International tax services: Financial services

Dynamic, diverse, and highly experienced in helping financial services organizations with their international tax structuring.

How PwC can help

The International Tax Services - Financial Services (ITS-FS) group assists financial services organizations, especially large and mid-size private equity & hedge funds, sovereign investment funds, pension funds, venture capital funds, and family offices. ITS FS helps  to navigate:

  • complex international tax environment,
  • stringent capital requirements,
  • risk management considerations,
  • management of operational tax risks,
  • tax implications of investing in different jurisdictions, and
  • enhanced reporting requirements.

Our core areas of focus

Banking and capital markets

Our ITS-BCM team has a deep knowledge and practical understanding of the financial services industry. We have a dedicated global team of experienced specialists in financial services tax, business transformation, and regulatory to help clients solve their business and tax issues in a regulated financial institution context. In short, this means you will be working with people who understand you and your business. Our client base is broad. It ranges from large wholesale and retail banks to investment banks, broker-dealers, custodians, exchanges and rating agencies. Our clients carry out their operations worldwide.

Our core areas of focus include the following areas of concern for our clients:

  • Structural alignment. We also assist our clients in developing financing structures for their local operations that permit a tax-efficient deployment of capital within a global organization, taking into account tax and regulatory constraints. For US multi-nationals, we have assisted in developing structures that achieve local financing objectives, while preserving deferral of income from a US GAAP standpoint and permitting flexible repatriation of earnings.
  • Tax-efficient financing. We help our clients develop sustainable, improved business models that work not only from a global tax perspective, but also from a local tax, transfer pricing, and tax accounting perspective. We work closely with our clients to identify key value drivers, undertake pricing analysis to price/value the components of the business, develop a range of conceptual operational models with associated tax savings, and evaluate transition issues and mitigation opportunities.
  • Attribute management in the face of legislative change. We team with clients to address the challenges of attribute management (e.g., excess foreign tax credits or limitation, NOLs, etc.) given the potential for major legislative changes in the United States and abroad.
  • Resilience in the face of financial crisis. With the recent credit crisis, our clients are faced with new business and tax demands. For example, as a result of industry consolidation, many of our clients are faced with integrating target companies into their overall structure. Our team has extensive experience with the tax technical and practical issues involved in rationalizing business combinations in a sustainable manner.
  • Many clients are also faced, for the first time in memory, with significant realized and unrealized losses. With PwC’s assistance, clients are able to make fully-informed decisions regarding steps to obtain a cash or financial statement benefit for such losses that otherwise may have been trapped. The financial crisis has also called into question client’s assumptions regarding liquidity and hedging requirements. PwC has helped clients to better anticipate the effect of the volatility of earnings and foreign currency swings on their effective tax rate.

For more information on the comprehensive customs compliance services we offer, please contact one of our professionals.

Insurance

The insurance industry is faced with the prospect of dramatic US administrative and legislative changes as well as challenges caused by the current financial environment. Our team of US ITS partners is devoted to assisting US and non-US multinational insurance companies navigate these dynamic waters. Drawing on our global network of over 50 insurance partners operating in all worldwide regions, we provide comprehensive cross-border solutions for US and non-US multinational insurance companies. We have extensive experience in such traditional topical areas as global structural and profit alignment, cross-border mergers and acquisitions, worldwide treasury management and cash deployment and financing, and tax attribute employment. We also assist companies in managing their US tax nexus risk, transfer pricing and IRS controversy assistance.

Prudent financial risk management is a critical element of an insurance company’s success. Our financial services professionals are dedicated to navigating the maze of rules governing the tax treatment of the wide variety of financial products that are employed by insurance companies. Corporate treasury departments devote significant resources to developing transactions that hedge the risk of adverse fluctuations in currency exchange rates, interest rates, and equity prices. An important objective of a company’s hedging strategy is to ensure that the economic results of hedging and hedged transactions offset precisely. Taxes are often overlooked when benchmarking the success of a treasury function’s hedging activities. Poorly structured hedging and other transactions can give rise to income or expenses for tax purposes that cannot be offset against taxable income or expense arising from the transaction being hedged. The resulting timing, character and source whipsaws are frequently of a magnitude that is disproportionately large when compared to the amount of actual net economic income or loss arising from the combined transactions. Our team works with treasury departments to reduce the conflicts between their non-tax objectives and the underlying maze of tax rules.

Finally, we assist insurance companies with their investment management functions. A key priority for insurance companies is reputation risk, and at present worldwide tax nexus risks are drawing scrutiny from all corners of the globe. Equally important to insurance companies is the return on their funds’ investments. Tax costs can have a material adverse affect on the return on investment but are frequently overlooked by non-tax investment managers. Our global team maintains constant review of all evolving worldwide investment tax positions regarding liquid and illiquid equity, debt, commodities, derivatives and other investment vehicles and helps insurance companies to manage their funds’ tax costs.

For more information on the comprehensive international tax services we offer, please contact one of our professionals.

Asset Management

We advise our clients on a broad range of international structuring issues, most of which are geared towards managing the level of tax risk for investment funds and management companies and enhancing post-tax returns for investors by reducing tax leakages.

Global tax review

As there has been a significant increase in audit activity abroad from foreign tax authorities, funds should focus on applying a more global holistic planning approach. PwC’s global reach, specialist focus and integrated tax approach have been factors in reaching the market leading position as advisors to the real estate funds sector. We can assist you in reviewing your global tax and permanent establishment risk for your funds and management company. We can assess any prevailing permanent establishment, nexus and residency exposures for your various funds, carry vehicles, and other offshore entities in the jurisdictions in which you operate and can advise on best practice methodologies to help reduce global tax risk.

For more information on the comprehensive international tax services we offer, please contact one of our professionals.

International Tax View

International Tax View (“ITV”) is one of many tools found in a suite of services offered to the financial services industry by PwC.

International Tax View (“ITV”)

ITV is a comprehensive database of withholding and capital gains tax rates for over 130 jurisdictions that includes detailed commentary of the domestic tax treatment of income derived from 14 asset classes. In addition, it also provides withholding and refund procedures, domestic filing obligations and commentary on the country’s approach to obtaining double tax treaty relief for over 44 specific fund vehicles.

Automated Tax Risk Scoping (“ATRS”)

ATRS automates the process of assessing capital gains tax risk in global investment portfolios at the financial instrument level. ATRS uses data from International Tax View to analyze investment portfolios line-by-line by applying tax calculation logic, including:

  • Application of an array of tax reductions and exemptions based on ownership threshold exemptions, likely double tax treaty exemptions, non-land rich exemptions and other domestic rules (e.g. listed security exemptions, EU exemptions);
  • “Flags” where the country/asset combination might have controversial tax treatments;
  • “Dashboard” - providing an aggregate view of the potential tax exposures and can be filtered by country, investment tier, investment platform, financial instrument, or by fund name;
  • A “Details” view providing the potential tax rate and determinations applied to each financial instrument, with the look and feel of a spreadsheet; and
  • Tax Calculations that are exportable in pdf reports and spreadsheets.

Withholding Tax Reclaims services

PwC assists its clients in filing refund claims for taxes over-withheld on cross-border investment income in multiple jurisdictions across the globe, either based on tax treaties or EU law (‘Fokus Bank claims’).

We provide services to help our clients review the withholding tax rates used by their custodian banks, and identify and reclaim taxes over-withheld in the past.

Multilateral instrument

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (“Multilateral instrument” or “MLI”) is intended to supplement and modify over 1,300 covered double tax agreements.

The PwC MLI Tracker Tool is another visualization tool showing the MLI’s potential impact on the existing tax treaties.

Hotline

PwC also offers clients the possibility to contract a “hotline” service for an additional fee, allowing for easier and direct correspondence with PwC’s Operational Tax team. Under this service, and for a fixed quarterly fee, the client team can directly contact, at any time, our dedicated team who will reach out to overseas firms, as needed.

This service is meant to cover more specific international tax questions that may arise for global investors on liquid trading type of investments and that are not included in the International Tax View database. PwC’s Operational Tax team utilizes the required resources to quickly and accurately find and convey an answer.

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Thomas Groenen

Thomas Groenen

US Leader - International Tax Financial Services, PwC US

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