Tax transparency for a Hedge Fund platform
The Issue
An international Hedge Fund operation has identified
Germany as one of its key markets in Europe. One element
that was key to the client's approach of the market
was to ensure that future investors would benefit
from a most advantageous taxation position on their
returns; with this in mind, the funds should be considered
"tax transparent" under German rules. The
main constraints were:
- The client's sales team was confronted with the
request for a commitment to full "tax transparency"
of the funds, after marketing of the fund commenced;
- Various fund administration companies have been
providing services to the client, each working in
a different environment and/or jurisdiction;
- Neither the client nor the administrators involved
had any experience in German tax reporting.
We have been requested to assist the client and its
administrators with regard to tax reporting functionalities
and we have also been asked to review the tax reporting
of the funds.
Our Approach
Our approach to the project included the following
steps:
A tax technical training has been held for key
staff of the Hedge Fund house and for the main administrators.
A task force has been created, for which a three day
workshop on the tax technical details was organised.
The administrators have set up German tax functionalities,
which were tested by our team. This test was again
followed by a debriefing workshop with the task force
in order to discuss findings, recommendations and
tax technical questions.
Technical implementation was finalised by the
client's task force and "live" production
of tax reporting has started. Finally, the tax reporting
for all funds has been submitted to us for review.
The Outcome
At the end of the project, all funds were compliant
with German tax reporting requirements, i.e. achieved
a "tax transparent" status. The client's
objectives were met, including:
- Set-up of a competence centre in the client's
organisation;
- Effective knowledge transfer and ongoing support
by our team;
- Minimizing (recurring) efforts for the administrators
to establish the annual German tax reporting;
- Ensure a smooth and quick review/certification
process at reasonable cost for the client.
