- PE/RE Funds th September 2018 - Deloitte United States · • Circular IML 91/75 • GD...
Transcript of - PE/RE Funds th September 2018 - Deloitte United States · • Circular IML 91/75 • GD...
Link ‘n’ Learn 2018 - PE/RE Funds13th September 2018
2© 2018 Deloitte
Getting Started
AgendaHere with you today
What’s happening in Lux:• Trends and figures
1
Luxembourg PE/RE regulatory framework:• Fund manager regulation vs product regulation• Product regimes (SIF, SICAR, RAIF, etc)• AIFM news from Lux • Key operation topics
2
Luxembourg tax topics• Vehicle taxation regimes• BEPS and SPV structuring• Fund manager taxation and Transfer pricing from a
Luxembourg standpoint
3
Gérard Lorent
Director,
Investment Management,
Luxembourg
Arnaud Bon
Director,
Investment Management,
Luxembourg
Enrique Marchesi
Director,
Tax ,
Luxembourg
Christophe Masset
Partner,
Tax
Luxembourg
3Confidential 3© 2018 Deloitte
Luxembourg PE/RE Industry Landscape
4© 2018 Deloitte
Luxembourg Real Estate fund managers trendsLuxembourg as the place to be in the current regulatory and tax environment
BEPS
BREXIT
AIFMD
External Drivers…… directly impact PE/RE
Houses…… as market data evidences
Driving large PE/RE Houses to
Luxembourg in order to benefit from
stability and pan-European
marketing passport through:
• AIFM set-up
• AIF set-up, either as master funds
or parallel funds
Requirement of substance within,
and motive for, RE Houses’
Luxembourg based operations
Operational
Efficiency
Re-thinking of back and middle
office functions and look-out for new
solutions to ensure quality and cost
effectiveness
AIF set-up in Luxembourg
AIFMs set-up in Luxembourg
Luxembourg as asset management platform
Fundtoolbox
Cost
Operations
Tax neutrality & benefits
Carried interest
.. which adapt their operating model…
• Wide array of flexible investment vehicles• Leveraging existing operations• Optimal split between internally managed
functions and outsourced tasks• Existence of skilled operational / back-office
focused workforce• Tax efficiency of Luxembourg investment vehicles• Structuring of management company /
management fees & carried interest
Number of Limited PartnershipsJune 2014 – June 2017
Blackstone
Expanding the finance,
accounting and risk
and compliance team
in Luxembourg
FT
Carlyle
Increasing operations and
substance in Luxembourg
to get “passporting”
rights
FT
EQT
One hub for
domiciliation
of funds in
Luxembourg
EQT
M&G
M&G Investments
choses
Luxembourg
before Brexit
Paperjam
5Confidential 5© 2018 Deloitte
Luxembourg PE/RE Regulatory environment
6© 2018 Deloitte
The European alternative investment fund galaxy
EU level Luxembourg level
AIFM
• Directive 2011/61/EU
• Regulation No 694/2014 of 17 December 2013
• Regulation No 448/2013 of 15 May 2013
• Regulation No 447/2013
• Regulation (EU) No 231/2013
• ESMA/2014/869EN
• ESMA/2013/1339
• ESMA/2013/998
• ESMA/2013/611
• ESMA/2013/232
UCI
• Law of 17 December 2010
• CSSF Circular 14/591
• CSSF Circular 08/356
• CSSF Circular 04/146
• CSSF Circular 03/97
• CSSF Circular 03/88
• CSSF Circular 02/81
• CSSF Circular 02/80
• CSSF Circular 02/77
• Circular IML 91/75
• GD Regulation of 14 April 2003
Transversal
• GD Regulation of 28 October 2013
• CSSF Regulation No. 16-07
• CSSF Circular 15/633
• CSSF Circular 14/589
• CSSF Circular 14/585
• CSSF Circular 12/540
• CSSF Circular 14/598
• CSSF Circular 04/155
• IML 98/143
• CSSF Regulation No. 12-02
• CSSF Circular 17/650
• CSSF Circular 16/644
SICAR
• Law of 15 June 2004
• CSSF Regulation No. 15-08
• CSSF Circular 08/376
• CSSF Circular 06/241
RAIF
• Law of 23 July 2016
SIF
• Law of 13 February 2007
• GD Regulation of 27 February 2007
• CSSF Regulation No. 15-07
• CSSF Circular 08/372
AIFM
• Amended Law of 12 July 2013
• CSSF Circular 18/698
• CSSF Circular 15/612
• CSSF Circular 14/581
• CSSF Regulation No 15-03
EU vehicles
• Regulation (EU) 2017/1991
• Regulation (EU) No 345/2013
• Regulation (EU) No 346/2013
• Regulation (EU) 2015/760
7© 2018 Deloitte
Navigating complexity
How to select the appropriate manager’s and vehicle’s regimes?
EU
Fund Manager regime
• AIFMD
• Light/full regime
• Special EU product regime (EUVCA, EUSEF, ELTIF)
Lux
Product Regime
• SIF
• SICAR
• RAIF
• None
Lux Legal Form
• SCSp (LP), SCA, SCS
• SA, Sarl
• FCP
Regime Considerations
Regime Considerations
Regime Considerations
Applies to Fund Managers
Applies to Fund
Applies to Fund
8© 2018 Deloitte
Summary of possible Luxembourg combinations for PE/RE
Lux non regulated Vehicles
Lux semi-regulated VehiclesLux Regulated Vehicles
AIFM Regime
Out of AIFMD scope
Light AIFMD Regime
Full AIFMD Regime
SIF SICAR RAIF
Product Regime
FCP
SCA, SA, SARL
SCS, SCSp
N/A
SCA, SA, SARL
SCS, SCSp
N/A
SCA, SA, SARL
SCS, SCSp
SCA, SA, SARL
SCS, SCSp
FCP
SCA, SA, SARL
SCS, SCSp
FCP
SCA, SA, SARL
SCS, SCSp
SCA, SA, SARL
SCS, SCSp
SCA, SA, SARL
SCS, SCSp
SCA, SA, SARL
SCS, SCSp
FCP
SCA, SA, SARL
SCS, SCSp
ELTIF
* Legal form options similar to options available to Luxembourg Product Regime
EuVCA / EuSEF
9© 2018 Deloitte
AIFMD regime criteria
AIF qualification
Thresholds
Opt-in
1
2
3
EU Regulatory
regime
Lux Regulatory
Regime
LuxLegal form
• Investment policy• Fund raising • Not UCITS• No exemption
• 500 Millions € (close ended, no leverage)• 100 Millions € (all others)
• Marketing purposes• Target Operating Model
10© 2018 Deloitte
What distribution regime for the fund manager?
Pros Cons+ -
• No regulated structure• Time to «market»• No depositary agent required• Light regulatory reporting obligations
• Possibility to distribute to Professional Investors upon notification of domestic regulator
• Market recognition
• Need for an AIFMD-licensed fund manager• Time to market• Depositary agent required• Regulatory reporting obligations
• National Private Placement Regime (NPPR) not accepted in all jurisdictions and stronger enforcement of rules in other jurisdictions
• NPPR to be abolished by 2018• Reverse Solicitation difficult to use practically
AIFMD light regime
Private placement / Reverse solicitation
AIFMD full regime
EU AIFMD passport
2
ELTIF Possibility to market to retail investors Specific investment / leverage restrictions
EU Regulatory
regime
Lux Regulatory
Regime
LuxLegal form
1
11© 2018 Deloitte
Luxembourg regulatory regime selection criteria
EU Regulatory
regime
Lux Regulatory
Regime
LuxLegal form
Time-to-market
1
Regulated product / LP comfort
2
Investment eligibility
3
Legal flexibility:• Share capital variability• Compartment
4
Tax Regime
5
12© 2018 Deloitte
What Luxembourg national regime for the investment vehicle?
• Recognized regulated investment vehicle• Variable share capital• Possibility to create sub-funds• Low subscription tax (1 bps of NAV)
SIF
SpecialisedInvestment Fund
SICAR
Investment Company in Risk Capital
RAIF
Restricted Alternative Investment Fund
Unregulated entity
• Recognized regulated investment vehicle• Variable share capital• Possibility to create compartments• No diversification requirement• Fully taxable but exempt for risk capital investments
• No diversification requirement / diversification requirement• Time to market – no CSSF approval• Taxation regime: SIF or SICAR-like regimes
• No diversification requirement• No asset eligibility rules• Time to market – no CSSF approval• Choice between DTT eligibility or tax transparency
• Time to market – need a prior approval from the CSSF• Diversification requirement (max. 30% of the NAV, i.e.
min. of 4 investments) but ramp-up period permitted• Cannot benefit from all DTTs in place
• Time to market – need to obtain prior approval from the CSSF
• Asset eligibility rules – Only risk capital assets• Cannot benefit from all DTTs in place
• New type of vehicle• Requires the appointment of a fully authorized AIFM• Asset eligibility and diversification rules• Cannot benefit from all DTTs in place
• No variable share capital – however, possibility to use alternative flexible mechanisms
• No compartments
Pros Cons+ -
EU Regulatory
regime
Lux Regulatory
Regime
LuxLegal form
1
2
3
4
13© 2018 Deloitte
Legal form selection criteria
Lux Regulatory
Regime
LuxLegal form
EU Regulatory
regime
Possibility offered by regime
1
LP comfort
2
Legal flexibility:• Share capital variability• Investors rights
3
Publication obligations
4
Tax Regime:• Corporate structure taxation• Special regime taxation• Tax transparency
5
14© 2018 Deloitte
Represented by units / LP interestsVariable
Yes
Yes
Yes
No
General partner
Cannot be removed without cause
General partner
Cannot be removed without cause
General partner
Cannot be removed without cause
What legal form for the investment vehicle?
Management Legal
personalityShare capital Distribution rules Taxation Reporting obligations
• Publication of articles of incorporation
• Publication of annual financial statements
• Publication of articles of incorporation
• Publication of annual financial statements
• No publication of LPA
• No publication of annual financial statements
• Publication of articles of incorporation
• Publication of annual financial statements
Fully taxable entity, special regime / exemptions possible (SOAPRFI / SIF / SICAR)
Fully taxable entity, special regime / exemptions possible (SOAPRFI / SIF / SICAR)
• Taxable transparent entity
• Tax transparent entity
• Profit allocation rules possible
• Need for distributable profit, unless SIF/SICAR/RAIF
• Profit allocation rules possible
• Need for distributable profit, unless SIF/SICAR/RAIF
• Profit allocation rules possible
• No need for distributable profit
• Profit allocation rules possible
• No need for distributable profit
• Represented by units
• Variable
• Represented by shares
• Variable upon board decision only if SICAR/SIF
• Represented by shares
• Variable upon board decision only if SICAR/SIF
Board of directorsCan be removed without cause
Limited liability company
Société anonyme
Corporate partnership limited by shares
Société encommandite par actions
Corporate parternshiplimited by units
Société encommandite simple
3
Limited partnership
Société encommandite spéciale
4
Lux Regulatory
Regime
LuxLegal form
EU Regulatory
regime
1
2
15Confidential 15© 2018 Deloitte
Entities supervised by the CSSF
Depository
Central Admin. (FA & TA)
Lawyer
Tax advisor Auditor
Domiciliary Agent M & A advisors
General Partner
New co CNew co A New co B
Target CTarget BTarget A
Property managers
Independent appraiser
Limited Partners
Service providers of the structure appointed by the fund
• Makes investment decisions for the fund
• Usually contributes to the fund
• Receives carried interest
Disposal proceeds, interests and dividends
Invest via Equity and debt Appoints
Corporate accountants
Property accountants
Luxembourg PE/RE funds set-upGeneral overview of main stakeholders
Fund Manager
Specific to Real Estate
AIF
AIFM
Appoints
Appoints
16© 2018 Deloitte
Main topics of consideration when designing a PE/RE AIFM target operating modelsDesigning an AIFM operating model shall be based on AIFMD as well as group constraints
Co
re
Front office
Middle office
Back office
Support
AIFM
Valuation Reporting & Disclosure
Distribution / Marketing
Risk ManagementPortfolio
Management
Internal Audit
Investment Compliance
InvestorCompliance
Fund Accounting & Reporting
Transfer Agent
IT TaxLegal
No
n C
ore
• Risk Management or Portfolio Management functions (“Core functions”) may be delegated to eligible counterparties
• Only one of the core functions may be delegated and critical mass of activities must be in AIFM (“51% rule”)
• Compulsory oversight framework to be implemented in relation to delegated functions
• All other functions (referred to as non-core Functions) may be delegated
• Sufficient infrastructure and support functions are still required
• Delegation shall be fully justified
• Oversight framework to be implemented in relation to delegated and critical functions
• Notions of delegation and outsourcing should be distinguished as:
Delegation of a function refers both to its responsibility and its execution, and hence implies delegation of responsibility within an adequate delegation oversight framework
Outsourcing refers to the simple execution of tasks by a third party under the full responsibility of the outsourcer
• Non-core support functions may be delegated/outsourced as long as the AIFM has sufficient infrastructure and support functions in place and such delegation:
Allows the AIFM to properly operate, and
Does not deprive the AIFM of any substance and decision ability
Investment Advisory
Domiciliation & Corporate Secretariat
AIFMD design rules
NON EXHAUSTIVE
Organization design rules
• Global organizational model
• Operational efficiency, quality and risk control
• Existing group capabilities and
resources in other locations
• Existing capabilities and
resources in Luxembourg
• Cost efficiency
• Interdependency of the
risk/valuation/reporting
activities
• Containment of remuneration
rules scope of application
• Scalability and sustainability
through time
• Asset-class specificities
• Tax substance (BEPS, Transfer
Pricing, etc.)
• Eligibility of delegates
Finance
17© 2018 Deloitte
Luxembourg PE/RE fund managers trendsOperating models vary depending on fund manager’s existing organization and goals
Risk Management
Portfolio Management
Valuation
Compliance
Fund Administration
Transfer Agency
• PM more and more retained by the AIFM – need however to demonstrate an analysis capacity at AIFM level
• Ability to delegate PM where Luxembourg established funds are parallel to other vehicles
AIFM PE/RE house
AIFM PE/RE house
AIFM Third-party
AIFM Third Party
AIFM RE house
AIFM RE house
• Valuation generally retained by the AIFM, leveraging existing resources and expertise of the group
• Set-up of valuation committee for governance purposes
• Function nearly exclusively retained at AIFM level
• Easily satisfies the need for Luxembourg substance
• Strong reliance on investor relation teams within the organization
• Fund administration often delegated, by the AIFM or the AIF, to the group to better leverage group expertise and capabilities
• Several models exist (among which the use of a third party provider as a “front”)• Corporate secretariat generally performed out of Luxembourg
• Transfer agency generally entrusted with a specialised third-party• Processing out of Luxembourg source of complexity• However, strong cooperation with investor relation teams to maintain up-to date
information in register
• Existing group resources generally used to collect, compile and produce risk metrics
Points of attention/related topicsFunction Market practice
Only one of the
core functions
may be delegated
and critical mass
of activities must
remain within
AIFM (“51%
rule”)
Third party
Third party
Low substance
High substance
18© 2018 Deloitte
The new Circular covers all dimensions of an AIFM with a strong focus on internal controls, substance and governance
CSSF Circular 18/698 at a glance
Management companies and AIFMs, as well as management companies subject to chapters 16 and 17 of the 2010 Law (together referred to as “GFI”)
Luxembourgish entities acting as transfer agent for investment funds
CSSF Circular 04/155 and IML Circular 98/143 no longer applicable to GFIs (both circulars included into 18/698)
Repeals CSSF Circular 12/546, as amended Amends CSSF Circulars 11/512 and 17/671
Comprehensive list of definitions Delegation and Oversight Governance AML/CFT Etc.
With immediate effect
CSSF Circular 18/698 on the
authorisation and organisation of Luxembourgish investment management companies
Specific provisions on AML/CFT for GFIs and entities carrying out the function of registrar agent
Scope of Application Revised
Rules
Entry into Force
Most salient topics
Sources: CSSF Circular 18/698; Deloitte research and analysis
19© 2018 Deloitte
Highlights of most salient topics
CSSF Circular 18/698 at a glance
Sources: CSSF Circular 18/698; Deloitte research and analysis
Topic Details
Other regulations EMIR, MMFR and MiFID
Specific sections on the application of the European Market Infrastructure Regulation (EMIR), Money Market Fund Regulation (MMFR) and Markets in Financial Instruments Directive (MiFID)
Availability of board members / Fit & Proper Dashboard
Defined thresholds on the time spent and number of mandates for board members: maximum 1,920 hours per annum and 20 mandates;
Introduction of a “fit and proper” dash board for board members and conducting officers
Focus on delegation and oversight aspects
Applicable to all delegated functions (Central Administration, Portfolio Management, Marketing, Valuation) Formalization of the due diligence (i.e. via a report) Detailed content of the due diligence documents (i.e. due diligence questionnaire and report)
Reporting to the CSSF Alignment of the delays within which the annual reports / recurring information have to be transmitted to the CSSF: five months after
the business year-end of the GFI
Internal Governance Risk management
Definition of the three-lines-of-defense model to be applied by GFI Alignment of the risk management requirements for AIFs and UCITS
Relationship with Depositary Exchange of information between the GFI and the depositary for oversight purposes (CSSF circulars 16/644 and 18/697)
Focus on AML / CFT Different scenarios and rules in respect of AML / CFT New annual reporting requirements in the area of AML / CFT to be transmitted to the CSSF
Own fund requirements for extended license
Own funds requirements for GFI with an extended license (i.e. offering discretionary portfolio management and other investment management services)
20© 2018 Deloitte
Luxembourg Tax Topics
21© 2018 Deloitte
New EUPSD
Avalanche of foreign tax reforms at different levels
International context
High impact expected
Low impact expected
NearFar
CbC Reporting
EU-wideFTT
Exchangerulings
EU CRSTP
BEPS Actions 8-10
EU ATAD 1
EU ATAD 2
MLI Non-CIVpaper
EU CCTB
OECD guidance
EU legislation
Domestic legislation
Source of the legislation:
Implementation stage
Drafting or adoption stage
Development stage
Status of the legislation:
22© 2018 Deloitte
§1 – PPT
Notwithstanding any provisions of a CTA, a benefit under the CTA shall not begranted in respect of an item of income or capital if it is reasonable to conclude,having regard to all relevant facts and circumstances, that obtaining that benefitwas one of the principal purposes of any arrangement or transaction thatresulted directly or indirectly in that benefit, unless it is established thatgranting that benefit in these circumstances would be in accordance withthe object and purpose of the relevant provisions of the CTA.
Classical fund structuring models largely endorsed
OECD consultation
on non-CIV funds
Revised OECD MC
of November 2017
Focus on Treaty Abuse
OECD Multilateral Instrument
23© 2018 Deloitte
• On 24 November 2016, the OECD published the agreed wordingof the new multilateral tax treaty (“MLI”) which, among otherthings, is aimed at stopping treaty shopping. Once in effect, theintention is that the new MLI will override and complement certainprovisions in existing double tax treaties:
In particular, the intention is that it should result in either aprincipal purpose test (“PPT”) or limitation of benefits (“LOB”)being included in all treaties to which it is applied. The purposeof these tests is to deny treaty relief where the recipient of theincome or gain does not meet certain conditions.
As at 30 May 2018, 78 countries have signed up the MLI and 6have formally expressed their intention to sign it up. As part ofthe process, most of countries have also confirmed whichoption they intend to follow in the case of the treaty shopping(i.e. PPT or PPT with simplified LOB or detailed LOB with PPT).
It should be noted that no countries can unilaterally decidewhat MLI provisions will apply to what treaties. They can statewhat options they are choosing but the overall impact thendepends on whether the counterparty to the original treatyhas chosen the same option or not.
• Within an EU context, it should be noted that the PPT approachwas already introduced in the amended EUPSD and in the ATAD.
APPROACH OF THE MAJOR JURISDICTIONS
Country MLI Position Option chosen
Australia MLI signed PPT approach
Austria MLI signed PPT approach
Belgium MLI signed PPT approach
Brazil MLI not yet signed Option not chosen yet
Canada MLI signed PPT approach
China MLI signed PPT approach
Czech Republic MLI signed PPT approach
Denmark MLI signed PPT approach
Finland MLI signed PPT approach
France MLI signed PPT approach
Germany MLI signed PPT approach
Hungary MLI signed PPT approach
India MLI signed Simplified LOB with PPT approach
Ireland MLI signed PPT approach
Italy MLI signed PPT approach
Luxembourg MLI signed PPT approach
Mexico MLI signed Simplified LOB with PPT approach
Netherlands MLI signed PPT approach
Norway MLI signed PPT approach
Poland MLI signed PPT approach
Portugal MLI signed PPT approach
Spain MLI signed PPT approach
Sweden MLI signed PPT approach
Switzerland MLI signed PPT approach
UK MLI signed PPT approach
US No intention to sign Detailed LOB approach already in place
* To be further confirmed whether each jurisdiction will focus on substance or purpose and how the PPT should be interpreted in each domestic law.
OECD Multilateral Instrument
Focus on Treaty Abuse – PPT
24© 2018 Deloitte
Article 7§1 MLI – PPT
Notwithstanding any provisions of a CTA, a benefit underthe CTA shall not be granted (…) if it is reasonable toconclude, having regard to all relevant facts andcircumstances, that obtaining that benefit was one ofthe principal purposes of any arrangement ortransaction that resulted directly or indirectly in thatbenefit, unless it is established that granting thatbenefit in these circumstances would be inaccordance with the object and purpose of therelevant provisions of the CTA.
GAAR – ATAD 1
A Member State shall ignore an arrangement or a series ofarrangements which, having been put into place for themain purpose or one of the main purposes ofobtaining a tax advantage that defeats the object orpurpose of the applicable tax law, are not genuinehaving regard to all relevant facts andcircumstances.
SUBJECT TO ECJ CASE LAW FOR EU STRUCTURES 12 September 2006, Case C-196/04 Cadbury Schweppes plc6 April 2017, Cases C-504/16 and C-613/16 Juhler Holding A/S & Deister Holding AG
Anti-abuse rules must be exclusively directed at ‘‘wholly artificial arrangements’’ (primacy of freedom ofestablishment)
Substance
interpretation
Purpose
interpretation
Equivalent
beneficiaries
interpretation
PPT = All of the above ?
OECD Multilateral Agreement
Interpretations of the PPT
25© 2018 Deloitte
The trend: substance & business purpose
Structuring in a changing environment
We witnessed a change in the way AIFs are operating over the last decade in reaction to the avalanche of EU/OECD tax reforms.
Low economic & commercialrationale, use of Luxembourg ismainly tax driven
Indofood case, HRMCguidance on BO, severaldomestic legislation onBO, etc.
BEPS, ATAD, CbCR,Amended EUPSD, severaldomestic legislation, etc.
Use of silos headed byLuxembourg SPVs withexternal substance
Trend to implement itsown substance or rely ona consolidated modelwhich should be justifiedby wider economic &commercial rationale
Convergence betweenAIFMD & Tax providingsustainability to thebusiness model
2000 2006/08
2018
Timeline
26© 2018 Deloitte
AIFMD as a Non Tax Purpose Structuring in a changing environment
AIFMD aims at
− Regulating AIF industry
− Achieving single EU AIF market
− Increasing transparency
− Controlling systemic risks
AIFMD contains NO tax provisions but because it will impact organizational / business model and people on a cross-border basis tax questions have to be addressed to make the implementation a success.
AIFMD also provides opportunities to align regulatory and tax substance. It provides a non tax purpose.
27© 2018 Deloitte
Example of a possible structure
Structuring in a changing environment
EU entities
Lux SPV 1 Lux SPV 2 Lux SPV 3
EU entitiesEU entities
Lux AIFM
Distribution of
the AIF to EU
investors
Parallelfund
Parallel
structure
Foreign IM
Non-AIFM GP
Lux (R)AIF
Master(RAIF-SICAR/Soparfi)
Distribution to non- EU
investors through a parallel
structure to segregate cost
& compliance
• Pooling regional platform possibly qualifying to PPT for DTT purposes
• PPT / GAAR test to be discussed
• Impact of the MLI to be investigated on a source country by source country basis
• Anti-hybrid rules and imported mismatch to be considered
• Management activities and fund consolidated in one place
• Substance and functions (including the oversight of delegation) required illustrating the convergence between tax and the AIFMD
• Cross-border management allowed within the EU
• BEPS development on the definition of PE to be monitored (action #7)
It could be
a 3rd party
Depositary, central
administration in
Lux.
EU investors Non-EU investors
28
© 2018 Deloitte
Asset Management
Transfer Pricing Market Trends
Governance
• Traditionally, regulatory focus has been on aspects of substance and organization, risk management, transparency, and reporting. Some regulators (e.g. in Luxembourg) have already adopted very precise rules on governance that detail the role and responsibilities of the governing and management bodies in the AM and WM sector
• Intensive scrutiny over governance arrangements is a clearly observed trend in the supervisory approach adopted by regulators all over Europe. The aim is to limit regulatory competition and arbitrage in Europe
• Increasing regulation, greater interaction between the regulatory and tax dimension as well as Brexit also lead to additional focus on tax as governance topic
• “Enforcement” is so far informal as part of on-site visits with focus on transfer pricing policies, intra-group legal agreements and transfer pricing documentation
• In addition to traditional indicators, tax governance has also become one of the indicators of proper management of regulated entities
• Importance of consistency of regulatory application/filings with tax position and messaging to regulators/tax authorities
1
2
3
4
5
6
Governance
Increased focus by regulators on tax as part of corporate governance
function
Transparency
Increased focus ontransfer pricing documentation
Industry
Move to regulatedstructures under
AIFM regime
Models & policies
Appropriateness and defensibility of
existing TP models and policies
Substance
Overlapping discussion on substance from a tax
and regulatoryperspective
Politicalenvironment
BEPS, Brexit,and EU state aid
Tax audit
environment
29
© 2018 Deloitte
• BEPS impact on the appropriateness of existing TP policies and approaches specific to the asset management sector
• Remuneration (for tax purposes) of the unique role of captive ManCos depending on delegation model/functional profile vs. unregulated structures
• Defensibility of one-sided approaches, i.e. where captive ManCo under delegation model retains residual profits
• Cost plus arrangements (e.g. for distribution related activities)
• Permanent establishment thresholds
• Approaches to support split of management fees for the remuneration of
• Distribution and capital raising
• Portfolio management
• Fund production (principal function of ManCo)
• Fund administration, back-office services and other support functions
• Revisiting legacy of tax arrangements
• Rulings with goodwill deductions, investment grants or cost plus arrangements
• Restructurings and transfer of activities
• Brexit-related on-shoring of activities in Luxembourg with question on exit tax/valuations
1
2
3
4
Governance
Increased focus by regulators on tax as part of corporate governance
function
Transparency
Increased focus on transfer pricing documentation
Industry
Move to regulatedstructures under
AIFM regime
Models & policies
Appropriateness and defensibility of
existing TP models and policies
Substance
Overlapping discussion on substance from a tax
and regulatoryperspective
Politicalenvironment
BEPS, Brexit,and EU state aid
Tax audit
environment
Asset Management
Transfer Pricing Market Trends
30
© 2018 Deloitte
Q&A
31
© 2018 Deloitte
Next Link ’n’ Learn - Thursday 27th of September
Topic – AML/KYC
32
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