Tax Townhall 02.05.18 2 irishfunds.ie Agenda Opening Gareth - - PowerPoint PPT Presentation

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irishfunds.ie

02.05.18

Tax Townhall

irishfunds.ie

Agenda

• Opening

– Gareth Bryan, KPMG

• AEOI (FATCA and CRS)

– Ruth Kelly-McEwen, State Street

• Domestic Tax

– Seamus Kennedy, Deloitte – Ilona McElroy, PWC

• International Tax

– Gerry Thornton, Matheson

irishfunds.ie

Agenda

• VAT

– Matthew Broadstock, Matheson

• EU Mandatory Disclosure

– Gareth Bryan, KPMG

• Q&A
• Closing

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irishfunds.ie

AEOI (FATCA and CRS) Working Group Update

• Ruth Kelly-McEwen – State Street

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irishfunds.ie

AEOI (FATCA and CRS) WG Update

AEOI (FATCA and CRS) WG Current Initiatives;

• 2017/2018 AEOI reporting – Review of 2017 reporting and Lessons learned, Engagement

with Revenue , Industry Briefing/Quarterly Technical Meetings

• 2018 AEOI Reporting Technical Updates – FATCA/CRS Schema changes/Validator

issues/Technical questions impacting reporting, issuing Members briefings.

• OECD/EU Changes/Updates – affecting AEOI (e.g. MDR/DAC 6)
• AEOI Compliance Framework – Revenue Audit Process – Next Steps/Plans.
• Industry standard FATCA/CRS Self-Certifications – reviewing in line with regulation

changes.

• Data Protection – assess the impact on GDPR on AEOI requirements
• AML (4/5) – New Beneficial Ownership registers impact on CRS.
• Monitoring AEOI developments in other jurisdictions – Cayman, Luxembourg, UK etc.
• Domestic obligations – Interaction of CRS legislation with existing Domestic obligations

under S891 (TCA)

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irishfunds.ie

AEOI (FATCA and CRS) WG Update

2018 Reporting

2018 AEOI Reporting Update Ireland

• The AEOI filing portal in ROS is now open for the filing of FATCA and CRS returns.
• The current version of the offline CRS validator hasn’t yet been updated with EU

validation changes for 2018. Returns can still be filed but may pass the offline validator and subsequently fail the final upload validation process in ROS.

• Reminder the Due Date for filing of FATCA and CRS Returns remains at 30 June

2018, this includes reporting results of the CRS Pre-Existing Due Diligence review.

• Supplementary Returns are required to be filed with Revenue for any CRS Pre-

Existing accounts closed during 2016 that have yet to be reported by 30 June 2018.

• The schema format for the supplementary returns is the same as the standard CRS

format however the message ref and doc ref ID’s and schema details need to reference 2016.

• For FATCA, the IRS have confirmed that FI’s no longer be able to use the default of

“9 Zero’s” placeholder in place of a U.S TIN” instead 9 capital A’s should be used along with the Date of Birth for the account holder.(see members briefing)

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irishfunds.ie

AEOI (FATCA and CRS) WG Update

2018 Reporting

Lessons learned from 2017 Reporting-Revenue Update

• Reminder that it takes at least 3 working days for an Agent link and another 3 working days for a new

registration on ROS to be set up. Don’t leave this too late.

• If changes need to be made to Revenue static data such as fund addresses etc., (which feeds into the

auto generated returns) this needs to be done separately with the local tax district for that FI.

• Increased volume of reportable accounts for 2018 (incl. pre-existing data). Revenue File Size of 10MB

per submission with a maximum size of 30MB; Most common schema reporting errors last year included ; – Error code 8007 – A/C report Error – mainly incorrect GIINS provided on the Sponsoring/Sponsored entity returns.(See WG update) – Error code 8008 – Schema files contained duplicated report records or the unique message ref and doc ref ID’s were incorrect.

• New – GIIN De-registration process: Financial Institutions are required to notify the IRS of its

deletion and also notify Revenue as soon as possible (but also ensuring that all necessary filings have been completed prior to deleting the GIIN)

• Technical issues can be raised to Irish Funds AEOI WG for discussion at quarterly technical

meetings with Irish Revenue.

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irishfunds.ie

AEOI (FATCA and CRS) Update

Revenue AEOI Compliance Framework/Audits;

• Revenue are legally required under FATCA and CRS to conduct “compliance reviews”
• OECD recently updated CRS Handbook detailing suggested CRS Compliance

Framework for Tax Authorities.

• Reviews will commence Q2 2018, being led by the Local Revenue District offices.
• Applying a risk based approach focused on, reviewing robust procedures and records

timeliness of filing FATCA and CRS Returns, the quality of the data received and any errors or questions received from other jurisdictions relating to those filings,

• Review of proper audit trail including detailing all the steps taken in the review and

classification of accounts along with “Well trained staff”.

• Compliance reviews likely to become wider in scope over time and their main focus

will be on the quality of the data exchanged.

irishfunds.ie

AEOI (FATCA and CRS) update- Regulation

GDPR and the impact on FATCA/CRS

GDPR FATCA and CRS

GDPR requires that both the fund (as data controller) and administrator (as data processor) to consider and document on what basis they are processing personal data, including data gathered and held for FATCA/CRS. An inventory of all personal data must be created under GDPR (which would include that information gathered for FATCA/CRS purposes) See DPC website for more detail on what should be included in the inventory. GDPR provides an opportunity to develop an

• rganised and strategic approach to collecting

and maintaining investor data New legislation introduced by Finance Act 2017 governs Revenue’s processing of taxpayer information and taxpayer’s rights in relation to such

• processing. This legislation is contained in section

851B of the Taxes Consolidation Act 1997 and provides that Revenue’s processing of taxpayer information has a legal basis that is compatible with GDPR Reminder of “Wider Approach” to CRS Due Diligence where all Investors required to provide a Self-Certification and TIN at the time of account

• pening (See Revenue CRS FAQ)

Irish Funds Industry Standard Self-Certs include Data protection wording and Customer Information notices

irishfunds.ie

AEOI Regulatory and Technical update

OECD Mandatory Disclosure scheme (MDR) Provide Tax authorities with advanced information on arrangements that purport to circumvent CRS and offshore structures that disguise the Beneficial owners of offshore assets.

• Intermediaries or (taxpayers) to identify and report to local tax authorities avoidance

arrangements or Opaque offshore structures that meet certain “hallmarks”.

• Potential retrospective review and disclosures required back to 29 October 2014
• Alternative Funds likely to be considered “Opaque Offshore Structures” and in-scope
• Many legitimate financial transactions (such as transfers to non-CRS Jurisdictions) and

legitimate changes of beneficial ownership could be in scope

• Will all OECD MDR requirements be transmitted into proposed DAC 6?

EU DAC 6 EU DAC 6 requires disclosure of potentially aggressive “cross border” tax planning arrangements (scope is broader than OECD MDR ).

• Intermediaries or (taxpayers) to identify and report to local tax authorities avoidance

arrangements or Opaque offshore structures that meet certain “hallmarks.

• Targets aggressive cross border arrangements but no clear definition of the term arrangement.
• Definition of Intermediary very broad could include fund promoters and other service providers to

fund products).

• How will DAC 6 be transmitted into local legislation?

irishfunds.ie

AEOI (FATCA and CRS) Update Other Jurisdictions

Irish Funds AEOI WG are constantly monitoring developments in other jurisdictions:

• The Cayman Islands issued revised CRS guidance reducing the ownership

threshold for “CP” from 25% to 10% in line with new AML Legislation enacted in Cayman.

• Cayman have also issued revised CRS Entity Self-Certifications to reflect

changes in disclosure requirements of ownership.

• There is a requirement to request a revised entity self-certification template from

all New Passive NFEs from 01 April 2018.

• Existing Passive NFEs must be remediated by 31 December 2018.
• Cayman Portal is now open and ‘AEOI News and Updates page’ has been

updated including a new user guide

• Supplementary 2016 Returns - Luxembourg requirements are similar to
• Ireland. UK/HRMC have taken a slightly different approach where

information is to be included in the 2017 return

• Reminder to register/notify the relevant tax authorities where there are new

FIs.

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irishfunds.ie

Domestic Tax Working Group Update

• Seamus Kennedy – Deloitte
• Ilona McElroy – PWC

irishfunds.ie

Domestic Tax

• Pan European Pension Plan (PEPP) – submission to

EFAMA in February 2018 – agreement in principle with proposal subject to there being no pre-condition

• f “tax harmonisation”
• s1035A – work in progress on submission regarding to

cover legislation and guidance

• PAYE “Christmas Day” letters from Revenue

irishfunds.ie

Domestic Tax

• Engagement with Revenue - iXBRL requirement in

Finance Act 2017

• Amalgamation of IREF Working Group with Domestic

Tax Working Group.

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irishfunds.ie

• Finance Act 2016

– Introduction of 20% WHT for IREFs – Exemptions from WHT for certain investors – 5 year exemption for gains

• Finance Act 2017

– 5 year exemption for gains removed – Additional exempt investors confirmed – Double charge to IREF removed – Advance clearance procedure – Ability of intermediaries to complete declarations Domestic Tax - IREFs

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irishfunds.ie

• Revenue Guidance

– PPIREF – Equivalence – Transparency

• Compliance for IREFs

– IREF Return – IXBRL requirements Domestic Tax - IREFs

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irishfunds.ie

International Tax Working Group Update

• Gerry Thornton – Matheson

irishfunds.ie

International Tax Working Group - Update

• Brazil
• 2 day technical meeting in Brazil in March 2017
• Minister of State Joe McHugh TD had meeting with Head
• f the Brazilian Revenue Service in March 2018
• Minister for Finance Donohoe, April 2018:

“The Irish Government was deeply disappointed by Brazilian Federal Revenue Service's decision to include Ireland on the List of Countries with Favoured Taxation and Tax Regimes. Inclusion on the list fundamentally misrepresents Ireland and the Irish tax system.” “Arising from the meeting the fundamental issue remains that Ireland’s 12.5% headline rate was at odds with existing Brazilian tax legislation (which sets a 17% threshold) which means that Ireland will remain on the list, regardless that Ireland is fully compliant with all international best practices in the areas of tax transparency and exchange of information and are one of

• nly 22 jurisdictions to be ranked as fully Compliant by the Global Forum on

Transparency and Exchange of Information for Tax Purposes. Furthermore, research by the OECD and others point to the importance of low corporation tax rates to encourage economic growth”

irishfunds.ie

International Tax Working Group - Update

• Treaties
• Japan – Ireland looking to renegotiate some terms
• Uruguay – negotiations have commenced
• Taiwan – groundwork set. Minister for Finance Donohoe,

April 2018:

“Like the rest of our EU partners, Ireland adheres to the one-China policy. However, some EU member states have negotiated a tax agreement with

• Taiwan. My Department, in consultation with the Department of Foreign

Affairs and Trade and the Revenue Commissioners, examined whether an agreement with equivalent effect to a tax agreement with Taiwan might be concluded in a manner consistent with our foreign policy. In the Finance Act 2015 an amendment was made to section 826 of the Taxes Consolidation Act 1997 to allow for agreements to be made with non-governmental entities such as Taiwan. This paved the way legally to concluding an agreement. Discussions on the next steps to be taken are ongoing with a view to identifying an approach that is acceptable to both countries. There have as yet not been formal negotiations between Irish officials and representatives

• f Taiwan.”

irishfunds.ie

International Tax Working Group - Update

• TRACE
• Back on the agenda – OECD meeting in February 2018
• OECD seeking to have TRACE dovetail with CRS
• For intermediaries, proposed strict liability a real concern
• For many tax authorities, automatic relief at source a real

concern

• Many OECD members not yet indicating their position
• U.S. position will be very important

irishfunds.ie

International Tax Working Group - Update

• Certificates of residence
• New template.
• Additional language in certs for Portugal and Italy.
• Certs in pdf only.
• For wet ink copies, can go to LCD offices.
• 20 working days to turn around, but aiming to get back

much quicker than that.

• Looking to put the process onto the ROS system, to

request certs online and issue certs in real time.

• Issues regarding advisors who are not registered as tax

agent of the fund.

• Overall, changes to the certificate regime for corporates

has reduced certificate output from 55,000 to 9,000 per year.

irishfunds.ie

International Tax Working Group - Update

• ATAD 2
• Revenue engaging with industry on implementation of

anti-hybrid rules

• Likely to be incorporated into the Taxes Consolidation Act

as a new chapter

• For Irish funds, three main topics of focus:
• Feeder funds (eg Cayman feeders) which may have hybrid

characteristics (eg, corporate for US tax purposes, partnership for Irish tax purposes).

• Irish funds which may have hybrid characteristics (eg, CCF

which is transparent for Irish tax purposes, but currently treated as opaque for Japanese tax purposes).

• Subsidiaries of Irish funds (eg, s110 companies)
• Revenue considering proposing a statutory basis for

determining the tax transparency of foreign entities

irishfunds.ie

International Tax Working Group - Update

• BEPS
• Last Irish Funds submission: January 2017 on non-CIV

consultation

• Seemingly no further OECD appetite to do further work
• n non-CIV funds
• MLI may come into operation at end of 2018:
• OECD Tax Talks Webcast in December. Anticipated that

most countries will ratify the MLI before the end of 2018. If that is the case, the changes in the MLI should take effect to update treaties from 1 January 2019 or 1 January 2020 (depending on when in 2018 the MLI is ratified by each country).

• Ireland has taken the first step in ratifying the MLI but has

yet to issue a Government Order to complete the Irish legal steps in the ratification process. After the Order is issued, Ireland must lodge an instrument of ratification with the OECD to complete the ratification process under the MLI.

irishfunds.ie

International Tax Working Group - Update

• Treaty Dispute - Peer Review
• Ireland ’s participation in tax treaty dispute resolutions

processes is currently the subject of a peer review process being undertaken by the OECD.

• The peer review process is conducted in two stages. Under

Stage 1, implementation of the Action 14 minimum standard is evaluated for Inclusive Framework members. Stage 2 focuses on monitoring the follow-up of the recommendations resulting from jurisdictions' Stage 1 report.

• The OECD is gathering input for the Stage 1 peer reviews of

Australia, Ireland, Israel, Japan, Malta, Mexico, New Zealand and Portugal, and invited taxpayers to submit input

• n specific issues relating to access to MAP, clarity and

availability of MAP guidance and the timely implementation

• f MAP agreements for these jurisdictions.

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irishfunds.ie

VAT Working Group Update

• Matthew Broadstock – Matheson

irishfunds.ie

VAT Working Group - Update

• VAT Recovery
• Revenue eBrief 68/18 – 23 April 2018
• “VAT deductibility for the Funds Industry”
• Fund VAT recovery
• Confirming the Revenue practice as regards VAT recovery

calculations for funds

• Primary method is based on level of non-EU investments as

a proportion of NAV (widely used method)

• Secondary method is based on the quantum of non-EU

investors in the fund (this is less favoured by the Revenue / practitioners)

irishfunds.ie

VAT Working Group - Update

• VAT Recovery
• Fund Managers and Fund Administrators
• Aspect Queries have been raised by the Revenue as

regards VAT recovery calculations in respect of Irish domiciled funds

• Suffering from withheld and delayed VAT refunds
• Discussions ongoing with the Revenue as to methods used

to date

• VAT WG are monitoring the position

irishfunds.ie

VAT Working Group - Update

• VAT Recovery
• Brexit considerations
• All subject to final deal reached
• Once UK leaves the EU VAT regime, VAT recovery

calculations based on non-EU supplies / assets may change

• Funds
• Managers
• Administrators
• First changes may be in March / April 2019 VAT return or

a later return depending on terms of transitional deal

irishfunds.ie

VAT Working Group - Update

• MiFID II - Research Services
• Historically bundled with VAT exempt execution services
• Now required to be unbundled with separate charges
• Standalone research services may be subject to 23%

VAT

• Possibility to continue to qualify for the “investment

management” exemption (GfBK CJEU decision)

• No specific Revenue guidance to date
• VAT WG has prepared a draft submission to the

Revenue which is to be considered at WG meeting on 17 May

irishfunds.ie

VAT Working Group - Update

• VAT Registrations
• Delays encountered whilst Revenue await launch before

completing registration

• Additional information requested
• Invoices from non-Irish service providers
• Authorisation letters from the CBI
• VAT WG are monitoring situation and discussing

submission to Revenue on 17 May

irishfunds.ie

VAT Working Group - Update

• ROS Agent Access
• Conflict between access to ROS for:
• Advisor as filing agent
• Administrator as paying agent
• EFT payment held to be in default
• Penalty letters have been issued for non-ROS payments
• VAT WG has met Revenue
• Agreement reached that Revenue would allow “dual agent”

access where required to allow separate payment and filing

• Issue of penalty letters has ceased at present

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irishfunds.ie

EU Mandatory Disclosure

• Gareth Bryan – KPMG

irishfunds.ie

Mandatory Disclosure

Cross Border Arrangement Intermediary Hallmark Report Any person that:

• Designs
• Markets
• Organises or
• Makes available for implementation or
• Manages the implementation
• f a ”Reportable cross-border arrangement”

Any person that, having regard to the relevant facts and circumstances and based on available information and the relevant expertise and understanding required to provide such services, knows or could be reasonably expected to know that they have undertaken to provide, directly or by means of other persons, aid, assistance or advice with respect to designing, marketing, organising, making available for implementation or managing the implementation of a reportable cross- border arrangement. An arrangement concerning either more than one Member State or a Member State and a third country where at least one of the following conditions are met: a) not all of the participants in the arrangement are resident for tax purposes in the same jurisdiction; b) one or more of the participants in the arrangement is simultaneously resident for tax purposes in more than one jurisdiction; c) one or more of the participants in the arrangement carries on a business in another jurisdiction through a permanent establishment situated in that jurisdiction and the arrangement forms part or the whole of the business of that permanent establishment; d) one or more of the participants in the arrangement carries on an activity in another jurisdiction without being resident for tax purposes or creating a permanent establishment situated in that jurisdiction; e) such arrangement has a possible impact on the automatic exchange of information or the identification of beneficial

• wnership.

irishfunds.ie

Mandatory Disclosure

Hallmarks linked to the main benefit test A.1 Condition of confidentiality A.2 Fixed fee by reference to tax advantage A.3 Substantially standardised documentation /available without need for substantial customisation B.1 Contrived steps related to loss-making companies B.2 Converting income into capital, gifts or other categories of lower taxed revenues B.3 Circular transactions resulting in round-tripping of funds C.1(b)i,( c),&(d) Cross-border transactions where deductible payment made between 2 or more associated persons where (b)i the recipient jurisdiction has no tax or zero or almost zero tax rate, (c) receipt has full exemption from tax or (d) payment benefits from preferential tax regime in the recipient’s residence jurisdiction

TEST 1: Can a person reasonably be expected to derive a tax advantage from the arrangement (or any part of the arrangement)? TEST 2: Having regard to all facts and circumstances, can it be established that the main benefit or one of the main benefits a person derives from the arrangement is the

• btaining of that tax advantage?

irishfunds.ie

Mandatory Disclosure

Hallmarks NOT linked to the main benefit test C.1(a) Cross-border transactions between 2 or more associated persons where deductible payment to recipient not resident anywhere C.1(b)ii Cross-border transactions between 2 or more associated persons with deductible payments to recipient resident in EU Blacklist or OECD non-cooperative jurisdictions C.2 Cross-border transactions where deductions for same depreciation on asset in more than one jurisdiction C.3 Cross-border transactions where relief from double taxation in respect

• f the same item of income or capital is claimed in more than one

jurisdiction C.4 Cross-border asset transfers, material difference in the consideration amount treated as payable D.1 Specific hallmarks concerning automatic exchange of information D.2 Specific hallmarks concerning beneficial ownership E.1-3 Specific hallmarks concerning transfer pricing

Disclaimer: The material contained in this document is for marketing, general information and reference purposes only and is not intended to provide legal, tax, accounting, investment, financial or other professional advice on any matter, and is not to be used as such. Further, this document is not intended to be, and should not be taken as, a definitive statement of either industry views or operational practice. The contents of this document may not be comprehensive or up-to-date, and neither Irish Funds, nor any

• f its member firms, shall be responsible for updating any information contained within this document.

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