets (min. 90%)• Investment-related limitation (20%)• Issuer-related limitation (10%)• Limitation of borrowing• Max. 100 investors (no natural persons)• Documentation in constitutive documents
8
Scope of the reformed German Investment Tax ActDecision diagram
1st check:Investment Asset Pool acc. tosec. 1 para. 1 sent. 1 KAGB?
3rd check:Exceptions acc. to sec. 1 para. 3 GITA?
2nd check:Notional Investment Fund acc. to
sec. 1 para. 2 sent. 2 GITA?
Investment Fund (+) Investment Fund (-)
No
No
Yes
Yes
Yes
No
Special Investment Fund
9
Taxation of Investment Funds and their German investors
10
Taxation of Investment Funds and their German investorsOverview
Special Investment Funds
• Basically, Special Investment Funds are subject to German corporate tax like Investment Funds
• A Special Investment Fund can however opt for tax transparency and continue the current taxation system with however significant modifications− Attribution of income and expenses to the German
investors on a pro rata temporis basis− Stringent requirements as regards the composition of
distributions− New definition of the deemed distributed income− New rules in relation to the computation of the daily tax
reporting figures− Introduction of a new daily tax reporting figure
(Fonds-Teilfreistellungsgewinn)
Investment Funds
Level of the Investment Fund• German and non-German Investment Funds are subject to
German corporate tax with the following types of income− German sourced dividends and equivalents− German sourced real estate income and gains
• In the case of certain eligible investors, the InvestmentFund can enjoy a tax exemption (complex procedure)
• Full exemption from German corporate income tax possibleif the terms and conditions of the Investment Fund rule thatsolely tax-exempt investors are entitled to invest
Level of the investor• Investors are taxed on (i) distributions, (ii) the pre-lump
sum amount (Vorabpauschale) and (iii) on capital gainsfrom the disposal of investment units
• For "equity funds“, a partial tax exemption rate of 30%,60% or 80% can apply, depending on the investor type
• In the case of "mixed funds“, half of the partial taxexemption rates are applicable
• For "real estate funds“, the partial tax exemption rateamounts to 60% (German real estate) or 80% (non-Germanreal estate)
• The applicability of the partial tax exemption rates dependson the ongoing investment of the Investment Fund pursuantto its constitutive documents
The reform of the GITA introduces two independent taxation systems:
• Investment Funds: opaque taxation system
• Special Investment Funds: option to continue the principle of tax transparency
11
Taxation of Investment Funds and their German investorsExtent of the corporate tax liability – German sourced dividends and equivalents
Equity Fund
Equity Fund
• German and non-German Investment Funds are subject to German WHT amounting to 14,218% plus solidarity surcharge = 15%(status certificate required)
• Collection of corporate tax due to German WHT, i.e. filing of tax returns not necessary
• Expenses must not be considered, no offsetting of losses
• Depending on the type of the Investment Fund, a partial exemption rate might apply on distributions, the pre-lump sum amount and the capital gain from a disposal of the investment units
Distribution
100 dividend income./. 15 German WHT
(incl. solidaritysurcharge)
Partialexemption rate
100 dividend income./. 15 German WHT
(incl. solidaritysurcharge)
12
Taxation of Investment Funds and their German investorsExtent of the corporate tax liability – German sourced real estate income and gains
Real Estate Fund
Real Estate Fund
• German and non-German Investment Funds are subject to German corporate tax amounting to 15% plus solidarity surcharge = 15,825%
• No German WHT, i.e. corporate tax return needs to be prepared and to be filed by the Investment Fund (tax assessment)
• Deduction of income-related expenses and offsetting of losses
• Depending on the type of the Investment Fund, a partial exemption rate might apply on distributions, the pre-lump sum amount and the capital gain from a disposal of the investment units
Distribution
100 rental income./. 0 German WHT
100 rental income./. 0 German WHT
Partialexemption rate
13
Taxation of Investment Funds and their German investorsPre-lump sum amount (Vorabpauschale)
Redemption price at the beginning of the calendar year
x base interest ratex 0,7 (30% are deemed income-related expenses)
= Base income (max. appreciation during the calendar year plus distributions)./. distributions during the calendar year
= Pre-lump sum amount (level of the Investment Fund)./. 1/12 per full month preceding the acquisition of the investment unitsx Partial tax exemption
= Pre-lump sum amount (level of the investor)
• The pre-lump sum amount is deemed to be received by the investor on the first business dayof the following calendar year
• The pre-lump sum amount reduces the capital gain from the disposal of investment units
• No taxation of a pre-lump sum amount in the year of sale of investment units
14
Taxation of Special Investment Funds and their German investors
15
Taxation of Special Investment Funds and their German investorsOverview
Special Investment Funds
• Basically, Special Investment Funds are subject to German corporate tax like Investment Funds
• A Special Investment Fund can however opt for tax transparency and continue the current taxation system with however significant modifications− Attribution of income and expenses to the German
investors on a pro rata temporis basis− Stringent requirements as regards the composition of
distributions− New definition of the deemed distributed income− New rules in relation to the computation of the daily tax
reporting figures− Introduction of a new daily tax reporting figure
(Fonds-Teilfreistellungsgewinn)
Investment Funds
Level of the Investment Fund• German and non-German Investment Funds are subject to
German corporate tax with the following types of income− German sourced dividends and equivalents− German sourced real estate income and gains
• In the case of certain eligible investors, the InvestmentFund can enjoy a tax exemption (complex procedure)
• Full exemption from German corporate income tax possibleif the terms and conditions of the Investment Fund rule thatsolely tax-exempt investors are entitled to invest
Level of the investor• Investors are taxed on (i) distributions, (ii) the pre-lump
sum amount (Vorabpauschale) and (iii) on capital gainsfrom the disposal of investment units
• For "equity funds“, a partial tax exemption rate of 30%,60% or 80% can apply, depending on the investor type
• In the case of "mixed funds“, half of the partial taxexemption rates are applicable
• For "real estate funds“, the partial tax exemption rateamounts to 60% (German real estate) or 80% (non-Germanreal estate)
• The applicability of the partial tax exemption rates dependson the ongoing investment of the Investment Fund pursuantto its constitutive documents
The reform of the GITA introduces two independent taxation systems:
• Investment Funds: opaque taxation system
• Special Investment Funds: option to continue the principle of tax transparency
16
Taxation of Special Investment Funds and their German investorsBasic principles
Level of the Special Investment Fund
• In principle, Special Investment Funds are subject to the same taxation regime as Investment Funds
• Special Investment Funds can however opt for tax transparency in which case they gain a complete exemption from German corporate tax
• Requirements to be fulfilled in order to obtain the tax transparent status:
− German sourced dividends and equivalents: irrevocably declaration of the Special Investment Fund that the certificates for tax purposes shall be issued in favour of the investors
− German sourced real estate income and gains: deduction of German WHT by the Special Investment Fund
Level of the German investor
• As under the current regime, German investors will be taxed on
− Distributed income
− Deemed distributed income
− Capital gains from the redemption of investment units
• If the Special Investment Fund does not opt for tax transparency, lump-sum tax exemptions apply; otherwise, the tax exemptions are comparable to those which apply in the case of a direct investment
• The requirements as regards the investor reporting increase significantly – particularly due to the attribution of income and expenses to the German investors on a pro rata temporis basis
17
Transitional provisions
18
Transitional provisionsBasic rules
• The reformed GITA comes into effect on 1 January 2018
− In the case of a fiscal year diverging from the calendar year, a fictitious short fiscal year is deemed to be ending on 31 December 2017 for tax purposes
− Applicable to all Investment Funds and corporation-like investment companies in the meaningof the current GITA
− Determination and publication of tax reporting figures for the last time with a prolonged period of time (i.e. publication by 31 December 2018 necessary)
− Deadline for the distribution resolution prolonged from four to eight months
• Investment units and shares in corporation-like investment companies in the sense of the current GITA as well as shares in Investment Funds falling into the scope of the reformed GITA are deemed to be sold on31 December 2017 and re-acquired on 1 January 2018
• The last redemption price (or stock exchange or market price) set in the calendar year 2017 is regarded as sales and acquisition price
• The gain/loss on the notional sale/re-acquisition is to be taxed at the point in time of the actual disposal
• The gain/loss is to be determined separately, i.e. declaration of the investor to be filed with thecompetent tax office
19
Transitional provisionsGrandfathered investment units
• Shares/units acquired before 1 January 2009 (introduction of the German flat-rate WHT) are grandfathered for private investors
• This protection will be abolished by the reformed GITA
− Changes in value between the acquisition and 31 December 2017 remain tax-free for private investors
− Changes in value from 1 January 2018 are taxable to the extent the capital gain from the disposal exceed a tax exempt amount of 100,000 Euro
− The tax exempt amount remaining at the end of each assessment period is to be determined separately by the competent tax office of the investor until the amount has been completely utilized
20
To-do list
21
To-do listMost important tasks
Investment Funds
• Review and revise constitutive documents in order to make sure that partial tax exemption rates apply
• Monitor the portfolio of the Investment Fund in order to make sure that German corporate tax returns are prepared and filed with the fiscal authorities where necessary
• Apply for status certificate to benefit from a reduced German WHT rate incl. management of WHT
• Explore whether or not there is a need to implement a process for the partial exemption of the Investment Fund from German corporate tax
• Review whether or not it is reasonable to launch Investment Funds and share classes respectively which can enjoy a full exemption from German corporate tax
Special Investment Funds
• Observe the market to realise if there is a trend that German institutional investors shift their money from Investment Funds into Special Investment Funds
• Analyse whether or not it makes sense to launch Special Investment Funds especially for the German marketin order to safeguard/gain additional market shares
• Implement a state-of-the-art tax reporting for your German investors and comply with the enhanced compliance requirements
• Verify the pros and cons to opt for tax transparency
22
ContactsGermany
Alexander WenzelPartnerFinancial ServicesFrankfurt / Germany
Tel +49 69 75695 6111Mobil +49 151 5800 2284E-Mail [email protected]
Stefan DluhoschSenior ManagerFinancial ServicesHamburg / Germany
Tel +49 40 32080 4448 Mobil +49 151 5800 1066E-Mail [email protected]
23
Market Insight
For Internal Use Only / Not for Distribution to the Public
Reform of the German Investment Tax ActLuxembourg industry perspective
Judith Mertesdorf-Perathoner
Franklin Templeton International Services S.à.r.l.Director Fund Tax
March 2017
Partial tax exemptions:
• Equity / real estate ratio to be included in the investment policy of the fund (“Anlagebedingungen”)– Statutes, articles of association or other constituting acts prospectus?
• Proof of equity / real estate ratio on an ex-post basis – Frequency of testing, acceptable documents, short-term breaches?– Alternative process: regular reporting on WM, acceptable for German banks?
• Calculation of equity / real estate ratio – Denominator: value of the fund net assets, total assets?– Numerator: target funds, taxable corporations?
Reform of the German Investment Tax Act
25
Open questions
Transition rules:
• Treatment of distributions relating to 2017, but paid out in 2018?
• Fictitious redemption & fictitious financial year end on 31 Dec 2017?
• Treatment of target fund income at the fictitious financial year end on 31 Dec 2017?
Reform of the German Investment Tax Act
26
Open questions
Product development:
• Determination of funds which should qualify for the partial tax exemption– Consider inclusion of equity / real estate ratio into the investment policy– Otherwise: consider ongoing equity / real estate ratio reporting– Implement asset classification and monitoring processes
• Identification of funds subject to German corporate income tax– Consider launch of sub-funds / share classes dedicated to privileged investors– Otherwise: consider set up of verfication and reimbursment procedure for
privileged investors– Compliance with cum/cum legislation
• Launch of special funds in Luxembourg– Structuring and legal set-up– Implement tax reporting and compliance solution
Reform of the German Investment Tax Act
27
Action items
Operational considerations:
• Consider if it makes sense to pay out extraordinary distributions prior to 31 Dec 2017
• Plan certification process and timing for final reporting under the old law with tax certifier
• Implement process for German corporate tax return filing, if necessary
• Apply for status certificate to benefit from reduced German withholding tax rate
• Implement new static data reporting for German market / WM
Reform of the German Investment Tax Act
28
Action items
29
Norway
30
Agenda
1. Fund investment taxation based on equity ratio test
2. The new “Share Saving Account”
31
NorwayFund investment taxation based on equity ratio test
32
Introduction
• New rules in force from FY16
• Norway has adopted new tax rules for fund investors (and Norwegian funds)
• Entered into force from January FY16
• First tax return filing in April / May FY17
• Expected future tax rates
• The government has announced ordinary capital gain taxation to be reduced to 23%from FY18.
• At the same time, tax on shares is expected to increase to 30.6%.
• Non-individuals income and gain from shares:0,07/0%
• Assuming EU funds
• Assuming EU based funds with EU based management companies
• New rules relevant for foreign corporate and contractual funds (and probably also trust-based funds, but normally not LP based funds)
• Probably also a requirement that units can be redemmed at fair market value (cf. tax office decision)
• Current tax rates
•For FY17 Norway operate with the following tax rates:
• Ordinary capital gain: 24%
• Individuals income / gain from shares: 29.76%
• Non-individuals income / gain from shares: 0,07/0%
Taxation of Norwegian resident investors
33
Shares are blue – other assets (bonds, derivatives etc.) are greenThree fund classifications – based on assets
Mostly / only bonds,
derivatives.
Bond fundNAV <20% shares
A mix of assets
Combination fundNAV: 20-80% shares
Share fundNAV>80% shares
19%50%
Mostly / only shares
81%
34
Fund classification found by calculating share proportion of NAV at 1 January*. When determining the NAV, disregard cash and cash equivalentsFund classification can be used in marketing during the income year.
* 31 December for new established funds
35
Determining fund classification
Shares71%
Other19%
Cash10%
Shares79%
Other21%
Shares79%
Other21%
Shares75%
Other15%
Cash10%
Shares83%
Other17%
Shares100%
All assets NAV
All assets NAV
36
Share funds for corporate investors, bond funds for individualsTaxation of investors
Individual investor:I’m all up for bond funds, as I am only taxed 24% on income.
The share funds cause me 29.7% tax, and next year will be worse.
Corporate investor:We fancy share funds as such income is tax exempt.
The bond funds comes with a tax bill of 24% …
37
Decomposing combination funds
Shares79%
Other21%
Combination fund Share fund part Bond fund part
Shares
Other
Combination fund
DecomposeDividends = 100
79
210
20
40
60
80
100
Share income Bond income
38
Taxation of investors – Combination funds (2017 rates)
Bond ShareIncome 21 79Tax: -5 -23.5Net 16 55.5
Bond ShareIncome 21 79Tax: -5 -0.6Net 16 78.4
79
210
20
40
60
80
100
Share income Bond income
39
NorwayThe new “Share Saving Account”
40
Share Saving Account (“SSA”) is a new tax regime for individuals investing in listed shares / units in share funds within the EEA
The SSA is not open for bond funds or combination funds
Pursuant to a special rule for FY17, share fund units with unrealised gain may be brought tax neutral into the SSA
41
Taxation of investments in SSA
1
2
3
Capital gains / lossesNo tax on capital gains (nor deduction for loss)
DividendsDividends received not included in the SSA, i.e.• 29.76% tax on dividends from share funds
Withdrawal from SSAWhen withdrawing cash from the SSA, this will first reduce the paid-in contribution• 0% tax on withdrawals up to paid-in contribution• 29.76% tax on exceeding withdrawals (losses treated
accordingly when SSA is closed).
42
Contacts
DanielHerdeSenior ManagerOslo office
Over 10 years experience with taxation of investment funds, banks and insurance companies
Norway
43UK Brexit
44
Brexit – implications for Asset Managers
• On Brexit, the UK will likely lose the ability to passport management and distribution functions into Europe
• Alternative jurisdictions considered will depend on existing commercial structures and operations – both for funds and corporate group activities
• Tax will likely follow regulatory considerations
Comparison of tax rates and regimes
• Tax authority attitudes• FS specific taxes• Rules on employee
benefits (e.g. pensions) and remuneration
• Cost of moving vs ongoing tax cost
Selection
• Define optimal final structure
• How to move (CBM, TOGC)
• Substance requirements
• Impact on employees – tax and policy design and reward structures
Implementation
• New intercompany agreements
• Branch / sub registrations
• TP update• VAT position• Systems and reporting
/ compliance• Employees –
implementation of new policy/structure
Adapt
• Ongoing monitoring of tax developments and potential impact on business
• CRS / FATCA clearances
• Reacting to tax implications of future business changes
• Ongoing compliant BAU embedded
2017 2018 2019
Exit negotiations
Clarity on exit scenario(e.g. clean Brexit)
EU Exit (in case of no extension)
Art 50 (expected)
17 Jan:PM speech
45
Brexit – implications for Fund management
Fund Management Companies (ManCos)
• A key consideration will be the ability to sub-delegate back to existing UK functions and exit charges around transfer of contracts
• Current position maybe: UK Funds and UK Mancos
• Future considerations post Brexit: Non-UK Funds and Non-UK ManCos
• Popular jurisdictions considered: Luxembourg and Ireland
• Issues: tax and regulatory consequences
UK and Foreign Funds
UK ManCo
Pre-Brexit
IM Contract
Post-BrexitLux/Irish
ManCo
Foreign Fund
IM Contract
46
Brexit – implications for Fund distribution
Changes in Contracts
• Need to establish an EU distribution company
• Consideration of potential tax implications and timing of regulatory approvals
• Ability to sub-delegate key functions and satisfy regulatory substance and oversight requirements
• Potential disparity between branches and rep offices when transferring from existing UK MiFID firm
Issues to consider:
- VAT implications of new contracts and sub-delegation contracts
- Reliefs available in both UK and chosen EU jurisdiction
• Popular jurisdictions considered: Luxembourg Germany and Ireland;
UK MiFID Firm
Newco-EU MiFID firm
Sales Branch
Sales Branch
Transfer of business
47
ContactUK
Joanne MawhinneyTax DirectorUK, LondonEmail : [email protected] Tel.: 020 7007 1781
Sheelan ShanTax DirectorUK, LondonEmail : [email protected] Tel.: 020 7007 2779
48
France
49
FranceNicolas MeurantAlexis FillingerHélène Alston
50
1. Focus on Securities Investment - Brexit issues
2. Introduction – Non-Qualified taxation vs. Qualified specific French tax regimes
3. UCITS & AIF Funds - Focus on the “couponnage” method
Agenda
51
Focus on Securities InvestmentBrexit issues
52
Focus on impact for the Securities Investment
• Applicability of French specific tax regimes under geographic conditions:
- European Union- European Economic Area- Tax treaties with mutual administrative
assistance provisions
• EU Directives
• Applicability of the Tax Treaty between France and UK
• UK Investments towards France
• French Investments towards UK
• Commercializing of UK Investment products
Divergency of tax impact depending on investment type flows
Case-by-case analysis of french specific tax regimes or/and tax treaty provisions or/and eu
law
53
Compliance with applicable geographic conditions / Tax Treaty provisions to consider for each investment flow
Example for compatibility with the French specific tax regimes
DIVIDENDS: Taper relief of 40 % of the taxable basis on French income tax
United Kingdom/France Investments:
• Compliance of the UK Investments in France with the French specific tax regimes on capital gains at common rates (50% between two and eight years and 65% over eight years) and reinforced rates (up to 85%)
CAPITAL GAINS:Taper relief on capital gains for holding period
United Kingdom/France Investments:
• Compliance of the UK Investments in France with the French specific tax treatment under the French Equity Savings Plan.
EQUITY SAVINGS PLAN:Eligibility for the French specific tax regime PEA
United Kingdom/France Investments:
• Compliance of the UK Investments in France with the French specific tax regime on dividends
DIVIDENDS / INTERESTApplicability of the Tax Treaty between France and UK (June 19, 2008)
United Kingdom/France Investments:
• For dividends, 15% of reduced withholding tax rate on dividends pursuant to article 11, 1 b) Tax Treaty between France and UK (June 19, 2008)
• For interests, no withholding tax pursuant to article 12 of the Tax Treaty
54
Overlay of specific geographic conditions: location of the vehicle /location of the investment quota
Loss of eligibility for the specific French tax treatment
Distribution Funds: Impact on French tax treatment (dividends, capital gains)
France/United Kingdom Investments:
• Specific French Funds (FCPR/FPCI « fiscaux ») : in case the quota de 50 % is realized partially or totally in the UK
UCITS / AIFM Funds :Impact for specific French FCPR /FPCI « fiscaux » investing in UK
France/United Kingdom Investments:
• PEA : in case the quota of 75 % is realized partially or totally in UKUCITS / AIFM Funds :Impact for French Funds investing in UK
France/United Kingdom Investments
• Loss of the eligibilty for the favorable French « couponnage » tax treatment
(i.e. loss of the specific tax treatment on dividends/ capital gains)
Distribution Funds:Impact on French tax treatment (PEA)
France/United Kingdom Investments:
• Loss of the eligibility of the favorable French PEA tax regime for UK shares and OPCVM Funds
55
Specific considerations of European Directives for the Asset Management companies
Commercializing of United Kingdom investment products
Under MiFID & UCITS IV Directives:
France/United Kingdom Investments:
• « European passport » issues
Under AIFM Directive:France/United Kingdom Investments:
• « European passport » issues
56
Case-by-case consideration: examplesApplicability of other French specific tax regimes
Life Insurance:United Kingdom / France Investments:
• Keep eligibility for the specific flat income withholding tax at 7.5 %
• Income realized via entities established in foreign jurisdictions considered as countries with a privileged tax system (“artificial” entity issues)
Article 123 bis of theFrench tax code:
France / United Kingdom investments:
57
Investor Tax ReportingNon-Qualified taxation vs. Qualifiedspecific French tax regimes
58
IntroductionNon-Qualified taxation vs. Qualified specific French tax regimes
Tax regime Overall tax rates
Non-Qualified taxation 64.5 %
Qualified taper relief regime on capital gains
- 64.5 % (< 2 years)
- 42 % (2 years < 8 years)
- 35.25 % (> 8 years)
Qualified dividend 46.5 %
Qualified « PEA » 15.5 % (> 5 years)
Qualified life insurance 7.5 % (> 8 years) + 15.5 %
59
Focus on the “couponnage” methodUCITS & AIF Funds
60
In France, some distributions benefit from a favorable tax regime resulting from a 40% allowance.
Income distributed by funds are excluded from the scope of this allowance up to the part exempted from corporate tax.
But the funds may transfer to their shareholders or unitholders the benefit of this allowance to the amount of eligible products received directly or indirectly by the funds.
Distributed products will then benefit from the 40% allowance if the fund proceeds to the ventilation of its distributions depending on their nature and origin (“couponnage”).
Funds DistributionBackground
Products distributed by foreign funds are treated as foreign investment income, regardless of the nature or the origin of the distributed product. Therefore, the said products do not benefit from the 40% allowance (resulting in taxation up to 64,5%).
However, UCITS or AIF (1) established within the European Union (EU) or European Economic Area (EEA) may transfer to their shareholders or unitholders the 40% allowance benefit, to the amount of eligible products received directly or indirectly by the funds (resulting in a tax saving up to 18%).
In order to benefit from the 40% allowance, the UCITS or AIF must proceed to the ventilation of their distributions depending on their nature and origin (“couponnage”).
VS.
(1) Admitted under specific conditions (cf. infra) by the Frenchtax administration’s new comments published on July 11,2016.
French funds Foreign Funds
61
Funds DistributionForeign UCITS
The French tax administration considers that Foreign UCITS’s shareholders/unitholders mightbenefit from the 40% tax allowance under the following conditions:
• The Foreign UCITS should be authorized in accordance with the Directive 2009/65/EC dated July 132009 (i.e. Directive UCITS);
• It should be established in EU other States or in a EEA’s State which has concluded with France aconvention on administrative assistance to combat tax evasion and avoidance; and
• It should ventilate its distributions depending on their origin and nature.
The Foreign UCITS’s distributions eligibility to the 40% allowance should then not required anyspecific analysis if the above-mentioned conditions are fulfilled.
62
Funds Distribution Foreign AIF specific case
The French tax administration has recently admitted that Foreign AIF’s shareholders/unitholdersmight benefit from the 40% tax allowance under the following conditions:
• The Foreign AIF should be subject to the Directive 2011/61/EU dated June 8, 2011 (i.e. Directive AIFMor AIFMD);
• It should be similar to French SICAV or FCP;
• It should be located in the EU other States or in a EEA’s State which has concluded with France aconvention on administrative assistance to combat tax evasion and avoidance; and
• It should ventilate its distributions depending on their origin and nature.
The Foreign AIF’s distributions eligibility to the 40% allowance should then be subject to aspecific analysis notably regarding the condition requiring that the Foreign AIF should be similarto French SICAV or FCP.
In France, the SICAV and the FCP are the two main investment funds’ vehicles. From a legalstandpoint:
• The SICAV (Société d’investissement à capital variable) is a limited company (Société Anonyme orSociété par Actions Simplifiée) with variable capital.
• The FCP (Fond Commun de Placement) is a joint ownership of financial instruments with no legalpersonality.
63
Illustration
0102030405060708090
100
French funds Foreign funds /UCITS & AIF
UCITS & AIFwith coupon
53,535,5 35,5
18
Net income Tax Difference
Additionnal net return for the French individuals
Consequences on dividends distribution (1) proceeded by funds
French Funds (2) Foreign Funds / UCITS & AIF UCITS & AIF with coupon (2)
Taxation at 46.5 % (4) Taxation at 64.5 % (3) Taxation at 46.5 % (4)
(1) Eligible to the 40% allowance under Article 158-3 of the French tax code
(2) Directive UCITS and AIFMD
(3) Income tax up to 45% + 15.5% social surcharges + 4% tax on high income
(4) Income tax up to 27% + 15.5% social surcharges + 4% tax on high income
64
Contacts
Nicolas MEURANTAvocat - Tax PartnerFrance ParisEmail : [email protected].: 01 40 88 71 69
Alexis FILLINGERAvocat – Tax PartnerFrance ParisEmail : [email protected] Tel.: 01 55 61 63 07
Hélène ALSTONAvocat – Tax Partner France ParisEmail : [email protected].: 01 55 61 60 32
France
65
Switzerland
66
SwitzerlandAndré Kuhn
67
PublicationsSwiss fund tax reporting
5 March 2009SFTA Circular
no. 25
14 April 2010Clarifications for Fund-of-funds
structures
2009 2010 2011 2012 2017
1 January 2009SFTA Circular
no. 24
13 September 2010
SFAMA Circular no. 24/2010
29 June 2011SFAMA Circular
no. 15/2011
7 February 2012SFTA Letter to
ALFI
29 August 2013 SFAMA Circular
no. 23/2013
2013 2015
8 May 2015 SFAMA Circular
no. 16/2015
Summer 2017updated SFTA Circulars no. 24 and 25
2014 2016
68
Income taxesTaxation of collective investment schemes
FCP / SICAV /
LP
Investment
FCP / SICAV /
LP
Investment
SICAF
Taxation
Taxation
69
Securities held as private assetsTaxation of collective investment schemes
FCP / SICAV /
LP
Investment
Taxable
• Dividend income
• Interest income
Tax free
• Capital gains
• Repayment of Capital Contribution Reserves (CCR)
Swiss tax reporting must be provided by the fund!
70
Securities held as business assetsTaxation of collective investment schemes
Taxable
• Dividend income
• Interest income
• Capital gains
• Repayment of Capital Contribution Reserves (CCR)
Tax free
-
Swiss tax reporting is not required!
FCP / SICAV /
LP
Investment
71
Equity and bond funds with synthetic exposureSwiss fund tax reporting
Physical Replication+ Dividend income
+ Interest income
+ Equalization income
+ Other income
= Total investment income
- Interest paid
- Manufactured payments
- Sec. lending fees
- Equalization expense
= Fully deductible expenses
- Fees (max. 1.5% of NAV)
= Net investment income
Synthetic ReplicationGross dividend yield of index
- Withholding taxes
= Net dividend yield of index
- Deductible expenses / fees
= Net investment income
• In case no yield figures are available the taxable income is based on the benchmark interest rate of the Swap agreement (e.g. LIBOR) with the same term
• No deductible expenses / fees for tax calculations based on benchmark interest rates
• Bond income on notional amount
72
Target funds
Fund-of-funds structuresSwiss fund tax reporting
• Transparent treatment down to a fund with at least 5 target funds (exceptions for fund-of-bonds-fund and fund-of-money-market fund structures)
• 1.5% fee cap to be considered on all levels
• Fund-of-funds must generally show at least the aggregated income from their target funds as taxable income:
• Exception 1: If target funds have no or only low fees an offsetting of fees at fund of funds level with income from target funds is permissible to max. 1.5% of NAV or lower effective fees
• Exception 2: Net equalization related to expenses can be offset against distributed (but not accumulated) income from target funds
Feeder Fund
Master Fund
5 < Target Funds
73
De-minimis rulesSwiss fund tax reporting
Target Fund
Target Fund
• Master fund may elect de-minimis rule for each target fund with less than 3% of the NAV
• Income is considered based distributions received (distributing funds) or positive NAV difference (accumulating funds)
• However, tax values from official securities list need to be used in case they are available
• Applied method must be kept for at least 5 years
Master Fund
Investments Target Funds
< 10%
75
Austria
76
1. Update on AT investor tax reporting
2. Registration for tax purposes
3. Regulatory
4. Contacts
5. Appendix
Agenda
77
Update on AT investor tax reporting
78
Reporting funds
• Appointment of AT tax representative
• Registration with Austrian Kontrollbank (OeKB)
• Reporting of components of the annual tax data (deemed distributedincome, DDI) to the OeKB – mandatory
• Reporting of the components of distribution payments (if any) – not mandatory but strongly recommended for AT investors
• Reporting-deadlines − DDI: 7 months after FYE/liquidation date of the fund− distribution payments: 1 day before payment date
• Calculation and disclosure of DDI, distribution payment and tax thereonby OeKB on its website www.profitweb.at
79
Components of Austrian DDI
Private investors
AT private foundations
Entrepreneurs
Corporates Foreigninvestors
Interests X X X X n/a
Dividends X tax free X tax free n/a
Expenses X X X X
Realized netgains (losses:carry forwards) 60% 60% 100% 100% n/a
Interestsaccording toEUSD n/a
abolished afterDecember 31,
2016
Austrian (AT) interests n/a in scope fund
80
Taxation of non residents
• Private persons and entrepreneurs
• Taxable income: AT interests only
• Tax status of fund (in scope/out of scope) shall be disclosed at OeKB (www.profitweb.at)
• Funds in scope (www.profitweb.at): >15% investment in AT cash and AT bonds
Reporting requirements- AT interests as part of annual DDI and distribution payments (if any)- No Daily reportings (abolished after December 31, 2016)
Lump sum tax base in case of not performing tax reportings and for not disclosed funds
- entire distribution (if any)- 6% of NAV as of December 31- in case of redemption: 0,5% of the most recent NAV per calendar month- 27,5 % withholding tax deducted by AT bank of investor
Tax exemption: investor is tax resident in a country participating in theAutomatic Exchange of Information and providing a certificate of tax residenceto his bank
• Funds out of scope (www.profitweb.at): <= 15% investment in AT cash and AT bonds− no reporting requirements and no taxation
81
Distribution order
• Predetermined order of taxable and tax free distributioncomponents
• Aim: avoidance of tax freepayments
• No distribution reporting- total sum of distribution is taxable- deduction from DDI- if negative DDI: no tax credit forinvestor
Distribution components
ordinary incomecurrent year
ordinary incomeprevious years
realized gains 60% current year
realized gainsprevious years 60%
realized gains 40% current year
realized gainsprevious years 40%
substance
Taxable if distributed
yes
no
yes
no
yes
yes
no
82
New tax reporting scheme
• In force since June, 2016
• Publication of tax amounts for each type of investor on the website of the OeKB: www.profitweb.at
• New reporting requirement as of April 1, 2017
− number of shares outstanding as of the reporting day = day when the AT tax representative of the fund reports to the OeKB
− Tolerance of 3 weeks before the reporting day will be accepted with regard to the amount of shares
83
Registration for tax purpose
84
Two parts of tax registration
First registration at level of fund:
original form delivered by manco to OeKB (mail!)
Second registration at level of share classes:
basic data form sent to [email protected]
including letter of intent to report tax data
Each tax registered share class is disclosed on the list of reporting funds („Meldefonds“) at www.profitweb.at
Publication of tax registration
85
Termination of share classes
• Dormant share classes− status of a dormant class is no longer acceptable− Reporting status shall not be lost: zero DDI tax reporting required− No reporting: loss of reporting status and lump sum taxation for AT investors
• Liquidated share classes
− Zero reporting of liquidation payments in order to avoid lump sum taxation
− last DDI reporting required until 7 months after liquidation date
• Deregistration of fund− only the fund itself can be deregistered at the OeKB but not the registered share
classes
86
Loss of reporting status
• No annual DDI reporting within reporting deadline (7 months after FYE of the fund / liquidation date)
• Non-reporting of distribution payments has no effect on the reporting status but results in tax inferior situation for AT investors
• Share class will automatically regain the reporting status after the next DDI reporting
• Consequences for AT investors
lump sum taxation - possibility of „self-proof“ of tax base
Annual DDI reportingmissed
Loss of reporting
status („self-proof“)
DDI reportingfollowing year
Share classregains taxtransparent
status
87
Regulatory
88
Distribution of funds (UCITS / AIF) in Austria
• Regulatory status of fund has no impact on tax reporting status
• EU-Passport− Manco: home country rule applies− No separate distribution licence required in AT− Exchange of information between regulatory authorities
• No EU-Passport− Separate licence required in AT− Requirements differ between UCITS and AIF
UCITS / AIF with EU passport
Regulatoryauthority home
country
Austrian Regulatoryauthority
(Finanzmarkt-aufsicht -FMA)
authorized
89
Contacts
90
Contacts
Robert PejhovskyT: +43 1 53700 4700E: [email protected]
• Country Leader Investment Management (IM)
• more than 25 years experience in consulting financial institutions worldwide
• Co-Leader of the working group of auditors of securities firms at the Austrian Institute of Auditors
• Certified Tax Consultant and Auditor
Nora Engel-KazemiT: +43 1 53700 5420E: [email protected]
• Head of investor tax reporting team for a wide range of foreign funds in Austria
• more than 19 years experience in IM
• Member of the Austrian association of foreign funds in Austria (VAIÖ) and several working groups for taxation of financial instruments and audit of funds
• Certified Tax Consultant and Auditor
Birgit Schwertner-AwaisSenior ManagerT: +43 1 53700 4150E: [email protected]
• more than 13 years experience in IM• detailed understanding of tax issues
raised by funds and asset managers• PMO of several investor tax
reporting projects and tax cooperations with banks
• Certified Tax Consultant and Auditor
France
Elke TeubenbacherSenior T: +43 1 53700 4721E: [email protected]
• more than 10 years experience in tax reporting for foreign funds in Austria
• coordinating the team of assistants performing the tax calculations and tax reportings for foreign funds
• team member at tax investor reporting projects and audit engagements of funds
91
Belgium
92
Agenda
1. Belgian taxation
2. Stock Exchange Transaction Tax
93© 2017 Deloitte Tax & Consulting
The annual subscription tax:
o foreign funds registered for public distribution in Belgium are subject to an annual taxbased on net subscriptions received by a financial intermediary located in Belgium fromBelgian investors.
o The annual tax will apply to the value of net subscriptions made by Belgian investors inthe fund at the rate of 0.0925% (and 0.01% for Belgian funds whose units are exclusivelymarketed to institutional investors).
Tax on capital gain realized on bonds funds in case of redemption: Belgian TIS
Tax on income received through a FCP: Daily streaming
Tax on dividend payment:
Dividends paid by a foreign funds are taxable for individual Belgian investors. Awithholding tax of 30%* (in full discharge) is collected through a Belgian paying agent.
In the absence of daily income streaming, the distributions from FCP may be subject tothe 30% withholding tax rate (in full discharge).*from 27% to 30% as from 01.01.2017
Tax on Financial transactions (subscription and redemption):
The financial transaction tax is applied on the secondary market of shares when theoperation is entered into or carried out in Belgium via a Belgian financial institution(extended to foreign intermediaries).
At the level of the Fund
At the level of the Investor
94
Taxe sur les operations boursières (“TOB”) / beurstaksTopic 1 : Stock Exchange Transaction Tax
Targeted operations
Secondary market transactions(sale, purchase, exchange)
Belgian or foreign securitiesConcerns publicly tradedsecurities (i.e. shares, bonds,certificates…)
Due by the professionalintermediaries established inBelgium
Rates
From 0.09% to 1.32%
Maximum tax amounts per transaction
Exemptions
Primary market transactionsCertains bonds such as OLO’s
Non-residents acting for theown account
95
Taxe sur les operations boursières (“TOB”) / beurstaks: recentchanges
Topic 1 : Stock Exchange Transaction Tax
As from 1 January 2017
Broader scope
• Extension to transactions carried out by foreign intermediaries provided the order is directly or indirectly given by an individual with a habitual residence in Belgium
• Foreign intermediaries acting for Belgian residentswill withhold TOB and transfer to Belgian taxauthorities
• Individuals can opt to comply with TOB obligations (i.e. paying the tax and filing the return)
• No specific definition for “habitual residence” (generally where the individual is mainly settled).
Open question: do persons subject to expat tax regime qualify as Belgian residents for TOB purposes? Tax authorities are investigating this aspect
Maximum tax amounts increased
Maximum tax amounts increased
The stock exchange tax rates remain unchanged but the caps are doubled
0.09% (with a maximum of EUR 1,300)for transactions with bonds and similar instruments
0.27% (with a maximum of EUR 1,600)for transactions with shares and other financial instruments
1.32% (with a maximum of EUR 4,000) with purchases of capitalization-shares of investment companies
97
Other Countries and Operational taxes
98© 2017 Deloitte Tax & Consulting
Deloitte, the Fund Tax provider of choice
3. At fund level:
• Tax structuring/advice
• Tax compliance/filing
• VAT
• E-filing of “taxe d’abonnement”
1. At investor level: 2. At investment level:• Monitoring and calculation of capital gains and tax exposure on a daily, monthly or quarterly
basis (FIN 48 / ASC 740-10)
• Preparation of transfer pricing documentation and transfer pricing guidelines
• Help developing internal guidance and controls to address and confirm whether an uncertain tax position exists; assisting the client with the financial statement disclosures
• Assistance in permanent account number or national tax number application, where applicable
• Assistance in the preparation of a return of income and filing
• Liaison with the local agent
• Calculation and advice on the taxability of sale transactions
• Preparation and filing of tax statements to tax authority or custodian
• Stamp duty and other potential tax liabilities
• Tax reclaims
Daily tax Tax registration Annual tax Ad-hoc
Austria - OeKB DDI Distributionreporting
Belgium B-TIS Ruling upon request Streaming (FCP) Subscription Tax
Chile - - - Asset test
Denmark - Application Reportable Income -
France - - PEA / Taper relief /couponnage -
Germany AKG I, AKG II, IG, ZG WM-Daten DDI §5, §18 and
§19, ADDIDistributionreporting
Italy - - IRRP/ Capital vs. income split Inheritance
Lichtenstein - - Fund earnings -
South Korea Korean Taxable NAV - - -
Norway Asset Test - Asset test SSASpain - - - Traspaso
Sweden - SKV 2745 KU Forms -
Switzerland - - Muster reporting -
UK Equalisation Application Excess RI Asset Test
U.S. Computation 8865 (CTB) / EIN / State
PFIC / K1 / FIN 48 Investor Reporting
Global visionGlobal solutionsLocal delivery
99© 2017 Deloitte Tax & Consulting
Operational taxes – increased importance
• Continual changes in taxation rules globally
• Operational taxes and related compliance moving up the agenda for Fund Boards
• Increased focus on inclusion of costs in NAVs
• Examples of more common non-resident CGT filing jurisdictions: India and Pakistan
Recent changes / practical issues
Brazil – impact of inclusion of Ireland on the blacklist
Swiss – UK, French and Netherlands domiciled funds challenged on DTT access
Venezuela – non-resident capital gains regime, practice v theory
100
Q&A
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