EIB Stakeholder and Engagement Revision of NCJ Meeting Policy 2 - - PowerPoint PPT Presentation

EIB Stakeholder Engagement Meeting

2 October, 2018 Brussels Office of the Group Chief Compliance Officer

Tax Approach and Revision of NCJ Policy

02/10/2018 02/10/2018 EIB – Stakeholder Engagement Meeting

AGENDA EIB Stakeholder Engagement Meeting

Revision of the EIB Group Policy towards Weakly Regulated, non- transparent and uncooperative jurisdictions (“NCJ Policy”)

EIB Brussels office: Rond-point Robert Schuman 6, 1040 Brussels 2 October 2018

• 9:30

Registration and welcome coffee

• 10:00

Welcome word and introduction of speakers

• Hakan Lucius, Head of Corporate Responsibility and Civil Society Division, EIB

Speakers:

• Gerhard Hütz, Director General and Group Chief Compliance Officer, EIB
• Branimir Berkovic, Head of Tax Compliance Unit, EIB
• Vaitiare Constantin, Compliance Officer, EIB
• 10.15

Presentation by the Office of the Chief Compliance Officer

• Setting the stage:
• Role of the EIB Office of the Chief Compliance Officer
• Recent regulatory developments in the area of taxation and the designation of non-cooperative jurisdictions for tax purposes
• Interim approach to the EIB NCJ Policy
• 10:45

Questions and answers session

• 11:00

Revision of the EIB Group NCJ Policy & on-going challenges

• Key features
• Practical examples
• 11:30

Questions and answers session

• 12:00

Lunch and networking 02/10/2018 2 EIB – Stakeholder Engagement Meeting

Part I Setting the stage

02/10/2018 3 EIB – Stakeholder Engagement Meeting

Introduction, EIB at a glance

02/10/2018

• +/- 450 projects/year in >160 countries
• Largest multilateral lender and borrower (78 billion EUR total financing/raised 58 billion EUR on

capital markets in 2017)

• Headquartered in Luxembourg - 40 local offices
• +/- 3 000 staff (finance professionals but also engineers, sector economists and socio-environmental

experts)

• One subsidiary: the EIF- Risk financing targeting innovative SMEs via equity and debt financial

instruments

« The EU Bank »

• Finance and expertise for sound and

sustainable projects

• Since 1958
• Circa 90% of lending within the EU
• Shareholders: 28 Member States

EIB – Stakeholder Engagement Meeting 4

Our priorities

Environment Infrastructure Innovation SMEs

5 02/10/2018 EIB – Stakeholder Engagement Meeting

EIB products

6

We help catalyse investment

LENDING BLENDING ADVISING Loans But also: Guarantees (trade financing) Equity participation Combining EIB finance with EU budget (Project Bond Initiative) Higher risk projects for innovation (InnovFin) Prepare, evaluate and support the implementation of projects (JASPERS) Support for public/private partnerships (EPEC) Attracting FUNDING for long-term growth

02/10/2018 EIB – Stakeholder Engagement Meeting

EIB Group financing in 2017: EUR 78.16bn

7

Signatures

EFTA & Enlargement Countries EUR 1.62bn Eastern Neighbours EUR

0.88bn

Africa, Caribbean, Pacific, South Africa

EUR1.47bn

Asia, Central and Latin America

EUR 1.99bn

Mediterranean EUR 1.96bn

European Union

70.24bn

Outside EU

7.91bn

EUR

EUR

Total EUR 78.16bn

02/10/2018 EIB – Stakeholder Engagement Meeting

02/10/2018 8

• In line with the Basel Committee for Banking Supervision principles and EBA

Guidelines on Internal Governance

• Independent function – reporting directly to the EIB President
• Under the guidance and responsibility of the EIB's Group Chief Compliance

Officer (GCCO)

• Compliance/ reputational risk managed at the EIB Group level (EIB and EIF) by the

GCCO

OCCO Areas of Activity

Integrity checks on projects and counterparties Integrity of staff and governing bodies Regulatory compliance

Compliance at the EIB

EIB – Stakeholder Engagement Meeting

02/10/2018 9

NCJ Policy and Addendum

AML-CFT Framework and procedures Internal tax screening tool Tax Good Governance Compli- ance risk methodo- logy Ethics and Codes of Conduct

Data Protection Procurement compliance Regulatory

Sanctions

Compliance framework

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Compliance and Business Ethics

10

• EIB Compliance Culture Change Programme
• Revision of Codes of Conduct (CoCs) and Whistleblowing Policy – ongoing
• Awareness Raising events, inter alia:
• Seminar with René Brülhart, Vatican (September 2018),
• Workshop with OECD (October 2018),
• Meetings with World Bank (October 2018).
• Ethics Network: EIB recently admitted as member to the UN driven Ethics

Network of Multilateral Organisations (ENMO). GCCO participation at the 10th conference, in July 2018.

• OCCO has an advisory role on Ethics issues

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OCCO’s roles in EIB project cycle

02/10/2018 11

EIB project cycle

Step 1 Proposal Step 2 Appraisal Step 3 Approval Step 4 Signature Step 5 Disbursement Step 6 Monitoring and reporting Step 7 Repayment

On a risk-based approach, strict due diligence checks carried out by EIB Compliance Approval documentation to Management Committee and the Board of Directors includes independent Compliance opinion (if required on a risk- based approach) Finance contract is signed (including safeguards against fraud, tax fraud, money laundering and financing of terrorism) Compliance monitoring at post approval stage

EIB – Stakeholder Engagement Meeting

Before taking a decision to invest…

• Strict due diligence criteria and process
• Anti-Money Laundering/ Countering Financing of Terrorism Framework and

procedures

• Screening for sanctions
• Enhanced due diligence on NCJ operations
• Tax due diligence
• Compliance risk methodology
• Compliance opinions on all operations outside EU
• Approval process
• Compliance monitoring

INTEGRITY CHECKS ON OPERATIONS AND COUNTERPARTIES INDEPENDENT COMPLIANCE OPINIONS

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Dialogue and engagement with IFIs, NGOs and Lead Organisations

02/10/2018

• On-going dialogue with NGOs on EIB’s NCJ Policy
• Joint submission of CSOs on NCJ policy
• MDB Private Sector Integrity Conferences
• Benchmarking exercise with IFIs - taxes and BBP
• DFI Tax symposium with IFIs and DFIs

Ongoing dialogue with IFIs and CSOs

• OECD
• Global Forum
• EU
• FATF

Ongoing dialogue with Lead Organisations

• Follow-up on relevant EU legislative packages
• Bilateral contacts with EU Commission
• Liaison with EP and the Council

Engagement with EU institutions

13 EIB – Stakeholder Engagement Meeting

Recent regulatory developments in the area of taxation and the designation of non-cooperative jurisdictions for tax purposes

02/10/2018 14 EIB – Stakeholder Engagement Meeting

Key Developments since last stakeholder engagement seminar (November 2017)

02/10/2018 15 EIB – Stakeholder Engagement Meeting

Council conclusions on EU list of non-cooperative jurisdictions for tax purposes (5 December 2017), changes January, March and May 2018 Updates of Reference Lists published by Lead Organisations Legal provisions on tax avoidance in EFSI Regulation, EFSD Regulation, ELM Decision, Financial Regulation EC Communication on new requirements against tax avoidance in EU Legislation governing in particular financing and investment operations (March 2018)

Legal provisions on Tax Avoidance, some examples

Article 155, para 2, Financial Regulation Article 22, para 1, EFSI Regulation When implementing Union funds, persons and entities shall: a. Comply with applicable Union law and agreed international and Union standards and, therefore, not support actions that contribute to money laundering, terrorism financing, tax avoidance, tax fraud or tax evasion; b. when implementing financial instruments and budgetary guarantees in accordance with Title X, not enter into new or renewed operations with entities incorporated or established in jurisdictions listed under the relevant Union policy on non- cooperative jurisdictions or that are identified as high-risk third countries pursuant to Article 9(2) of Directive (EU) 2015/849, or that do not effectively comply with Union or internationally agreed tax standards on transparency and exchange of information. Entities may derogate from point (b) of the first subparagraph only if the action is physically implemented in one of those jurisdictions, and does not present any indication that the relevant operation falls under any of the categories listed in point (a) of the first subparagraph. When concluding agreements with financial intermediaries, entities implementing financial instruments and budgetary guarantees in accordance with Title X shall transpose the requirements referred to in this paragraph into the relevant agreements and shall request the financial intermediaries to report on their observance. Excluded activities and non-cooperative jurisdictions In their financing and investment operations covered by this Regulation, the EIB and the EIF shall comply with applicable EU legislation and agreed international and EU standards and, therefore, shall not support projects under this Regulation that contribute to money laundering, terrorism financing, tax avoidance, tax fraud and tax evasion. In addition the EIB and the EIF shall not enter into new or renewed operations with entities incorporated or established in jurisdictions listed under the relevant EU policy on non-cooperative jurisdictions, or that are identified as high risk third countries pursuant to article 9.2 of Directive (EU) 2015/849, or that do not effectively comply with EU or internationally agreed tax standards

• n transparency and exchange of information.

When concluding agreements with financial intermediaries, the EIB and the EIF shall transpose the requirements referred to in this Article into the relevant agreements and shall request the financial intermediaries to report

• n their observance.

The EIB and EIF shall review its policy on non-cooperative jurisdictions at the latest following the adoption of the Union list of non-cooperative jurisdictions for tax purposes. Every year thereafter, the EIB and EIF shall submit a report to the EP and to the Council on the implementation of its policy mentioned in the previous paragraph in relation to the EFSI financing and investment operations including country by country information and a list of intermediaries with whom they cooperate.

02/10/2018 16 EIB – Stakeholder Engagement Meeting

Lead Organisations – Reference Lists

02/10/2018 17

Tax

• EU – Council conclusions on EU list of non-cooperative jurisdictions for

tax purposes, available: https://ec.europa.eu/taxation_customs/tax-

common-eu-list_en

• OECD Global Forum – EOIR Standard ratings, available:

http://www.oecd.org/tax/transparency/exchange-of-information-on- request/ratings/#d.en.342263

AML

• EU – Art 9.2 of Directive 2015/849, available: https://eur-

lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016R1675&from=ES

• FATF – High-risk and other monitored jurisdictions, available:

http://www.fatf-gafi.org/countries/#high-risk

EIB – Stakeholder Engagement Meeting

Designation of Jurisdictions – Council Conclusions

• Council conclusions on EU list of non-cooperative jurisdictions for tax purposes
• Adopted by the Council of the European Union on 5 December 2017
• amended 21 January 2018, 8 jurisdictions were removed from the Annex I list
• amended 13 March 2018, 3 jurisdictions removed and 3 jurisdictions added to Annex I list
• amended 25 May 2018, 2 jurisdictions removed from the Annex I list
• amended 2 October 2018, 1 jurisdiction removed from the Annex I list
• EU list of non-cooperative jurisdictions for tax purposes set out in Annex I
• jurisdiction mentioned in Annex II “have been determined as co-operative, subject to the

successful delivery of commitments”

• Jurisdictions put on hold
• Defensive measures “in both non-tax and tax areas could be applied by the EU and Member

States vis-à-vis the non-cooperative jurisdictions, as long as they are part of such list”

• Harmful preferential tax regimes (Annex I and Annex II, Section 2.1), details available:
• 6 March 2018 Compilation of letters to third country jurisdictions seeking commitments on taxation; and
• Overview of the preferential tax regimes examined by the Code of Conduct Group (Business Taxation) since its

creation in March 1998, available: http://data.consilium.europa.eu/doc/document/ST-9639-2018-REV-1/en/pdf

• Current state of play:
• Annex I: 6 jurisdictions (originally 17)
• Annex II: 65 jurisdictions (originally 47)

02/10/2018 18 EIB – Stakeholder Engagement Meeting

Designation of Jurisdictions - Council Conclusions

• EU listing criteria:
• Jurisdictions chosen for screening – 92 third-country jurisdictions

02/10/2018 19

Tax Transparency

Compliance with international standards

• n:
• automatic exchange of

information and

• information exchange
• n request

Ratified the OECD's multilateral convention

• r signed bilateral

agreements with all Member States, to facilitate this information exchange

Fair Taxation

No preferential tax measures that could be regarded as harmful and does not facilitate

• ffshore structures or

arrangements aimed at attracting profits which do not reflect real economic activity

Implementation

• f anti-BEPS

measures

Commitment to implement the OECD's Base Erosion and Profit Shifting (BEPS) minimum standards

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Designation of Jurisdictions - Council Conclusions

02/10/2018 20 EIB – Stakeholder Engagement Meeting

Listed jurisdictions ‘Committed’ jurisdictions

65 Annex II jurisdictions 37 with harmful pref. tax regimes 13 facilitate Off- shore structures

6 jurisdictions Annex I

Defensive measures apply No defensive measures apply

As at 02.10.2018

Designation of jurisdictions

02/10/2018 21

Listing of jurisdictions by Lead Organisations - Aggregate overview

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As at 02.10.2018

Preferential tax regimes (1)

02/10/2018 22

Harmful preferential tax regimes, as per “6 March 2018 Compilation of letters to third country jurisdictions seeking commitments on taxation” (as at 1 October 2018)

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Preferential tax regimes (2)

02/10/2018 23

Harmful preferential tax regimes, as per “6 March 2018 Compilation of letters to third country jurisdictions seeking commitments on taxation” (as at 1 October 2018)

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Public scrutiny

02/10/2018 24

‘The European Investment Bank and tax havens’, December 2009, ‘ Towards a responsible taxation policy’, 2015, ‘ The dark side of the EIB funds’, September 2016, ‘Investing in Integrity? Transparency & Accountability of the European Investment Bank’, October 2016, ‘Going abroad: a critic of the EIB’s External Lending Mandate’, November 2016, ‘Development finance institutions and responsible corporate tax behaviour’, November 2016, ‘Quand l’Europe investissait dans les paradis fiscaux ’, May 2017, European External Investment Plan: Key Issues to Watch During Implementation (Nov, 2017) Civil Society Joint Paper – Submission for the EIB’s Non-Compliant Jurisdictions (NCJ) Policy review (Jan, 2018) Leading by Example on Responsible Taxation (April 2018) …

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Joint CSOs paper – Submission for the EIB’s Non- Compliant Jurisdictions (NCJ) Policy review (2018)

Key recommendations to EIB:

• “stop investing via structures based in tax havens”
• “EU list of non-cooperative jurisdictions” (Annex I & Annex II)
• “physical implementation clause”
• “preferential tax regimes”
• “raise the bar on transparency and accountability”
• “effective tax rate”
• “require clients to have a responsible corporate tax policy”
• “develop and strengthen its in-house capacity”
• “require public Country by Country Reporting from its clients”
• “disclose the beneficial ownership of its clients on the website”

02/10/2018 25 EIB – Stakeholder Engagement Meeting

Interim Approach to the EIB NCJ Policy

02/10/2018 26 EIB – Stakeholder Engagement Meeting

Interim approach to EIB NCJ Policy since January 2017

02/10/2018 27

Expanded scope Operations potentially raising tax concerns, notably those with links to jurisdictions displaying risks of facilitating tax avoidance Extended due diligence Risk-based extended due diligence covering also the identification of potential tax avoidance practices Phasing-in Phased-in implementation of tax avoidance screening tools by testing & further refinement Informing the Board Additional information on the tax aspects of various operations to the Board

EIB – Stakeholder Engagement Meeting

• Listing of a jurisdiction
• Hybrid financial arrangements, leverage ratio, multi-jurisdictional structure, recent re-organization
• Adverse media attention in relation to tax concerns
• Effective tax rate & applicable tax regime
• Tax treatment of cash-flows
• Presence of funds
• Presence of provisions for disputed tax positions
• Public disclosure of statements on tax compliance / tax integrity, director/executive responsible for tax

affairs

• Justifications / explanations for identified tax risk indicators

Tax Integrity Questio- nnaire & Disclosures

27 EIB – Stakeholder Engagement Meeting

Part II Revision of the EIB Group NCJ Policy and on-going challenges

02/10/2018 28 EIB – Stakeholder Engagement Meeting

Turn into EIB Group Policy, modernise approach and language Introduce “tax avoidance” Enhance tax disclosures / measures Develop anti-tax avoidance toolbox NCJ Policy Review General Approach to Revision of NCJ Policy

11/06/2018 02/10/2018 29 EIB – Stakeholder Engagement Meeting

General Approach (2)

Introduce “tax avoidance” Turn into Group Policy, modernise approach and language Enhance tax disclosures / measures

• EIB’s expectations from contracting counterparties
• Risk assessment tools and measures
• CP to inform tax authorities of ownership structure
• Country-related tax risks
• Revise current definition of “targeted activities”
• Build in additional and tailored checks (due diligence) for

tax avoidance risks indicators

• Take account of EFSI 2 / EFSD, ELM Financial Regulation

language

• Develop an EIB Group approach and reinforce already

strong EIB Group commitment

• Expand definitions, better targeted (tailored) approach
• Reference to the most recent tax developments
• Immediate effect of EU listing (no grace period)
• Expand scope of disclosures and measures to take account
• f Interim Approach lessons, EFSI 2 / EFSD, ELM, Financial

Regulation language, EC Communication, CSO expectations

30 11/06/2018

Develop anti-tax avoidance toolbox

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General approach (3)

31

The EIB Group NCJ Policy aims to strike the right balance between:

• the need to obtain visibility and explanation on certain structures

and their tax treatment while not necessarily triggering unwarranted in-depth due diligence for low risk projects, in line with a risk-based approach;

• focusing resources and taking enhanced measures in situations

where the risks are higher and apply simplified measures when risks are lower;

• the scope of tax integrity checks and operational objectives,

allowing the EIB Group to meet applicable requirements without jeopardising deliveries under its mandate. While note is taken of the far-reaching expectations advocated by certain stakeholders, the EIB Group entities cannot replace the work

• f competent tax authorities.

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PROPOSED AMENDMENTS BY SECTION – I. INTRODUCTION

02/10/2018 32 EIB – Stakeholder Engagement Meeting

• I. Introduction – Subsections

33

• I. Introductory Remarks

I.1 Preamble I.2 Main Definitions I.3 Reference Lists I.4 Basic Principles I.5 Scope

02/10/2018 EIB – Stakeholder Engagement Meeting

I.1 Preamble

34

Enrich with references to the following elements:

• tax good governance principles promoted by the EU, the OECD, the G20 as well as

Global Forum

• Communication from the Commission on new requirements against tax avoidance

in EU Legislation governing in particular financing and investment operations of 21 March 2018 (“EC Communication”)

• EU Council conclusions on “The EU list of non-cooperative jurisdictions for tax

purposes” of 5 December 2017, as amended thereafter (“EU Council Conclusions”)

• commitment of the EIB Group to enhance due diligence measures in alignment

with the developments in the area of tax good governance

02/10/2018 EIB – Stakeholder Engagement Meeting

• I. Introductory Remarks
• Shorten NCJ Policy history
• Make reference to the Interim Approach and engagement with stakeholders
• Emphasise rationale for the 2018 policy review:
• commitment to remain at the forefront in supporting implementation of international

and EU standards in the field of AML-CFT and to promote tax good governance, notably

• the EC’s Anti Tax Avoidance Package
• regulatory developments of the OECD

I.2 Main Definitions (1)

35

• Introduce new definitions:
• AML Directive, Beneficial Owner, BEPS, FATF, NCJ Policy, Global Forum, OECD,

Prohibited Conduct

• Revise definitions:
• EU Legal Framework
• Lead Organisations - further clarify reference to the Global Forum, G20 and

the Inclusive Framework on BEPS

• Reference Lists - further clarify reference to AML/CFT and tax good

governance standards

• Targeted Activities - expand to include ‘tax avoidance’
• NCJ Operation - clarify that it refers to a lending (including equity

investments), borrowing, treasury or guarantee operation with an NCJ Location Link

02/10/2018 EIB – Stakeholder Engagement Meeting

I.2 Main Definitions (2)

36

• Revise NCJ definitions to clarify distinction between Restricted and Prohibited

Jurisdictions:

02/10/2018 EIB – Stakeholder Engagement Meeting

“Restricted Jurisdiction” “Prohibited Jurisdiction”

• classified by one or more Lead Organisations as

“non-compliant”, “partially compliant”, “non- cooperative” or equivalent in connection with the above mentioned international and/or EU standards (e.g. jurisdictions listed in Annex I to EU Council Conclusions)

• classified by one or more Lead Organisations as

presenting ongoing and substantial AML-CFT risks, having repeatedly failed to address and/or remedy (as the case may be) identified strategic deficiencies in its AML-CFT framework and for which call for action on members of the classifying Lead Organisation applies;

• r
• Listed as non-cooperative jurisdiction for tax

purposes by the EU Council Conclusions (Annex I) and classified as a “Restricted Jurisdiction” for AML-CFT purposes

I.2 Main Definitions (3)

37

• Revise NCJ Link definitions:

Location Link

• where the

contracting counterparty is established or incorporated in an NCJ

Ownership Link

• where the

contracting counterparty is

• wned (as per the

meaning of AML Directive) by a legal

• r natural person

established or incorporated in an NCJ

Control Link

• where the

contracting counterparty is controlled (as per the meaning of AML Directive) by a legal

• r natural person

established or incorporated in an NCJ

02/10/2018 EIB – Stakeholder Engagement Meeting

I.3 Reference Lists

38

• Revise sub-section “Reference Lists”
• Modernise and update language (where necessary)
• Reinforce risk-based approach due diligence measures in

consideration of Reference Lists

• In the event of conflict between ratings/lists provided in different

Reference Lists, any Reference List published by the EU shall prevail

02/10/2018 EIB – Stakeholder Engagement Meeting

I.4 Basic Principles

39

• Modernise language, revise Policy goals, reinforce a risk-based

approach (“RBA”)

• Explain approach: assessment of all operations in line with RBA

standards of the due diligence process promoted by the EIB Group AML-CFT Framework and revised NCJ Policy

• Revise and update language of basic/core principles.
• Prohibition:
• Prohibition to enter into new or renewed operation with any material NCJ

Link (location, ownership, control) to a Prohibited Jurisdictions

• Prohibition to enter into new or renewed NCJ Operation in a Restricted

Jurisdiction (see practical examples)

• Exception: if the operation is physically implemented in the relevant Restricted Jurisdiction

and the risk (if any) that the operation could be misused for Targeted Activities can be mitigated

• Reporting obligations to the Board of Directors

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I.5 Scope

40

• Revise sub-section “Scope” to clarify that the Policy applies to:
• all operations, including EIB Group-financed structures implemented
• n behalf or for the account of other bodies within or outside the EU,

in which the EIB Group participates in the course of its financing and investment activities as detailed in operational procedures, and

• all borrowing and treasury activities of the EIB Group with an NCJ

Location Link.

02/10/2018 EIB – Stakeholder Engagement Meeting

PROPOSED AMENDMENTS BY SECTION – II. POLICY GUIDELINES

41 02/10/2018 EIB – Stakeholder Engagement Meeting

• II. Policy Guidelines – Subsections

42

II.A Prohibition II.B Enhanced Vigilance II.C Informing the Board of Directors

02/10/2018 EIB – Stakeholder Engagement Meeting

• II. Policy Guidelines

43

• Sub-section II.A “Prohibition”
• Clarify measures applicable to operations with links to Prohibited

Jurisdictions

• Clarify measures applicable to NCJ Operations in Restricted Jurisdictions
• Sub-section II.B “Enhanced Vigilance”
• Include reference to Appendix I “Anti-Tax Avoidance Toolbox”
• Reiterate existing measures
• Introduce possibility to extend enhanced vigilance measures to

contracting counterparties incorporated or established in cooperative jurisdiction that have not yet solved tax good governance deficiencies – so called “committed jurisdictions”

• Sub-section II.C rename into “Reporting obligations to the BoD”
• Revise reporting obligations to the Board of Directors

02/10/2018 EIB – Stakeholder Engagement Meeting

PROPOSED AMENDMENTS BY SECTION – III. MEASURES IMPLEMENTED BY BANK

44 02/10/2018 EIB – Stakeholder Engagement Meeting

• III. Measures Implemented by the EIB Group – Subsections

45 III.1 Integrity due diligence extended to all NCJ Operations III.2 Tax Disclosure III.3 Relocation requirements III.4 Integrity covenant in the Bank’s contracts, Counterparty’s declarations and undertakings Add: Additional measures 02/10/2018 EIB – Stakeholder Engagement Meeting

III.1 Due diligence on NCJ operations

46

• Modernise language (where necessary)
• Reinforce commitment to carry out due diligence on operations to assess

that:

• the contracting counterparties are not incorporated in an NCJ (exception:

physical implementation)

• no support to financial sector in an NCJ (exception: financial intermediary for

EIB Group’s investments in the relevant NCJ)

• the beneficial owners of contracting counterparties are identified
• additional information for operations with NCJ Links is collected
• NCJ Operations are possible only where:
• the contracting counterparty/ies’ and the operation’s physical implementation

location are in the same jurisdiction AND

• the risk (if any) of the operation being misused for Targeted Activities can be

mitigated.

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III.2 Tax Disclosure

47

• Reinforce requirement for contracting counterparties to provide for NCJ

Operations and controlling shareholders established in an NCJ:

• the economic rationale of the structure and the specific economic requirements that

make recourse to the relevant structure necessary AND

• a description of the tax regime applicable to the proceeds of the operation.
• Collect information on the commitment of an NCJ to tax good governance

standards (e.g. reasons for listing under the Council Conclusions, membership of the Global Forum and the Inclusive Framework on BEPS, implementation of internationally agreed standards and etc.)

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III.3 Relocation requirements

48

• Deletion of “Grace Period” is proposed in view of requirement for direct applicability of

the EU list of non-cooperative jurisdictions for tax purposes

• Clarify that the relocation provision is applicable to new Cross-border operations with

contracting counterparties incorporated or established in NCJs prior to signature of the contract

• Physical implementation exception will not apply where it is specifically excluded in the

applicable mandates/ legislation

III.4 Integrity covenant in the Bank’s contracts, Counterparty’s declarations and undertakings

Revise integrity covenants

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Additional measures

49

• Reinforce the possibility to adopt additional measures to address certain risk

factors identified in the course of the due diligence performed on the NCJ Operation which may be perceived as being misused by the contracting counterparty for Targeted Activities

• Introduce reference to the catalogue of measures included in the proposed

Appendix 1 “Anti-Tax Avoidance Toolbox”

• Reinforce reference to the extension on risk sensitive basis of NCJ Policy measures

also to operations without NCJ Links

02/10/2018 EIB – Stakeholder Engagement Meeting

PROPOSED AMENDMENTS BY SECTION – IV. POLICY ADMINISTRATION

50 02/10/2018 EIB – Stakeholder Engagement Meeting

• IV. Policy Administration

51

• Rename section heading into: “Ongoing Review and Application”
• Confirm commitment to remain ambitious by always keeping the NCJ Policy at the

forefront and updated taking all relevant EU and international regulatory developments into account

• Reinforce commitment to transpose the new requirements ensuing from the

revised Policy in the detailed operational procedures and due diligence measures tailored in consideration of each EIB Group’s institution’s specificities and following specific requests from the decision-making bodies

02/10/2018 EIB – Stakeholder Engagement Meeting

PROPOSED AMENDMENTS BY SECTION – APPENDIX I “ANTI-TAX AVOIDANCE TOOLBOX”

52 02/10/2018 EIB – Stakeholder Engagement Meeting

Appendix I “Anti-Tax Avoidance Toolbox” (1)

02/10/2018 53

Tax good governance expected from contracting counterparties

• compliance with applicable national, European

and/or international laws and to that extent refrain from artificial arrangements aimed at tax avoidance

• hold and provide adequate, accurate and current

beneficial ownership information

• awareness of expectations highlighted in the EIB

Group NCJ Policy

• refrain from: cross-border ownership structures

involving jurisdictions with identified tax good governance deficiencies by Lead Organisations which are exclusively motivated by tax reasons and do not have any economic substance

• proactively take account of their exposure to

national, European and international tax risks arising from their ownership/control structure

• endorse the arm’s length principle for

transactions with related parties

Tax avoidance risk assessment tools and measures

• May seek confirmation from contracting

counterparties that they do not benefit from preferential tax regimes Possibility to request, on a risk-sensitive basis, contracting counterparties to provide:

• wnership structure chart, economic rationale

and tax regime applicable to major shareholders upstream the project ownership structure

• information on statutory and effective tax rates

and explanation in differences (if any)

• explanation on tax adverse media reports
• explanation on disputed tax positions
• confirmation that their intra-group transactions

(if any) are compliant with the arm’s length principle and/or whether any transfer pricing documentation was prepared and provided to relevant tax authorities

• CRS / FATCA classification of entities
• an independent tax opinion
• a document from competent tax authorities on

‘tax good standing’ (if available)

1 2

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Appendix I “Anti-Tax Avoidance Toolbox” (2)

02/10/2018 54

Country-related tax risks

EIB Group will take into account the tax integrity risks stemming from the presence of the contracting counterparties in certain jurisdictions. This assessment may consider inter alia:

• jurisdiction’s tax good governance deficiencies

identified by Lead Organisations

• membership of a country / jurisdiction in the Global

Forum

• membership of a country / jurisdiction in the Inclusive

Framework on BEPS

• adherence to the Multilateral Convention on

Administrative Assistance in Tax Matters and/or existence of bilateral exchange of information instruments and/or existence of EU legislation providing for exchange of information

• adherence to the Multilateral Convention to Implement

Tax Treaty Related Measures to Prevent BEPS

Simplified approach where contracting counterparties are:

• public companies listed on a stock exchange and subject to disclosure requirements;
• public administration (sovereigns, sub-sovereigns), state owned enterprises or international financial institutions;
• Contracting Counterparties which are subject to country-by-country reporting;
• r in the absence of cross-border elements.

4 5

Relationship with competent tax authorities

When necessary, EIB Group may encourage dialogue between the Contracting Counterparties with competent tax authorities, with a view to being informed about certain tax aspects of the them Contracting Counterparty’s structure and/or arrangements, such as the multijurisdictional ownership structure and/or the classification of financial instruments/entities, and/or information on direct or indirect shareholders.

3

EIB – Stakeholder Engagement Meeting

Designation of jurisdictions

Prohibited Restricted OECD Global Forum FATF Art 9(2) 4th AMLD Annex I Annex II Put on hold “Preferential Tax Regimes” Tax Sensitive Jurisdictions NCJ LIST Council conclusions Lead Organisations Interim Approach

TIQ IQ

18/09/2018 55 02/10/2018 EIB – Stakeholder Engagement Meeting

Overview of key features – draft proposal

02/10/2018 56

Jurisdictions Classification criteria Lead Organisation Prohibition Enhanced vigilance Reporting to Board Relocation requirement Restricted Jurisdictions Tax OR AML-CFT EU (Tax List Annex I) / OECD Global Forum / FATF / EU (AMLD) Yes: Location Link. Operation possible

• nly if physically

implemented in the relevant Restricted Jurisdiction Yes, any NCJ Link Yes Yes: new Cross- border operations with Contracting Counterparties incorporated or established in NCJs prior to signature of the contract Prohibited Jurisdictions AML-CFT (strategic deficiency) AND AML-CFT (Restricted) + Tax (EU list, Annex I) FATF/ EU (AMLD) (strategic deficiency) AND FATF/EU (AMLD) + EU (Tax List, Annex I) Yes: any NCJ Link (location/owner- ship/control). Operation possible

• nly if physically

implemented in the relevant Prohibited Jurisdiction Jurisdictions Classification criteria Lead Organisation Prohibition Enhanced vigilance Reporting to Board Relocation requirement Tax Sensitive Jurisdictions Tax on risk- sensitive basis EU (Tax List, Annex II) / OECD Global Forum No Yes, any NCJ Link Yes No

EIB – Stakeholder Engagement Meeting

Practical examples of draft proposal

57

Contracting Counterparty Parent Co. Parent Co.

EIB

Prohibition to enter into

• peration*

Contracting Counterparty Parent Co. Parent Co.

EIB

Contracting Counterparty Parent Co. Parent Co.

EIB

Contracting Counterparty Parent Co. Parent Co.

EIB

Enhanced vigilance and information to the Board

>10%

Contracting Counterparty

EIB

Contracting Counterparty Parent Co. Parent Co.

EIB

>10%

Parent Co. Parent Co.

Legend:

Prohibited jurisdiction Restricted jurisdiction Not an NCJ Parent Co. Parent Co. Parent Co. Parent Co.

>10% >10%

Type of jurisdiction: Applicable measures:

* Save for physical implementation exception where applicable 18/09/2018 02/10/2018 EIB – Stakeholder Engagement Meeting

Tax Integrity Due Diligence – Scope

• Contracting counterparty – meets regulatory requirement which states:

“shall not enter into new or renewed operations with entities incorporated or established in…”

• Major or controlling shareholder – follows AML-CFT principles
• Materiality threshold
• as per AML/CFT Directive > 25%,
• Possibility for EIB to calibrate risk-sensitivity
• Simplified tax integrity due diligence – where Contracting counterparties

are:

• (i) public companies listed on a stock exchange,
• (ii) public administration (sovereigns and sub-sovereigns), state owned enterprises or

IFIs,

• (iii) contracting counterparties subject to country-by-country reporting,
• r in absence of cross-border elements.

02/10/2018 58 EIB – Stakeholder Engagement Meeting

Tax Integrity Due Diligence – Tools

59 18/09/2018

General tax disclosures TIQ Package

• Tax Integrity Questionnaire

(TIQ)

• Specific tax disclosures

Harmful preferential tax regimes

Summary information in the approval documents

02/10/2018 EIB – Stakeholder Engagement Meeting

Q&A Session

02/10/2018 60 EIB – Stakeholder Engagement Meeting