Tax Aspects of Cross Border European Securitisation

Transcription

1 Tax Aspects of Cross Border European Securitisation Malta, 30 September 2016

2 Oeriew Key Tax Objecties of International Securitisation Tax Neutrality Tax Neutrality at Origination Tax Neutrality at SPV s leel Tax Neutrality at Inestors leel Tax Neutrality in Malta Tax Neutrality ia Double Taxation Treaty Tax Neutrality ia WHT Repatriation Structure Certainty Cost Efficiency Outlook 2

3 Key Tax Objecties of International Securitisation Tax Neutrality Tax Certainty Cost Efficiency 3

4 Tax Neutrality The key tax objectie in a securitisation transaction is to achiee tax neutrality. This means to ensure (as far as possible) that the securitisation transaction does not lead to any additional tax liabilities arising in or to any acceleration of tax liabilities than would hae been the case had the securitisation not taken place. Tax Neutrality of Origination Tax Neutrality at Inestors leel Tax Neutrality at SPV s leel 4

5 Tax Neutrality at Origination / for Originator Aoidance of tax leakage as a result of the transfer of the receiables to the SPV. Realisation of income taxable profits / losses for the originator? Will the transfer be liable to VAT? Will the transfer be liable to other transfer duties, e.g. stamp duties? Taxation of contractual agreements between Originator and SPV, e.g. whether the serice fees will be liable to VAT. Consideration of the domestic tax impact of the securitisation on the Originator, e.g. on its thin capitalisation position. Impact of transfer pricing regime on the structure, e.g. BEPS implementation. 5

6 Tax Neutrality at SPV s leel Aoidance of income tax leakage at SPV s leel: Aoidance (as far as possible) of withholding tax (WHT) on payments made on the receiables. If any, implementation of WHT refund / repartiation structures. Ensuring that there are nil or minimal taxable profits within the SPV on which income taxes could be charged, e.g. aoiding any timing missmatches regarding realization of income on the receiables on the one side and funding and other expenses on the other ( flow-type heater ). Aoidance of tax liability of SPV in a country other than Securitisation Country, e.g. assuming a taxable presence / permament establishment due to the sericing actiities of the Originator. Ensuring, that any indirect taxes at SPV s leel are minimized, i.e. that a tax neutral VAT position is achieed. 6

7 Tax Neutrality at Inestors leel Aoidance of income tax leakage at Inestors leel. Ensure the ability of the SPV to make outbound payments to the note holders free of WHT. No local tax liability for foreign note holders. Optimisation of the tax status of the note holders in the country of residence. Ensure that no stamp duties and capital, wealth or similar taxes arise. 7

8 To Sum up: Key tax aspect of international Securitisation Transactions: Tax Neutrality. Key aspect to achiee Tax Neutrality: Find a tax neutral location for the Securitisation SPV. 8

9 Tax Neutrality in Malta SPV established in Malta is taxable in principle but can deduct costs from its profits (including the Residual Deduction Amount) i.e. essentially no taxable profits should remain at the leel of the Securitisation SPV. Malta does, in principle, not ley withholding tax on payments made by the SPV to non-malta resident bond holders. Double Taxation Network with 65 countries as well as EC membership may help to reduce or een eliminate foreign WHT. Certain Serices proided to the SPV might be VAT taxable in Malta; serices as subscription, underwriting and placement serices should be VAT exempt. Certain exemptions from Malta stamp duty on transfer of marketable securities may usually be aailable with respect to Securitisation Transactions. Malta offers a straightforward solution for a neutral tax treatment of the Securitisation SPV, the Originator and the Inestors. 9

10 Tax Neutrality in Malta ia Double Taxation Treaty Aoidance of source taxation in Origination Country: Securitisation of German mortgage loan receiables to international Inestors. Interests on German mortgage loans are in principle subject to German income tax under German domestic tax law. Germany Originator Malta Interest Payments Interest Payments Inestor Art. 11 par. 1 of the German Maltese Double Taxation Treaty (DTT) proides, howeer, for a 100% tax relief from German taxation. SPV Inestor Applies also to interest payments on German mortgage loans (see Art. 11 par. 2 DTT): Mortgage Loan Receiables Bonds Inestor The term interest as used in this Article means income from debt-claims of eery kind, whether or not secured by mortgage, and in particular, income from goernment securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. No German tax burden on interest income of SPV. 10

11 Excursus: German Anti Treaty Shopping Proision Tax Neutrality in Malta ia Double Taxation Treaty History of Anti Treaty Shopping Proision in Germany: Prior court decisions of the German Supreme Tax Court: Extensie substance requirements to be met for foreign entities to claim for Treaty benefits (so called Dublin Dock 1-Decisions). Germany Originator Interest Payments Malta SPV Interest Payments Inestor Inestor Later court decisions of the German Supreme Tax Court: Weakening of the substance requirements due to EC-law (so called Dublin Dock 2-Decisions). Answer of the legislator: Implementation of Sec. 50d para. 3 of thegermanincometaxlaw:norefundofgermanwhttax under a Tax Treaty if certain substance requirements will not be met ( Treaty oerride ). Mortgage Loan Receiables Bonds Inestor Does only apply in the case of WHT. Acceptance of a foreign entity may be challenged by general German tax aoidance rules. Substance requirements under this 11 rules can be achieed, howeer, easier.

12 Tax Neutrality in Malta ia WHT Repatriation Structure Repatriation of WHT in Origination Country to Securitisation Structure: Securitisation of German financing instruments with profit linked interest to international Inestors, e.g. profit participation agreements (PPAs). Germany 1. German WHT Tax Authorities 2. Annual Tax Refund SPV 2 Malta 3. Tax Refund Profit linked interest on German financings are in principle subject to German WHT under German domestic tax law. No treaty relief achieable under the German Maltese Double Taxation Treaty (DTT) for profit linked interest. 100% SPV 1 Inestors Inestors Using a tax transparent entity as Securitisation SPV with 100% German shareholder. LP new legal form in Malta. Profit Linked Interest Inestors Applying for a tax refund in Germany and pushing back the tax refund in the structure by German shareholder. Receiables Timing leakage to be considered, e.g. bridge financing might be 12 necessary.

13 Certainty Rating agency will require a high decree of assurance that there will be no unexpected tax charge on the transaction in order to proide a rating on the bonds. In practice, in many cases a securitisation transaction may lead to some leel of tax cost. In these cases it is important that such costs are known with certainty in adance such that a decision can be taken by the Originator whether the costs can be considered as acceptable deal costs haing regard to the oerall commercial benefits of the transaction. In some cases een an indemnity may be required from the Originator in respect of any unforeseen tax charges which may arise. 13

14 Certainty How to achiee Certainty? Certainty by Binding Ruling Certainty as result of practical experience / well known Securitisation Country Certainty by Tax Indemnity of the Originator Certainty by Tax Opinion 14

15 Cost Efficiency Securitisation transaction should be structured as cost effcicient as possible. Certainty Cost Efficiency Tax Neutrality 15

16 Outlook (Tax-) Impact of BEPS on Cross-Border Securitisation Transactions? (Tax-) Impact of Brexit on Cross-Border Securitisation Transactions? Impact of deelopment of OECD Model Conention on Cross- Border Securitisation Transactions? 16

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18 Your Speaker Legal Studies, Uniersity of Bonn, Lausanne and New York Legal training in Cologne, Düsseldorf (Haarmann Hemmelrath & Partner) and New York (Linklaters) Freshfields Bruckhaus Deringer, Frankfurt, Member of international tax department 2007 Admission as Tax Accountant Marc H. Kotyrba Tax T kotyrba@renzenbrink-partner.de Partner at Renzenbrink Raschke on Knobelsdorff Heiser as of 2015 Partner at Renzenbrink & Partner Chairman of German Swiss Lawyers Association (DSJV e.v.) 18