Impact of EU Financial Transaction Tax on the asset management industry
In this Newsflash, we look at the impact of theEU Financial Transaction Tax ("FTT") on the asset management industry arising from the draft Council Directive issued by the European Commission on14 February 2013 to implement an EU FTT in 11 countries. The Directive has a very broad scope and will impact both EU and non-EU Financial Institutions and there remains much uncertainty about the timing and form of the ultimate EU FTT. We highlight how funds could fall within the scope of the tax, explain the impact that we expect the FTT to have on asset managers and advise on what actions institutions in this sector should be taking now.
TRACE Implementation Package announced by the OECDAfter years of technical discussions, the Committee on Fiscal Affairs of the OECD approved the TRACE Implementation Package (“TRACE”) at its meeting of 23 January and presented it at the OECD conference on TRACE/FATCA in Paris on 12 February 2013. TRACE, which stands for “Treaty Relief and Compliance Enhancement”, is a regime to allow for automated tax withholding by Authorised Intermediaries who agree to the automatic exchange of information.
OECD Report on Base Erosion and Profit Shifting (BEPS)The OECD has today released a lengthy report in relation to its Base Erosion and Profit Shifting (BEPS) work. Arising from concern by tax authorities that the tax planning activities of corporates is resulting in substantial losses in tax revenues, the report assesses the current position and considers how base erosion and profit shifting could be addressed using a collaborative solution. In the current climate of intense criticism and media scrutiny of corporate tax practices, this is a welcome re-assessment of the common principles by which taxing rights are divided between states, and one that will have widespread implications for the Financial Services sector. Read more about the background and PwC's comments in our latest Newsflash.
EU Commission adopts its new proposal for an EU Financial Transaction Tax
As expected, the European Commission today presented its "new" draft proposal for a Council Directive implementing a financial transaction tax (FTT) in 11 countries. The draft is largely the same as the original proposal released in September 2011 but contains some important changes. The draft Directive continues to have a very broad scope and will impact both EU and non-EU financial institutions. The cost of the tax, coupled with the major operational changes that will be required to comply with the regime, means that the EU FTT will result in significant cost for financial institutions and their clients. Read more about the changes to the previous draft and their implications in our latest Newsflash.
Italian FTT - the draft Decree: do we now have all the answers?
The Italian Minister of Economy and Finance ("MEF") issued a draft Decree on 1 February 2013 relating to the implementation of the Italian Financial Transaction Tax ("FTT") provisions included in the 2013 Stability Law. The Decree provides further guidance on the scope of the Italian FTT, the computational basis and the practicalities as to who will be responsible for collecting the tax and reporting to the Italian tax authorities. Read more about the details of the Decree and PwC's observations in our latest NewsFlash.
Green light for EU Financial Transaction Tax
As expected, on 22 January 2013 the ECOFIN Council (EU Finance Ministers) adopted a decision by qualified majority authorising 11 of the 27 EU Member States to proceed with the introduction of a harmonised EU FTT through Enhanced Cooperation in their countries. The Commission will now present a "new" substantive draft proposal on the FTT within the next few weeks which is expected to be largely the same as its original proposal released in September 2011. Negotiations will then begin between Member States on the final shape of the EU FTT. This period represents an opportunity for lobbying. Read more about the next key steps in our NewsFlash.
Latest developments on the EU Financial Transaction Tax – deciphering the Brussels labyrinth
Enhanced cooperation continues to be the most likely way in which certain Member States of the EU will adopt some form of Financial Transaction Tax (FTT). The ECOFIN Council vote on authorising enhanced cooperation is expected soon. After this, negotiations will begin on the detailed shape of any EU FTT. The planned implementation date of 1 January 2014 will most likely be delayed and there are good opportunities for lobbying to shape the proposed FTT regimes over the coming months.
Financial transaction taxes: the Italian FTT takes shape
In the late evening of 12 December, 2012, the Italian Government filed the long-awaited FTT amendment with the Senate Commission. While this amendment is theoretically still subject to change in the Senate and in the Chamber of Deputies, as a practical matter it should not be altered substantially. A Ministerial Decree should be published within 30 days from the entry into force of the budget law, further defining the technicalities of the Italian FTT. Read more about the Italian FTT in our Newsflash.
France issues guidance for foreign investment funds to reclaim withholding taxes
On May 2012 the European Court of Justice ("ECJ") rendered another landmark judgment in relation to discriminatory French tax withheld on dividend payments made to foreign investment funds. The Santander case involved ten investment funds resident in Belgium, Germany, Spain and the United States that had received dividends from their French equity portfolios and had been subject to French dividend withholding tax ("WHT"). The French Government has taken a number of actions to respond to the Santander Case including publication of detailed guidance on how foreign investment funds can reclaim previously withheld taxes. This Newsflash provides more on the detailed guidance.
Financial Transaction Tax - Commission gives green light for Enhanced Cooperation
On 23 October, the EU Commission adopted a proposal for a Council Decision, stating that the EU Member States in favour of introducing an EU Financial Transaction Tax ("FTT") may do so through Enhanced Cooperation. After careful legal analysis, the Commission has come to the conclusion that all legal requirements for such authorisation have now been met and that the 10 participating Member States should be allowed to move forward. We set out in this Newsflash our views on the proposal.
Proposed Italian & Portuguese Financial Transaction Taxes
Italy and Portugal have both pledged to support an EU-wide Financial Transaction Tax (FTT) via enhanced co-operation. In the interim however, both nations are forging ahead to introduce national legislation with the view of enforceability as early as Jan 2013 for Italy and sometime 2013/2014 for Portugal. A brief overview of both proposals is provided in this Newsflash.
Green light for EU FTT under enhanced cooperation
EU Tax Commissioner informed the EU-27 Finance Ministers on 9 October 2012 that 11 Member States are supporting the introduction of a common "EU-wide" financial transactions tax (FTT) in their countries via enhanced cooperation. This means that the first hurdle to starting enhanced cooperation will soon be met as at least 9 Member States are legally required to formally send a letter to this effect to the Commission. We set out in this Newsflash our views on the proposed EU-wide FTT.
Germany and France push for EU financial transactions tax
In a highly symbolic gesture, on Friday 28 September, one year to the day after the European Commission released its draft proposal for an EU-wide financial transactions tax (FTT), the German Finance Minister and his French counterpart informed the finance ministers of the other 25 EU Member States in a letter that they have signed and sent a bilateral request to the European Commission for enhanced cooperation to implement a FTT in a sub-set of countries in Europe. This latest Franco-German initiative is a clear indication that the talks on enhanced cooperation for FTT have run into difficulties and that not much progress has been made since the June 2012 EU summit. We set out in the Newsflash this latest Franco-German initiative and related developments.
Spanish Financial Transactions Tax proposed
The Spanish authorities have somewhat unexpectedly tabled proposals for a Spanish FTT which, on the surface, has similarities to the French FTT model. The Spanish development shows that member states may not wait for the EU political wheel to turn and may consider their own version. For the FS industry, an EU FTT is unwelcome, placing significant administrative burden on the industry at a time of extreme stress on many groups. We set out in the Newsflash our early views on the Spanish proposals.
The EU financial transactions tax: unprecedented steps
This is the fourth in our series of Newsflashes regarding the proposed introduction of a Financial Transactions Tax (FTT) within the EU. Following the recent ECOFIN meeting and EU summit, it now appears likely that the huge political force behind the proposals will result in a FTT being implemented in a number of European countries through the EU’s enhanced cooperation procedure. The use of this procedure to introduce new taxes is unprecedented. In this bulletin we set out the very latest position across the EU and provide our thoughts on what shape any FTT may take.
Seminal European Court ruling on the illegality of some European withholding taxes
European FS institutions, mainly led by the funds industry, have been taking action against certain EU Member States on the basis that in some cases the imposition of withholding taxes on dividends was illegal under the EU Treaty.
This was on the basis that EU Member States under the Treaty may not treat foreign investors, and in particular EU and EFTA shareholders, more harshly than equivalent domestic investors.
A recent case which concerns France and both EU and non EU investors has been decided in favour of the investors and against France. There are implications potentially for any foreign investor in EU equity investments and therefore will be of wide interest.
Financial Transactions Tax (FTT) within the EU
This is the third in our series of Newsflashes regarding the proposed introduction of a Financial Transactions Tax (FTT) within the EU, first mooted in the draft EC Directive issued on 28 September 2011. This newsflash shares the latest developments since December 2011, including the latest position across the EU Member States. It also provides a brief overview of the proposed French transaction tax and what this might mean for the EU’s proposals. Considering that political will for the introduction of some form of FTT remains very strong, this Newsflash comments on where the proposals might ultimately land and the key dates over the next 6 months.
The Financial Transactions Tax - Where are we now?
On 28 September 2011, the European Commission (EC) issued a draft directive which seeks to introduce a financial transactions tax (FTT) within the European Union (EU). This Newsflash provides an update on the ongoing debate that has taken place since the release of the draft directive - we review the principal developments which have taken place, assess the current position of the various Member States towards the proposals and comment on some of the practical implications of the FTT if introduced. Finally, we will look at how this issue might develop in the future.
Global FS Tax Newsflash - Developments in Free Movement of Capital principle in the EU
For some time there has been a debate on whether non-European Union (EU) residents can benefit from the free movement of capital principle in the EU treaty. This is virtually the only section where non-EU residents have specific rights under the treaty. Based on recent developments, there now appears to be acknowledgement of this right in the Netherlands. This NewsFlash provides an update on this recent development in the EU and its impact on non-EU investors.
The EU Financial Transactions Tax Draft Directive and the Implications for the Global FS industry
This Newsflash provides an overview of the draft directive released by the EU Commission which seeks to introduce the financial transactions tax (FTT) within the EU. If adopted, it would be applied from 1 January 2014. It is also the intention of the EU to explore ways to introduce the FTT at a global level through the G-20. We include within the Newsflash our comments and observations of the potential impact of these new developments on the business community.
IRS Re-issues Round 3 FATCA Guidance— addresses effective date of withholding tax under FATCA on payments to NFFEs
On July 25, 2011, the IRS re-issued Notice 2011-53 to clarify that the delayed effective date to withhold tax under FATCA applies to withholdable payments made to all non-financial foreign entities (NFFEs).
In the original version of Notice 2011-53 (issued on July 14, 2011), the IRS provided transitional relief for withholding on pass-through payments and certain withholdable payments, but was silent as to whether the transitional relief would apply to a withholding agent's obligation to withhold FATCA tax on withholdable payments made to NFFEs. This is now clarified in the revised notice.
Round 3 of FATCA guidance: New Implementation timelines and transitional rules for Foreign Financial Institutions
On July 14, 2011, the Internal Revenue Service (IRS) issued Notice 2011-53 ('the Notice' or 'Round 3 FATCA guidance'), which pushes back slightly the timelines for Foreign Financial Institutions (FFIs) and U.S. withholding agents to implement the various provisions under the Foreign Account Tax Compliance Act (FATCA). While this news will be much welcomed by all in the industry, industry experts maintain that meeting the new deadlines will still be a major challenge. The notice anticipates proposed regulations to be issued end of 2011 followed by final regulations in summer 2012.