Tài liệu Issue 92 – Regulatory and Tax Developments in May 2012 docx

1 FUND NEWS May 2012 Investment Fund Regulatory and Tax developments in selected jurisdictions Issue 92 – Regulatory and Tax Developments in May 2012 Regulatory News European Union

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FUND NEWS May 2012

Investment Fund Regulatory and Tax developments in

selected jurisdictions

Issue 92 – Regulatory and Tax

Developments in May 2012

Regulatory News

European Union

ESMA publishes updated list of

measures adopted by competent

authorities on short selling

On 29 May 2012 the European

Securities and Markets Authority

(ESMA) published an update regarding

the measures taken by EU supervisory

authorities regarding short selling This update includes measures taken by Austria and is available via the following web link:

http://www.esma.europa.eu/page/Short-selling

done through a common Memorandum

of Understanding (MoU), which will

Regulatory Content

European Union

ESMA publishes updated list of measures adopted by competent authorities on short

Luxembourg

CSSF publishes Frequently Asked Questions document on the KIID Page 2

CSSF signs new Co-operation Agreements

Page 2

Tax Content

EU

Advocate General’s Opinion that discretionary portfolio management services are not exempt services for VAT Page 2

The Netherlands

Tax treaty with Germany Page 3

UK

HMRC publish second round consultation document on the future taxation of UUTs

Page 4

Luxembourg

Luxembourg and Germany sign new tax

Aberdeen E-alert Page 6

Accounting content

IFRS for Investment Funds – Issue 4 - Classification of Financial Assets under

Other news

KPMG European Responsible Investing Fund

Fund News – May 2012

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Luxembourg

CSSF publishes a Frequently Asked

Questions document on the KIID

The Commission de Surveillance du

Secteur Financier (CSSF) published a

Frequently Asked Questions document

on the Key Investor Information

Document (KIID) for UCITS The

document is available via the following

web link:

http://www.cssf.lu/fonds-dinvestissement/

CSSF signs new Co-operation

Agreements

In May 2012 the CSSF signed a

co-operation agreement with the China

Securities Regulatory Commission

(CSRC) on mutual assistance and

exchange of information in the areas of

securities regulation and securities

markets

The CSSF also signed a co-operation

agreement with the Egyptian Financial

Supervisory Authority on mutual

assistance and exchange of information

in the areas of regulation, cross-border

asset management and financial

markets

Tax News

European Union

Advocate General’s Opinion that discretionary portfolio management services are not exempt services for VAT

On 8 May the Advocate General’s (“AG”) Opinion (“the Opinion”) in the Deutsche Bank AG case was issued It provides a number of interesting points which could impact the provision of wealth management and private banking portfolio management In the Opinion, the AG concluded that portfolio management services do not fall under a relevant VAT exemption and are, therefore, taxable The Opinion also states that where advice and execution are provided under a single

arrangement, the entire package of services ought to be taxed The AG also provided some comments on “fiscal neutrality” arguments The AG suggests that use of this concept is, in this case, limited given the fund management exemption is specifically limited to collective investment schemes A full European Court of Justice (“ECJ”) judgement is expected

to follow within a few months

Background

Deutsche Bank provided discretionary portfolio management services The assets were shares and other securities, and, within certain parameters,

Deutsche Bank was permitted to buy and sell without requesting approval from the client It charged a total fee

based on 1.8% of the assets under management, comprising 1.2% for advisory services and 0.6% for securities dealing activities

The questions referred to the ECJ were whether:

1) the portfolio management services should be VAT exempt either as a dealing in securities or as a service which fulfils a function similar to fund management services;

2) the package of services constitute a single supply of services for VAT purposes or not; and

3) whether European legislation covering the place of supply of financial services can cover services which fall outside a relevant VAT finance exemption

Opinion

The AG decided that it would be artificial

to split Deutsche Bank’s services into separately taxed components in that the customer contracted for a single portfolio management service, and the split of fees between advice and execution did not change this To benefit from exemption both the advisory and execution elements taken together would need to constitute a VAT exempt financial service

The AG characterised an exempt share dealing service as one principally concerned with the buying and selling of instruments (i.e the trade itself) In this case the AG decided that the

customer’s key aim in engaging Deutsche Bank was to receive its

Fund News – May 2012

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investment expertise, rather than to

execute the underlying trades

themselves Indeed, the Opinion

envisaged a situation where no trades

were required On this basis, Deutsche

Bank’s services did not have

characteristics of an exempt financial

service and were taxable

Deutsche Bank and the European

Commission argued that investments in

individual portfolios and in special

investment funds were sufficiently

similar that both should benefit from the

same VAT exempt treatment The AG

rejected this on the basis that the fund

management exemption has been

drafted such that it only covers collective

investment schemes, which would not

include individual portfolios

In answering the last question, which is

of limited application given the changes

to the VAT place of supply rules post 1

January 2010, the AG concluded that

whilst the services did not benefit from

exemption, they were nevertheless

governed by the same VAT place of

supply rules

Summary

The AG’s Opinion raises issues for

investment mandates where a fee is

split between taxable advisory services

and exempt transaction fees Taken at

its widest reading, it could mean that

exempt fees charged under split

mandates could, going forward, fall to be

taxable (on the basis they constitute

payment for a single taxable supply)

Where a business which has not yet

submitted claims for potentially

over-declared VAT to its local tax authority, it should consider whether to do so now

There needs to be a balance between a provider’s need to protect itself from claims from its customers for overcharged amounts and the AG’s view which strongly suggests any claim would be unsuccessful

The AG’s Opinion is available via this web link:

http://curia.europa.eu/juris/document/do cument.jsf?text=&docid=122541&pageI ndex=0&doclang=en&mode=lst&dir=&o cc=first&part=1&cid=565004

The Netherlands

New tax treaty with Germany

A new income tax treaty between the Netherlands and Germany has been

signed The new tax treaty will most likely apply from 1 January 2014 and will replace the tax treaty of 1959

The maximum rates of withholding tax

on dividends are:

• 5% in case of a substantial holding (a holding of at least 10% of the capital);

• 10% in case of dividend payments

to a Dutch resident pension fund;

• 15% in all other cases

No withholding tax is levied on interest

or royalties

Furthermore, in the Protocol a stipulation with regard to the tax treatment of a

Dutch closed FGR ('besloten fonds voor gemene rekening') is included

A closed FGR is treated as tax transparent for Dutch tax purposes This implies that all income and gains derived through such FGR are attributed to the investors in proportion to their

participations in the FGR FGRs are frequently used for asset pooling by pension funds and other investors

In the Protocol the German tax authorities confirm that a closed FGR will also be regarded as tax transparent for the application of the income tax treaty concluded between the Netherlands and Germany This tax transparency also applies to third country investors in the closed FGR Previously, the Netherlands have concluded similar special agreements

Fund News – May 2012

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(Competent Authority Agreements)

regarding the tax treatment of a closed

FGR with Canada, Norway, Denmark

and the United Kingdom It is expected

that CAAs with other countries

(including the USA and Switzerland) will

follow

The new income tax treaty is available

via this link (in Dutch) and this link (in

German)

UK

HMRC publish second round

consultation document on the future

taxation of UUTs

On 24 May 2012 HM Revenue &

Customs (“HMRC”) published the

second round consultation document

relating to proposed changes to the

taxation of unauthorised unit trusts

(“UUTs”) The proposals aim to:

simplify; reduce burdens; and provide

greater certainty for investors in exempt UUTs (“EUUTs”) Exempt UUTs are UUTs all of whose investors are themselves exempt from tax on chargeable gains The proposals also seek to remove certain avoidance opportunities identified by HMRC

The proposals in the consultation are that:

• EUUTs will remain subject to income tax, but the requirement to withhold basic rate income tax on deemed distributions will be removed The accounting year will become the basis period and distributions will be deemed to have been made at the end of each accounting period The EUUT will

be liable to income tax to the extent that income is not distributed

Transitional rules will be introduced

• Further simplifications are proposed:

it is suggested that EUUTs will not

be subject to tax on trading profits if investments are on a “white list”

(the paper is silent on whether real estate is to appear on the “white list”) It will be possible to invest in non-reporting offshore funds in a more tax-efficient way provided that sufficient information can be obtained from the underlying funds

Provided that interest is accounted for on an accruals basis, the requirement to comply with the accrued income scheme may go

• EUUTs will need to seek approval from HMRC but more proportionate rules will be introduced to address the current “cliff-edge” risk to the

EUUT’s status where there are inadvertent non-exempt investors

• Authorised Investment Funds (“AIFs”) will still be able to invest in EUUTs (subject to FSA rules) but this will affect the tax treatment of the AF The AF will pay corporation tax at the main corporation tax rate rather than 20 percent rate for AFs; and it will not be permitted to make

an interest distribution

• Non-exempt UUTs (“NEUUTs”) will

be within the charge to corporation tax and any distributions would be treated in the same way as corporate dividends

The consultation closes on 20 August with draft legislation to follow in autumn 2012; proposed inclusion in Finance Bill 2013; and for the proposals to take effect from the end of the 2013-2014 tax year

While the framework for EUUTs is similar to before, the proposals are significant and managers of EUUTs and investors in EUUTs (predominantly pension funds and charities) should consider them carefully In particular those UUTs with a mix of exempt and non-exempt investors should pay close attention as there is a clear steer in the paper that these should restructure

• Exempt investors in a NEUUT may begin to experience unacceptable levels of tax leakage;

• there will be a clear divide between EUUTs and NEUUTs; and

Fund News – May 2012

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• the UUT will become less attractive

as a vehicle for non-exempt

investors; however there may still

be a place for such an open-ended

unauthorised vehicle

The second consultation document (32

pages) is available via this web link:

http://customs.hmrc.gov.uk/channelsPor

talWebApp/channelsPortalWebApp.porta

l?_nfpb=true&_pageLabel=pageLibrary_

ConsultationDocuments&propertyType=

document&columns=1&id=HMCE_PRO

D1_032081

Luxembourg

Luxembourg and Germany sign new

tax treaty

On 23 April 2012 Luxembourg and

Germany signed a new income and

capital tax treaty

The new treaty generally follows the

OECD Model Convention and will, once

ratified by both countries, replace the

existing 1958 tax treaty

Some important highlights are summarized below:

• The withholding tax (WHT) rate on dividends is reduced to 5% (from 10% before) where the beneficial owner is a company of the other Contracting State holding at least 10% of the capital of the paying company (before a stake of 25% of the voting shares was required)

• The new tax treaty provides (as the previous tax treaty) a zero WHT rate for interest and a 5% WHT rate for royalty payments

• Income paid on convertible and profit participating bonds should under the new tax treaty fall within the interest provision (in the previous tax treaty, this income has been explicitly covered by the dividend article) Accordingly, there should generally be no WHT on such payments (unless the instrument is classified as equity in the State in which the issuing company is resident)

• According to the new tax treaty, capital gains realized upon disposal

of shares in a company deriving more than 50% of their value (directly or indirectly) from immovable property situated in a the other Contracting State may under the new tax treaty be taxed in the state of the immovable property

While under current Luxembourg tax law, capital gains realized by non-resident taxpayers upon disposal of shares in resident

companies are generally not taxable (unless the alienator had a

participation of more than 10% and realized capital gains of speculative nature), German tax law provides under certain conditions for the taxation of capital gains realized by non-residents upon disposal of participations in German companies

• The new tax treaty limits the scope

of permanent establishments when stating that building sites,

construction and installation projects constitute a permanent

establishment provided that they last more than 12 months (before this period was set at 6 months)

• The new tax treaty provides for a detailed article that allocates taxing rights over different kind of pension payments (for example, pensions paid by a social security of a Contracting State), thereby increasing legal certainty in this respect

• While Luxembourg generally applies the exemption method (with a reserve for progression) and the credit method in regard to income that is subject to a limited WHT in Germany (i.e dividends, interest and royalties), Germany adopted the exemption method only where certain conditions are met For example, business profits deriving from a Luxembourg permanent establishment or dividends paid by a Luxembourg company are only tax exempt if the income is derived from active business as defined

Fund News – May 2012

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under German tax law (i.e so-called

active business test) Nevertheless,

the German participation exemption

regime should continue to apply in

these cases If an exemption is not

granted, the income will be taxed in

Germany and the so-called tax credit

method be applied

• According to the protocol of the

new tax treaty, SICARs, SICAVs and

SICAFs may benefit from the

reduced/zero withholding tax rates

provided in regard to dividends and

interest payments If certain

conditions are met, these

withholding tax rates may also

benefit to Luxembourg FCPs

Further details of the treaty will be

reported subsequently

Aberdeen E-alert

The latest Aberdeen E-Alert (tax

newsletter focusing on withholding tax

reclaims based on the Aberdeen case

law) discusses the conclusions of the

European Court of Justice (ECJ) in

relation to the French withholding tax on

outbound dividends to foreign UCITS

The full text of the e-alert is available via

the following web link

Accounting News IFRS for Investment Funds – Issue 4 - Classification of Financial Assets under IFRS 9

This publication will guide you through the practical application issues that investment funds may encounter when applying the classification requirements

of IFRS 9 Financial Instruments that is to supersede IAS 39 Financial instruments:

Recognition and Measurement

It discusses the key requirements and includes interpretative guidance and illustrative examples

http://www.kpmg.com/Global/en/Issues AndInsights/ArticlesPublications/ILine-of- Business-publications/Pages/IFRS-investment-funds-isse-4.aspx

KPMG European Responsible Investing Fund Survey

How is Responsible Investing defined? What is the size of the Responsible Investing “RI” Fund Market in Europe? What are the favoured domiciles of such funds? The “European Responsible Investing Fund Survey” carried out by KPMG Luxembourg and commissioned

by the Luxembourg Fund Association (ALFI) intends to answer these questions by giving a snap shot of the European Responsible Investing Fund universe

Whilst this study confirms that Responsible Investment funds remained

a niche product in 2010, with EUR 129.49 billion, across a total of 1,236 investment fund vehicles, the survey indicates that the sector, driven by customers demand and policy initiatives will encounter significant evolution in the future

For instance, this study confirms that social entrepreneurship funds were marginal in 2010 but with the EU initiative on Social Entrepreneurship funds, this picture could radically change

in the upcoming years

Impact investment should also be accelerated by the creation of new investment vehicle options such as the

“société d’impact” currently discussed within the Luxembourg framework There is no doubt that Responsible Investing will evolve in the future and this study is critical in order to be able to track the progress of this growing sector

in the coming years To read the full report please click here and for a podcast on the findings please click here:

Fund News – May 2012

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Contact us

Dee Ruddy

Senior Manager

T: + 352 22 5151 7369

E: dee.ruddy@kpmg.lu

Audit

Nathalie Dogniez

Partner

T: + 352 22 5151 6253

E: nathalie.dogniez@kpmg.lu

www.kpmg.lu

Publications

Tax Georges Bock

Partner

T: + 352 22 5151 5522 E: georges.bock@kpmg.lu

Advisory Vincent Heymans

Partner

T: +352 22 5151 7917 E: vincent.heymans@kpmg.lu

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and

timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such

information without appropriate professional advice after a thorough examination of the particular situation

© 2012 KPMG Luxembourg S.à r.l., a Luxembourg private limited company, is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity All rights reserved The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International

A Disputed Proposal: An Overview of the Financial Industry's Response to the Volcker Rule here:

The evolution of

an industry –

2012 KPMG/AIMA Global Hedge Fund Survey here:

Charles Muller

Partner

T: +352 22 5151 7950 E: charles.muller@kpmg.lu

Dodd-Frank for Foreign Financial Institutions - Geared up for change? here: