Tax Issues, Trends and opportunities in Asset Management August 2016
enda ernational issues and trends ithholding tax issues ase Erosion and Profit Shifting (BEPS) ommon Reporting Standard (CRS) S legislative landscape pact on investment fund products w technology is being used for compliance 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights 2
hholding tax -challenges es increasingly challenging treaty claims revenue grab? enging intermediate entities allegations of treaty shopping ng through collective vehicles and requiring proof of investors ence nd local EU country case law strongly supports withholding tax s for certain investment products and investor types based on the EU m of movement of capital. ficant statute of limitation provisions may result in the expiry of a fund s m ability. r of practical difficulties in tracking and managing taxes on capital o identify holdings in countries where capital gains exist? cterization of payment under foreign law? ying self-assessed liabilities? Tax leakage can impact investment yields by 40-65 bps per annum.. g? ng periods? rship thresholds? 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights 3 3
ECD- Base Erosion & Profit Shifting (BEPS) 4
he changing international tax landscape bal initiatives OECD BEPS Coherence Action 2: Hybrid Mismatch Arrangements Action 3: CFC Rules Action 4: Interest Deductions Action 5: Harmful Tax Practices Substance Action 6: Preventing Tax Treaty Abuse Action 7: Avoidance of PE Status Action 8: TP Aspects of Intangibles Action 9: TP/Risk and Capital Action 10: TP/High Risk Transactions Transparency Action 11: Methodologies and Data Analysis Action 12: Disclosure Rules Action 13: TP Documentation & country-by-country reporting Action 14: Dispute Resolution Action 1: Digital Economy Action 15: Multilateral Instrument 2016 KPMG International Cooperative ( KPMG International ). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 5
EPS Sample of potential Impact on fund structure Transfer pricing Can Manager Investment management agreement Will the manager need to prepare more detailed transfer pricing documentatio the manager have the internal processes in place to collate the required inform Could a CbCR report lead to tax authorities increasing their level of scrutiny on pricing policies? (e.g. marketing activities undertaken from a tax haven, etc.) Fund entities permanent establishments Offshore Manager Jurisdiction A Investors Could the use of servers for investment management (e.g. high frequency trad create a taxable permanent establishment? Convertible loan hybrid Would the convertible loan result in a hybrid mismatch? Fund (Cayman) Convertible Loan Are payments under the convertible loan being paid in a reasonable time? Withholding tax on securities Will underlying jurisdictions respect Luxembourg Platform for treaty purposes? Lux Platform A LoB/PPT clause might prevent access to Luxembourg treaty in respect of Ju A, B and C. Jurisdiction A securities Jurisdiction B securities Jurisdiction C securities Are Jurisdiction A securities more likely to be excluded from treaty access? Mi impact the relative value of securities in Jurisdictions A, B and C? Can the fund identify its ultimate investors to demonstrate they would be equiv beneficiaries under a treaty, and hence potentially satisfy a PPT? 2016 KPMG International Cooperative ( KPMG International ). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 6
CRS AND FATCA SIMILARITIES AND DIFFERENCES Goal Promote cross border tax compliance SIMILARITIES Workflow FATCA & CRS Data input Identify reportable accounts Reporting FATCA US DIFFERENCES Scope Implementation CRS FATCA CRS > 90 countries committed CRA is prescribing the wider approach be adopted by Canadian FIs Search US indicia Check US cure documentation Larger amounts of data search and calculation involved to search for indicia for the wider approach prescribed by the CRA Customized rules and cure documentations by country 20 process steps per country for indicia checking and document curing 7
onsiderations for Investment Fund Product 8
echnology is the key to compliance 9
ontact information 10
Thank you
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