Issue 95 – Regulatory and Tax Developments in August 2012 doc

Existing investors making a new subscription: the investor must be provided with a KIID unless the UCITS is aware that the investor’s current copy of 1 2 3 4 5 6 7 8 9 10 11 Regulatory C

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FUND NEWS August 2012

Investment Fund Regulatory and Tax developments in

selected jurisdictions

Issue 95 – Regulatory and Tax

Developments in August 2012

Regulatory News

Ireland

Irish regulator clarification on

additional subscriptions and the KIID

The Irish regulator, the Central Bank of

Ireland, has issued the following

guidance on the Key Investor

Information Document (KIID) where

investors make additional or new

subscriptions:-

1 Existing investors: the most up-to-date version of the KIID must always be available on a UCITS’ or its management company’s website However, there is no requirement to provide subsequent versions of the KIID to existing investors except as set out below

2 Existing investors making a new subscription: the investor must be provided with a KIID unless the UCITS is aware that the investor’s current copy of

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

Regulatory Content Ireland

Irish regulator clarification on additional subscriptions and the KIID Page 1

Consultation Paper 59 Page 2

New draft AML legislation Page 2

Luxembourg

Bill of law implementing AIFMD submitted to Parliament Page 2

Regulation on SIF Risk Management and Conflicts of Interest requirements Page 6

Malta

SICAV Incorporated Cell Companies

Recognised Incorporated Cell Companies

Level playing field for Limited Partnerships

UK

FSA proposes ban on promotion of UCIS and similar products to retail investors Page 7 Tax Content

European Union

VAT treatment of portfolio management services – the Deutsche Bank case Page 9

Ireland

Ireland’s Double Taxation Agreement Network Continues to Grow Page 10

Luxembourg

Aberdeen E-Alerts Page 10

Turkey

The Private Pension Savings and Investment

Law 6322 to increase savings in Turkey

Page 11

Fund News – August 2012

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the KIID is the most up-to-date

version

3 Automatic re-investments:

where additional subscriptions

arise under contract, there is no

need to provide an up-to-date

KIID

4 Regular savings schemes: as

these are based on a single

subscription contract, the KIID

need only be provided once

However, if the subscription

arrangements change and a

new subscription form (i.e a

new contract) is completed

then a current KIID must be

provided

Consultation Paper 59 – Proposed

changes to the regulatory reporting

requirements of Irish authorized

collective investment schemes

The Central Bank has issued a

consultation paper under which it

proposes to make a number of changes

to the regulatory reporting regime for

Irish funds As a result, reporting will be

made through the new Online Reporting

System (ONR system) for:

• Annual and interim financial

statements and a short

questionnaire

• Annual auditor statutory duty

confirmation return and supporting

documents

• Annual financial derivatives

instrument report (UCITS only)

• New annual sub-fund profile

questionnaire

• New Regulatory Report

• Annual updated KIID

New draft anti-money laundering legislation

A draft Criminal Justice (Money Laundering and Terrorist Financing)(Amendment) Bill 2012 has been published The draft bill deals with

a number of practical and technical issues which have arisen as a result of the implementation of the Third Anti-Money Laundering Directive It is anticipated that this draft bill will be enacted quickly

Luxembourg

Bill of law implementing the AIFMD into Luxembourg law submitted to the Parliament

On 24 August 2012, the draft law 6471 transposing the Alternative Investment Fund Managers Directive (AIFMD) into Luxembourg law (Directive 2001/61/EC)

was submitted to the Chambre des

Députés (Luxembourg Parliament) The

draft law will be discussed in Parliament where it may be amended, and is expected to be voted into law before the end of 2012 The draft law is a

’framework law’ and sets out the rules applicable to Alternative Investment Fund Managers (AIFM) At the same time the laws governing Luxembourg regulated funds will continue to co-exist The first part of the draft law (Chapters 1-11) will adopt a new piece of legislation that closely follows the wording of the AIFMD The second part

of the law (Chapter 12) updates various existing laws in order to ensure consistency with the AIFMD, and also introduces some new structuring options to modernize the legal framework

Update of the Fund laws

Under Luxembourg law Alternative Investment Funds (AIF) may be set-up

as Part II Undertakings for Collective Investment (UCIs) under the law of 17 December 2010, Specialized Investment Funds (SIF) under the Law of 13 February 2007, or an Investment Company in Risk Capital (SICAR) under the law of 15 June 2004 The draft law introduces the following amendments to

Fund News – August 2012

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these pieces of legislation:

• Part II UCIs

All Part II UCIs will be qualified as AIFs

and are subject to the AIFMD regime

Each AIF will have to appoint an AIFM,

or be self-managed and require

authorisation as an AIFM, and comply

with the remaining AIFMD provisions

• SIFs

Luxembourg updated the SIF law in

March 2012 and introduced new

requirements for regulatory approval of

the SIF before the launch of activities,

new rules on risk management and

conflicts of interest, and the possibility

to cross-invest between sub-funds in the

same umbrella structure The set-up of

an appropriate risk management

framework and conflicts of interest

procedures had to be put in place by 30

June 2012 The draft AIFMD

implementing law will amend the SIF

law and distinguish between SIFs

managed by an AIFM and SIFs managed

by a non-AIFM with only those managed

by an AIFM subject to the SIF regime

• SICAR Similar to the regime for SIFs the SICAR Law will be divided into two parts: the first regulating SICARs that are not considered as AIF, and the second including specific provisions for SICAR that will fall under the definition of AIF

Introduction of a new professional of the financial sector (PFS) status:

‘’Professional Custodian of Assets other than Financial Instruments’’

Luxembourg has decided to authorize the appointment of an entity that is neither a credit institution nor an investment firm as depositary of a certain category of AIFs These AIF will offer no redemption rights exercisable during a period of five years from the date of the initial investments and generally do not invest in assets that must be held in custody or generally invest in issuers or non-listed companies

to potentially acquire control over such companies

A new status of PFS will be created:

’professional custodians of assets other

than financial instruments’ The criteria set down to be authorised as PFS custodian are the following:

• Have a legal personality

• Minimum share capital requirement

of EUR 500,000

• Not subject to additional own funds requirements based on the volume

of assets under custody

Modification of the Management Company regimes available in Luxembourg

The law of 17 December 2010 on UCIs contains two Management Company regimes, a UCITS licensed Management Company (Chapter 15), and a non-UCITS Management Companies (Chapter 16) The draft AIFM law provides for the

set-up of an AIFM under chapter 2

The draft law allows a UCITS Management Company to ask for an extension of its license to be approved and recognized as an AIFM The UCITS Management Company will have to submit an application file to the CSSF

Fund News – August 2012

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The UCITS Management Company will

have to comply with Chapter II of the

draft law and provide additional

information to the CSSF regarding:

• the AIF it intends to manage

• a program of activity setting out the

organizational structure of the

UCITS Management Company,

including information on how it will

comply with operating conditions

and reporting obligations

• Information on remuneration policy

which has to be compliant with the

AIFMD

• Information on the delegation of

tasks

• How it will comply with the share

capital and own fund requirements

set out in the AIFMD

Once the approval is granted, the UCITS

Management Company will be

recognized as AIFM-compliant and will

benefit from the AIFMD passport

A Chapter 16 Management Company

will also be able to seek authorisation to

act as an AIFM

Main Tax Changes

From a tax point of view, the

implementation of AIFMD in

Luxembourg will engender several

changes, which are summarized below

1 New Luxembourg limited

partnership – a very flexible fund

raising vehicle

The company law and tax regime

applicable to the Luxembourg limited

partnership (‘LP’) will be significantly

modified The reform will further increase the flexibility and provide for a full tax transparency and tax neutrality

The new Luxembourg LP will be aligned with models existing in England, Scotland, Jersey, Guernsey and other common law jurisdictions and will be tailor-made for alternative investment fund raising and for carried-interest structuring

2 Modernisation of the existing common limited partnership (“Société en Commandite Simple”

or “SCS”)

The SCS will remain governed primarily

by the limited partnership agreement (“LPA”), but with an extended contractual freedom to fulfil any business needs of the fund managers and investors, while safeguarding the confidentiality required by the alternative investment fund market

The Luxembourg company law applicable to the SCS will be modernised and will include the following interesting features:

• possibility of contributions in industry (services, know-how) by general partners (“GPs”) and limited partners,

• contractual freedom to allocate profits or losses,

• full flexibility to define voting rights,

• publication of the LPA limited to excerpts to safeguard the confidentiality of the identity of the limited partners and of sensitive information

3 Introduction of a new special limited partnership (“Société en

Commandite Spéciale” or “SCSp”)

The SCSp will be a brand new type of vehicle in Luxembourg, profiting from the same flexible company law regime

as the SCS The originality is the SCSp having no legal personality, thus creating

a new choice between a Luxembourg

LP with legal personality (SCS, similar to

a Scottish LP) and a Luxembourg LP without legal personality (SCSp, similar

to an English LP)

4 Full tax transparency and tax neutrality

The SCS is currently treated as transparent for corporate income tax (“CIT”) and net worth tax (“NWT”) purposes The same treatment will apply

to the future SCSp

If the GP(s) taking the form of limited company(ies) hold(s) less than 5% of the partnership interests, the income of the Luxembourg LP will no longer be deemed to be a business income Moreover, if the activity of the SCS and SCSp is limited to private wealth management (which generally corresponds to the activity of private equity and real estate funds), the income

of the SCS and SCSp should not be classified as business income

Consequently, no permanent establishment should be recognized, especially for municipal business tax (“MBT”) purposes

The new provisions will allow a full tax transparency and tax neutrality of both the SCS and SCSp in Luxembourg

Fund News – August 2012

5

The tax treatment of SCS set up before

the new law enters into force will

remain unaffected by the new rules

5 Management of investment funds –

Recast of the scope of the VAT

exemption

Bill 6471 includes changes to Article 44,

1, d) of the Luxembourg VAT law

covering the investment funds

management services exemption

Art 206 of the bill is the consequence of

a recent Luxembourg case-law

according to which subcontracted

investment management services

received by a Luxembourg investment

manager for the benefit of a SICAV

established in an European Union

Member State other than Luxembourg

should not benefit from the VAT

exemption of Article 44, 1, d) of the

Luxembourg VAT law (“VATL”)

Indeed, in its current wording the

exemption applies only to the

management of investment funds

subject to the supervision of the

Luxembourg regulatory authority (the

CSSF or the CAA) and not to another

European Union regulatory authority

This leads to a situation where a

management company can incur input

VAT on subcontracted investment funds

management services without any

recovery possibility considering that the

management services it renders to an

European Union regulated fund would

be VAT exempt if located in

Luxembourg

To remedy this situation, the bill would

recast Article 44, 1, d) VATL to include within the scope of the VAT exemption the management of investment funds located in other European Union Member States and subject to supervisory bodies similar to the CSSF

or the CAA

The enactment of this bill should reach its aim to avoid a situation where a management company would have incurred non-recoverable input VAT on subcontracted investment funds management services

It should be noticed that the bill also includes within the scope of the VAT exemption the management of alternative investment funds (“AIF”), whatever their place of establishment

The impact of this provision should be threefold First, the supply of

management services to a Luxembourg AIF should be VAT exempt Second, subcontracted AIF management services received by a Luxembourg manager should also benefit from the exemption And third, in return for this exemption, the input VAT recovery right

of a Luxembourg AIF manager would have to be carefully monitored, even if the AIF managed is established outside the European Union The interpretation

of those provisions, if enacted as such, could be further detailed in a Grand Ducal Decree or in a Circular from the Luxembourg VAT authorities

6 Carried interest

The draft law also introduces a carried interest regime The provisions cover the taxation of gains realized by the

disposal of units, shares or other securities issued by an alternative investment fund in the framework of a carried interest as well as the mere carried interest

The provision applies to employees of alternative investment fund managers or alternative investment fund

management companies

Capital gains realized upon sale of units, shares or securities covered by the present draft law are tax free if held for more than 6 months except if the individual holds or held a substantial participation

Carried interest not represented by units, shares or other securities are taxed as extraordinary income at a quarter of the global tax rate (around 10%)

The tax provisions qualify the income of carried interest as other income (not as income of salaried activity) and limit the tax regime to individuals that became tax resident in Luxembourg during the year or the 5 subsequent years of the introduction of the present law The provisions do only apply for income realized within 10 years after the year the individual took its functions in Luxembourg They do, however, not apply to individuals that have been tax residents or taxed on professional income in Luxembourg anytime during the 5 last years before the year the law has been enacted Neither do the provisions apply to carried interest where prepayments have been made

Fund News – August 2012

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7 AIF managed out of Luxembourg

Non resident AIFs are not subject to

Luxembourg direct taxation by the mere

fact that they are effectively managed in

Luxembourg

The implementing law is available, in

French only, via the following web link:

CSSF Regulation n°12-01 on Risk

Management and Conflicts of

Interests for SIFs

On 13 August 2012, the Commission de

Surveillance du Secteur Financier (CSSF)

issued a new Regulation laying down

detailed rules relating to risk

management and conflicts of interests

for SIFs

1 Risk management

The Regulation explains that the risk

management function has to implement

and maintain an adequate and

documented risk management policy

intended to detect and manage

appropriately the exposure to the risks

It also has to ensure compliance with

the SIF’s risk limitation system

Furthermore, the risk management

system has to be adopted by the

directors of the SIF and has to be

subject to a review on a regular basis

Any material change that could occur

has to be notified to the CSSF

The Regulation clearly states that the

risk management function has to be

hierarchically and functionally

independent from operating units

Nevertheless, a derogation from this

requirement is foreseen if justified by

the nature and scale of activities

SIFs may also delegate all or part of their risk management to third parties only in cases where the third party has the necessary skills to perform it in a reliable and efficient manner Moreover, the delegation will not, in any case, relieve the directors of SIFs of their

responsibility

2 Conflicts of interest The Regulation specifies that SIFs have

to implement and maintain an effective conflicts of interest policy requiring a written policy, appropriate to the size and organization of the SIF and the nature, scale and complexity of its business SIFs will also have to implement and maintain a policy in order

to prevent each relevant person (defined

in Article 6) from entering into personal transactions which may give rise to a conflict of interest They will have to prevent or manage each conflict of interest resulting from the exercise of voting rights attaching to the

instruments held SIFs will also have to prove their independence in terms of management of conflicts of interest according to specific criteria

Finally SIFs will have to keep update on

a regular basis a record of the types of collective portfolio management activities in which a conflict of interest may arise or has arisen

The Regulation will enter into force on 1 September 2012 The CSSF Regulation n°12-01 is available (in French only) via the following link:

Malta

SICAV Incorporated Cell Companies Regulations

The Companies Act (SICAV Incorporated Cell Companies) Regulations extend the Maltese legislation applicable to cell companies, first introduced in the insurance sector, to the fund sector In terms of these regulations, each Incorporated Cell of an Incorporated Cell Company (ICC) has separate legal personality and is treated as a separate company forming part of the ICC Scheme Incorporated Cell Companies and Incorporated Cells share the same registered office and at least one common director The Regulations also allow for the relocation and expulsion of Incorporated Cells and the

transformation of an Incorporated Cell Company or an Incorporated Company into a non-cellular company and vice-versa It is also possible to redomicile or shift the legal seat of an Incorporated Cell Companies and Incorporated Cells

in terms of the Companies Act (Continuation of Companies) Regulations

Recognised Incorporated Cell Companies Regulations

The new Recognised Incorporated Cell Companies (RICCs) framework introduces a specific set of conditions which are separate from those applying

to the ICC SICAV regime The Companies Act (Recognised Incorporated Cell Companies) Regulations provides promoters with a flexible Incorporated Cell Company (ICC) structure that may be used as a vehicle

to achieve various objectives including

Fund News – August 2012

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the setting up of a fund platform Under

these regulations, a limited liability

company may be formed or constituted

as a recognised incorporated cell

company to establish incorporated cells

and to provide such incorporated cells

with administrative services In order to

provide such administrative services, a

recognised incorporated cell company

requires a Recognition Certificate issued

by the Maltese Financial Services

Authority

Level playing field for Limited

Partnerships and SICAVs

By virtue of the Companies Act

(Amendment of the Tenth Schedule)

Regulations, Limited Partnership

structures have been brought on a level

playing field with investment companies

with variable share capital (SICAV)

Therefore, Limited Partnerships will

benefit from more structural and

operational flexibility under the

Companies Act It will be possible for

Limited Partnerships to be formed either

as a class partnership or as a

multi-fund partnership The multi-multi-fund

partnership may moreover elect for the

segregation of assets and liabilities

between separate funds In addition, it is

also possible for Limited Partnerships to

be set up with capital that is not divided

into shares

UK

The FSA proposes to ban the promotion of UCIS and similar products to retail investors

On 22 August the Financial Services Authority (“FSA”) published its latest proposals to increase consumer protection through banning the promotion of Unregulated Collective Investment Schemes (“UCIS”) and similar products to the majority of retail investors The details are in consultation paper (“CP 12/19”) which follows on from its Product Intervention discussion paper (DP 11/1) issued in January 2011

The FSA’s conclusion is that such products must be restricted to sophisticated investors and high net worth individuals that are properly assessed and are aware of the risks if it

is to mitigate the risks and reduce the level of miss-selling that the FSA has observed in the market

The FSA assesses that current regulation does not provide sufficient protection to “ordinary” retail investors

It has gathered evidence that only one in four advised sales of a UCIS to retail customers was suitable In addition it concludes that other products, with similar risks to UCIS, which are not covered by the rules on the marketing of UCIS, can be widely promoted in the retail market The FSA is concerned that failures of non-mainstream pooled investments in recent years have lead to

a total investment losses for customers

Overall the conclusion of the FSA is that promotion of UCIS and similar products can fall substantially short of the standards required and that it must take action to protect ordinary retail

customers from unsuitable products and potentially large losses It highlights that since 1 September 2010 it has issued 22 Final Notices and four Decision Notices

in relation to UCIS failures and summarises these on its website:

http://www.fsa.gov.uk/smallfirms/your_fi rm_type/financial/investment/ucis-enforcement-notices.shtml

The FSA identifies such investments as being esoteric; potentially illiquid; and susceptible to catastrophic loss of value Examples of esoteric investments include: traded life policies; fine wines; crops; unlisted shares; timber; and UCIS and other schemes investing in such assets In addition securities in special purpose vehicles which have similar risks should also be restricted on their promotion The FSA proposes that firms should only promote these products to people for whom a UCIS or similar is more likely to be appropriate

The FSA draws attention to the fact that

it has issued warnings to investors concerning UCIS, including the protections available and not available when investing in a UCIS:

http://www.fsa.gov.uk/consumerinforma tion/product_news/saving_investments/ ucis

but clearly considers it must now go further in meeting its statutory objective and making rules and guidance that protect retail investors

In what many may consider to be a controversial move (and notably one ranked as a three star consultation by

Fund News – August 2012

8

the FSA) the effect of these proposals,

should they come into force as drafted,

would be:

• The introduction of glossary

definitions for certified high net

worth investor, certified

sophisticated investor, sophisticated

investor and non mainstream pooled

investment to restrict and align

current eligible investor criteria,

removing the existing firm discretion

in assessing investor sophistication

• Implementation of specific

marketing restrictions including

mandatory risk discloses which aim

to create a level playing field

between different types of

investment product and to provide

some protection against retail

investors being inappropriately

classified

• Requirements for firms to document

and maintain records of the precise

basis on which they make each

promotion to a retail client, including

setting out the basis on which the

client meets the marketing

exemptions

• Requirements for Individuals

responsible for the Compliance

Oversight Function within affected

firms to confirm the compliance of

each financial promotion with the

marketing restriction rules

In addition, the proposals include:

• Handbook guidance: to clarify that

personal recommendations (i.e the

provision of advice) generally

amount to financial promotion and therefore are subject to the relevant marketing restrictions; and

• updating of the definition of retail investment product under the Retail Distribution Review to clarify that UCIS and similar products do not necessarily have to be considered

as ‘substitutable’ investments when firms/advisers are evidencing independence of advice

It is important to note that execution only sales and incoming cross-border financial promotions of these investments are not affected by the proposals

The consultation is for three months to the 14 November after which the FSA will publish a Policy Statement and its finalised Rules and Guidance in quarter one 2013

CP 12/19 (92 pages) is available via this web link in which the FSA provides a summary of why it is consulting at this time:

http://www.fsa.gov.uk/library/policy/cp/2 012/12-19.shtml

Tax News

European Union

VAT treatment of portfolio management services – the Deutsche Bank case

On the 19 July the European Court of Justice (ECJ) released its Judgment in the “Deutsche Bank case” (C44/11) The Judgment confirmed the Advocate General's Opinion that discretionary portfolio management services are subject to VAT and are not exempt either as a dealing in securities or, alternatively, as a service similar to fund management

Background

Deutsche Bank provided discretionary portfolio management services, the relevant portfolio assets being shares and other securities Subject to certain parameters, Deutsche Bank bought and sold assets without requesting approval from the client It charged a total fee based on 1.8 percent of the assets under management This comprised 1.2 percent for advisory services and 0.6 percent for securities dealing activities Deutsche Bank sought clarification from the ECJ on whether:

1 Portfolio management services should be VAT exempt either as a dealing in securities or as a service which is similar to fund

management;

2 The bundle of advisory and execution services constituted a single supply for VAT purposes or

Fund News – August 2012

9

not; and whether

3 Previous European legislation

covering the place of supply of

financial services covered services

which fell outside the VAT finance

exemption

The Judgment

The ECJ’s Judgment follows the

Advocate General’s Opinion and

confirms that:

1 Portfolio management represents a

single, taxable supply for VAT

purposes In reaching this view, the

ECJ held that Deutsche Bank’s

execution and advisory elements

ought to be placed on an equal

footing and, taken together, they

form a single, inseparable supply

which it would be artificial to split

This being the case, the ECJ

considered whether the package of

services fell to be exempt or not

The ECJ held that portfolio

management services clearly do not

fall within the exemption for the

management of special investment

funds

2 Turning to the exemption for

transactions in securities, the ECJ

noted that this exemption covers

transactions to “create, alter or

extinguish” rights in relation to

securities The ECJ stated that as

this was only part of the overall

service and because of the

requirement to strictly interpret the

scope of EU VAT exemptions,

Deutsche Bank’s services must fall

to be taxable It was also noted that

if the exemption for transactions in securities already covered the management of those assets, there would have been no need for EU VAT legislation to provide for a separate fund management exemption

3 On the last question, the ECJ confirmed that, prior to the introduction of the VAT Package in

2010, EU VAT legislation governing the place of supply of financial services was not limited to supplies which fall within a relevant

exemption As such, discretionary portfolio management services fell under this heading and, in a business-to-business context, were taxed according to the customer’s location

Implication

Whilst the ECJ’s decision follows the VAT treatment applied by a number of investment managers and private banks, many institutions (particularly in the UK) have historically split their mandates such that a separate exempt fee is charged for execution services The extent to which this treatment can continue is now in doubt, albeit the Judgment does acknowledge that advisory and execution services may be separately engaged for, depending on the customer’s underlying aims and profile

These judgments, considered together, suggest that investment management comprises a spectrum of activities, with exempt execution and introductory services at one end and taxable

discretionary management at the other Quite where services such as execution with advice would sit is not wholly clear and may require further case law or guidance

National responses to the ECJ’s Judgment and, in particular, whether institutions can continue to exempt execution fees are awaited Institutions should also assess the status of any protective claims they may have submitted Where the tax collector does not reject a claim there is merit in maintaining that exemption can apply Prior to the introduction of the new place of supply rules on 1 January 2010,

a number of jurisdictions viewed certain taxable financial services (such as non-exempt fund management and investment management services) as being taxed according to the supplier’s location Businesses which have incorrectly been charged VAT on cross-border supplies of these services should, therefore, consider whether to revert to their supplier for a refund Double taxation will have arisen where the supplier has charged local VAT and the business has simultaneously self-accounted for home state VAT under the reverse charge Clearly, whether a refund is appropriate would depend on a range of factors including complex time limitation issues in each relevant jurisdiction

If you have any questions about this case and its implications for your business, please contact your usual KPMG VAT adviser

Fund News – August 2012

10

Ireland

Ireland’s Double Taxation Agreement

Network Continues to Grow

Ireland has recently agreed DTAs with

Egypt, Qatar and Uzbekistan in addition

to those signed with Albania, Bosnia &

Herzegovina, Hong Kong and

Montenegro last year

This continued focus on Ireland’s DTA

network has significantly increased the

number of DTAs within the Irish

network To date Ireland has signed

comprehensive DTAs with 68 countries

Ongoing negotiations with several other

jurisdictions will see the network

continue to grow

Ireland has DTAs with most of the major

investment markets The agreements

cover direct taxes, which in the case of

Ireland are income tax, corporation tax

and capital gains tax

A comprehensive DTA network is

important for international financial

services businesses and is of particular

interest to investment funds where

withholding taxes on dividends and

interest have a direct impact on

investment yields Moreover for

investment countries that impose capital

gains tax on nonresident investors (or

where there is uncertainty in relation to

the application of capital gains taxes),

having access to a DTA network is

important to help reduce such taxes and

exposures

The text of the Ireland’s DTAs can be

found on the Irish Revenue

Commissioners website here:

Luxembourg

Aberdeen E-alert

The Aberdeen E-Alert Issue 2012-11 (tax newsletter focusing on withholding tax reclaims based on the Aberdeen case law) discusses the abolishment in France of WHT on dividend payments to foreign investment funds The full text of the e-alert is available via the following web link::

The Aberdeen E-Alert Issue 2012-12

(here) looks at new guidance from the German Ministry of Finance regarding the competence of tax offices Risk in case of an omission to file WHT reclaims based on the ECJ decisions in the Aberdeen and in the Santander case in Germany

Turkey

The Private Pension Savings and Investment System Law

The Law numbered 6327 amended the Private Pension Savings and Investment System Law and various other Laws has been enacted by the Parliament and put into effect on 28 June 2012 upon being published on the Official Gazette The Law introduced new provisions on how

to attract more participants to the pension system and to tax gains from the system One of the major incentives

to attract more people in to the system

is “State contribution”

State contribution

• The law removed the existing advantages in the current system

regarding the exemptions at the exit and availability of wage tax

deductions for the individuals whereas it intends to bring long term incentives through employer contributions and state

contributions The state will also be contributing an amount equivalent to 25% of the contributions made to the system for an individual (employee or employer contributions) although such contribution will still be capped at the gross minimum wage per annum It is expected that more participants will be joining the system and thus the pension fund market will be developed

• The law removed an uncertainty and after August 29, 2012, the

withholding taxes on gains at exit from the system will only be applicable over the yields but not the principal amounts invested into the system The individuals will be able to access to the principal amount of contributions and their returns depending on their duration

of stay in the system The schedule

is as follows:

a) The employee will be accessing

to 15% of principal and return if he/she stays in the system for minimum 3 years

b) The employee will be accessing

to 35% of principal and return if he/she stays in the system for minimum 6 years

c) The employee will be accessing

to 60% of principal and return if