Issue 95 – Regulatory and Tax Developments in August 2012 doc

1 FUND NEWS August 2012 Investment Fund Regulatory and Tax developments in selected jurisdictions Issue 95 – Regulatory and Tax Developments in August 2012 Regulatory News Ireland Irish regulator clarification on additional subscriptions and the KIID The Irish regulator, the Central Bank of Ireland, has issued the following guidance on the Key Investor Information Document (KIID) where investors make additional or new subscriptions:- 1. Existing investors: the most up- to-date version of the KIID must always be available on a UCITS’ or its management company’s website. However, there is no requirement to provide subsequent versions of the KIID to existing investors except as set out below. 2. Existing investors making a new subscription: the investor must be provided with a KIID unless the UCITS is aware that the investor’s current copy of (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Regulatory Content Ireland Irish regulator clarification on additional subscriptions and the KIID Page 1 Consultation Paper 59 Page 2 New draft AML legislation Page 2 Luxembourg Bill of law implementing AIFMD submitted to Parliament Page 2 Regulation on SIF Risk Management and Conflicts of Interest requirements Page 6 Malta SICAV Incorporated Cell Companies Regulations Page 6 Recognised Incorporated Cell Companies Regulations Page 6 Level playing field for Limited Partnerships and SICAVs Page 7 UK FSA proposes ban on promotion of UCIS and similar products to retail investors Page 7 Tax Content European Union VAT treatment of portfolio management services – the Deutsche Bank case Page 9 Ireland Ireland’s Double Taxation Agreement Network Continues to Grow Page 10 Luxembourg Aberdeen E-Alerts Page 10 Turkey The Private Pension Savings and Investment System Law Page 10 Law 6322 to increase savings in Turkey Page 11 Fund News – August 2012 2 the KIID is the most up-to-date version. 3. Automatic re-investments: where additional subscriptions arise under contract, there is no need to provide an up-to-date KIID. 4. Regular savings schemes: as these are based on a single subscription contract, the KIID need only be provided once. However, if the subscription arrangements change and a new subscription form (i.e. a new contract) is completed then a current KIID must be provided. Consultation Paper 59 – Proposed changes to the regulatory reporting requirements of Irish authorized collective investment schemes The Central Bank has issued a consultation paper under which it proposes to make a number of changes to the regulatory reporting regime for Irish funds. As a result, reporting will be made through the new Online Reporting System (ONR system) for: • Annual and interim financial statements and a short questionnaire. • Annual auditor statutory duty confirmation return and supporting documents. • Annual financial derivatives instrument report (UCITS only). • New annual sub-fund profile questionnaire. • New Regulatory Report. • Annual updated KIID. New draft anti-money laundering legislation A draft Criminal Justice (Money Laundering and Terrorist Financing)(Amendment) Bill 2012 has been published. The draft bill deals with a number of practical and technical issues which have arisen as a result of the implementation of the Third Anti- Money Laundering Directive. It is anticipated that this draft bill will be enacted quickly. Luxembourg Bill of law implementing the AIFMD into Luxembourg law submitted to the Parliament On 24 August 2012, the draft law 6471 transposing the Alternative Investment Fund Managers Directive (AIFMD) into Luxembourg law (Directive 2001/61/EC) was submitted to the Chambre des Députés (Luxembourg Parliament). The draft law will be discussed in Parliament where it may be amended, and is expected to be voted into law before the end of 2012. The draft law is a ’framework law’ and sets out the rules applicable to Alternative Investment Fund Managers (AIFM). At the same time the laws governing Luxembourg regulated funds will continue to co-exist. The first part of the draft law (Chapters 1-11) will adopt a new piece of legislation that closely follows the wording of the AIFMD. The second part of the law (Chapter 12) updates various existing laws in order to ensure consistency with the AIFMD, and also introduces some new structuring options to modernize the legal framework. Update of the Fund laws Under Luxembourg law Alternative Investment Funds (AIF) may be set-up as Part II Undertakings for Collective Investment (UCIs) under the law of 17 December 2010, Specialized Investment Funds (SIF) under the Law of 13 February 2007, or an Investment Company in Risk Capital (SICAR) under the law of 15 June 2004. The draft law introduces the following amendments to Fund News – August 2012 3 these pieces of legislation: • Part II UCIs All Part II UCIs will be qualified as AIFs and are subject to the AIFMD regime. Each AIF will have to appoint an AIFM, or be self-managed and require authorisation as an AIFM, and comply with the remaining AIFMD provisions. • SIFs Luxembourg updated the SIF law in March 2012 and introduced new requirements for regulatory approval of the SIF before the launch of activities, new rules on risk management and conflicts of interest, and the possibility to cross-invest between sub-funds in the same umbrella structure. The set-up of an appropriate risk management framework and conflicts of interest procedures had to be put in place by 30 June 2012. The draft AIFMD implementing law will amend the SIF law and distinguish between SIFs managed by an AIFM and SIFs managed by a non-AIFM with only those managed by an AIFM subject to the SIF regime. • SICAR Similar to the regime for SIFs the SICAR Law will be divided into two parts: the first regulating SICARs that are not considered as AIF, and the second including specific provisions for SICAR that will fall under the definition of AIF. Introduction of a new professional of the financial sector (PFS) status: ‘’Professional Custodian of Assets other than Financial Instruments’’ Luxembourg has decided to authorize the appointment of an entity that is neither a credit institution nor an investment firm as depositary of a certain category of AIFs. These AIF will offer no redemption rights exercisable during a period of five years from the date of the initial investments and generally do not invest in assets that must be held in custody or generally invest in issuers or non-listed companies to potentially acquire control over such companies. A new status of PFS will be created: ’professional custodians of assets other than financial instruments’. The criteria set down to be authorised as PFS custodian are the following: • Have a legal personality • Minimum share capital requirement of EUR 500,000 • Not subject to additional own funds requirements based on the volume of assets under custody Modification of the Management Company regimes available in Luxembourg The law of 17 December 2010 on UCIs contains two Management Company regimes, a UCITS licensed Management Company (Chapter 15), and a non-UCITS Management Companies (Chapter 16). The draft AIFM law provides for the set- up of an AIFM under chapter 2. The draft law allows a UCITS Management Company to ask for an extension of its license to be approved and recognized as an AIFM. The UCITS Management Company will have to submit an application file to the CSSF. Fund News – August 2012 4 The UCITS Management Company will have to comply with Chapter II of the draft law and provide additional information to the CSSF regarding: • the AIF it intends to manage. • a program of activity setting out the organizational structure of the UCITS Management Company, including information on how it will comply with operating conditions and reporting obligations. • Information on remuneration policy which has to be compliant with the AIFMD. • Information on the delegation of tasks. • How it will comply with the share capital and own fund requirements set out in the AIFMD. Once the approval is granted, the UCITS Management Company will be recognized as AIFM-compliant and will benefit from the AIFMD passport. A Chapter 16 Management Company will also be able to seek authorisation to act as an AIFM. Main Tax Changes From a tax point of view, the implementation of AIFMD in Luxembourg will engender several changes, which are summarized below. 1 New Luxembourg limited partnership – a very flexible fund raising vehicle The company law and tax regime applicable to the Luxembourg limited partnership (‘LP’) will be significantly modified. The reform will further increase the flexibility and provide for a full tax transparency and tax neutrality. The new Luxembourg LP will be aligned with models existing in England, Scotland, Jersey, Guernsey and other common law jurisdictions and will be tailor-made for alternative investment fund raising and for carried-interest structuring. 2 Modernisation of the existing common limited partnership (“Société en Commandite Simple” or “SCS”) The SCS will remain governed primarily by the limited partnership agreement (“LPA”), but with an extended contractual freedom to fulfil any business needs of the fund managers and investors, while safeguarding the confidentiality required by the alternative investment fund market. The Luxembourg company law applicable to the SCS will be modernised and will include the following interesting features: • possibility of contributions in industry (services, know-how) by general partners (“GPs”) and limited partners, • contractual freedom to allocate profits or losses, • full flexibility to define voting rights, • publication of the LPA limited to excerpts to safeguard the confidentiality of the identity of the limited partners and of sensitive information. 3 Introduction of a new special limited partnership (“Société en Commandite Spéciale” or “SCSp”) The SCSp will be a brand new type of vehicle in Luxembourg, profiting from the same flexible company law regime as the SCS. The originality is the SCSp having no legal personality, thus creating a new choice between a Luxembourg LP with legal personality (SCS, similar to a Scottish LP) and a Luxembourg LP without legal personality (SCSp, similar to an English LP). 4 Full tax transparency and tax neutrality The SCS is currently treated as transparent for corporate income tax (“CIT”) and net worth tax (“NWT”) purposes. The same treatment will apply to the future SCSp. If the GP(s) taking the form of limited company(ies) hold(s) less than 5% of the partnership interests, the income of the Luxembourg LP will no longer be deemed to be a business income. Moreover, if the activity of the SCS and SCSp is limited to private wealth management (which generally corresponds to the activity of private equity and real estate funds), the income of the SCS and SCSp should not be classified as business income. Consequently, no permanent establishment should be recognized, especially for municipal business tax (“MBT”) purposes. The new provisions will allow a full tax transparency and tax neutrality of both the SCS and SCSp in Luxembourg. Fund News – August 2012 5 The tax treatment of SCS set up before the new law enters into force will remain unaffected by the new rules. 5 Management of investment funds – Recast of the scope of the VAT exemption Bill 6471 includes changes to Article 44, 1, d) of the Luxembourg VAT law covering the investment funds management services exemption. Art. 206 of the bill is the consequence of a recent Luxembourg case-law according to which subcontracted investment management services received by a Luxembourg investment manager for the benefit of a SICAV established in an European Union Member State other than Luxembourg should not benefit from the VAT exemption of Article 44, 1, d) of the Luxembourg VAT law (“VATL”). Indeed, in its current wording the exemption applies only to the management of investment funds subject to the supervision of the Luxembourg regulatory authority (the CSSF or the CAA) and not to another European Union regulatory authority. This leads to a situation where a management company can incur input VAT on subcontracted investment funds management services without any recovery possibility considering that the management services it renders to an European Union regulated fund would be VAT exempt if located in Luxembourg. To remedy this situation, the bill would recast Article 44, 1, d) VATL to include within the scope of the VAT exemption the management of investment funds located in other European Union Member States and subject to supervisory bodies similar to the CSSF or the CAA. The enactment of this bill should reach its aim to avoid a situation where a management company would have incurred non-recoverable input VAT on subcontracted investment funds management services. It should be noticed that the bill also includes within the scope of the VAT exemption the management of alternative investment funds (“AIF”), whatever their place of establishment. The impact of this provision should be threefold. First, the supply of management services to a Luxembourg AIF should be VAT exempt. Second, subcontracted AIF management services received by a Luxembourg manager should also benefit from the exemption. And third, in return for this exemption, the input VAT recovery right of a Luxembourg AIF manager would have to be carefully monitored, even if the AIF managed is established outside the European Union. The interpretation of those provisions, if enacted as such, could be further detailed in a Grand Ducal Decree or in a Circular from the Luxembourg VAT authorities. 6 Carried interest The draft law also introduces a carried interest regime. The provisions cover the taxation of gains realized by the disposal of units, shares or other securities issued by an alternative investment fund in the framework of a carried interest as well as the mere carried interest. The provision applies to employees of alternative investment fund managers or alternative investment fund management companies. Capital gains realized upon sale of units, shares or securities covered by the present draft law are tax free if held for more than 6 months except if the individual holds or held a substantial participation. Carried interest not represented by units, shares or other securities are taxed as extraordinary income at a quarter of the global tax rate (around 10%). The tax provisions qualify the income of carried interest as other income (not as income of salaried activity) and limit the tax regime to individuals that became tax resident in Luxembourg during the year or the 5 subsequent years of the introduction of the present law. The provisions do only apply for income realized within 10 years after the year the individual took its functions in Luxembourg. They do, however, not apply to individuals that have been tax residents or taxed on professional income in Luxembourg anytime during the 5 last years before the year the law has been enacted. Neither do the provisions apply to carried interest where prepayments have been made. Fund News – August 2012 6 7 AIF managed out of Luxembourg Non resident AIFs are not subject to Luxembourg direct taxation by the mere fact that they are effectively managed in Luxembourg. The implementing law is available, in French only, via the following web link: CSSF Regulation n°12-01 on Risk Management and Conflicts of Interests for SIFs On 13 August 2012, the Commission de Surveillance du Secteur Financier (CSSF) issued a new Regulation laying down detailed rules relating to risk management and conflicts of interests for SIFs. 1. Risk management The Regulation explains that the risk management function has to implement and maintain an adequate and documented risk management policy intended to detect and manage appropriately the exposure to the risks. It also has to ensure compliance with the SIF’s risk limitation system. Furthermore, the risk management system has to be adopted by the directors of the SIF and has to be subject to a review on a regular basis. Any material change that could occur has to be notified to the CSSF. The Regulation clearly states that the risk management function has to be hierarchically and functionally independent from operating units. Nevertheless, a derogation from this requirement is foreseen if justified by the nature and scale of activities. SIFs may also delegate all or part of their risk management to third parties only in cases where the third party has the necessary skills to perform it in a reliable and efficient manner. Moreover, the delegation will not, in any case, relieve the directors of SIFs of their responsibility. 2. Conflicts of interest The Regulation specifies that SIFs have to implement and maintain an effective conflicts of interest policy requiring a written policy, appropriate to the size and organization of the SIF and the nature, scale and complexity of its business. SIFs will also have to implement and maintain a policy in order to prevent each relevant person (defined in Article 6) from entering into personal transactions which may give rise to a conflict of interest. They will have to prevent or manage each conflict of interest resulting from the exercise of voting rights attaching to the instruments held. SIFs will also have to prove their independence in terms of management of conflicts of interest according to specific criteria. Finally SIFs will have to keep update on a regular basis a record of the types of collective portfolio management activities in which a conflict of interest may arise or has arisen. The Regulation will enter into force on 1 September 2012. The CSSF Regulation n°12-01 is available (in French only) via the following link: Malta SICAV Incorporated Cell Companies Regulations The Companies Act (SICAV Incorporated Cell Companies) Regulations extend the Maltese legislation applicable to cell companies, first introduced in the insurance sector, to the fund sector. In terms of these regulations, each Incorporated Cell of an Incorporated Cell Company (ICC) has separate legal personality and is treated as a separate company forming part of the ICC Scheme. Incorporated Cell Companies and Incorporated Cells share the same registered office and at least one common director. The Regulations also allow for the relocation and expulsion of Incorporated Cells and the transformation of an Incorporated Cell Company or an Incorporated Company into a non-cellular company and vice- versa. It is also possible to redomicile or shift the legal seat of an Incorporated Cell Companies and Incorporated Cells in terms of the Companies Act (Continuation of Companies) Regulations. Recognised Incorporated Cell Companies Regulations The new Recognised Incorporated Cell Companies (RICCs) framework introduces a specific set of conditions which are separate from those applying to the ICC SICAV regime. The Companies Act (Recognised Incorporated Cell Companies) Regulations provides promoters with a flexible Incorporated Cell Company (ICC) structure that may be used as a vehicle to achieve various objectives including Fund News – August 2012 7 the setting up of a fund platform. Under these regulations, a limited liability company may be formed or constituted as a recognised incorporated cell company to establish incorporated cells and to provide such incorporated cells with administrative services. In order to provide such administrative services, a recognised incorporated cell company requires a Recognition Certificate issued by the Maltese Financial Services Authority. Level playing field for Limited Partnerships and SICAVs By virtue of the Companies Act (Amendment of the Tenth Schedule) Regulations, Limited Partnership structures have been brought on a level playing field with investment companies with variable share capital (SICAV). Therefore, Limited Partnerships will benefit from more structural and operational flexibility under the Companies Act. It will be possible for Limited Partnerships to be formed either as a multi-class partnership or as a multi- fund partnership. The multi-fund partnership may moreover elect for the segregation of assets and liabilities between separate funds. In addition, it is also possible for Limited Partnerships to be set up with capital that is not divided into shares. UK The FSA proposes to ban the promotion of UCIS and similar products to retail investors On 22 August the Financial Services Authority (“FSA”) published its latest proposals to increase consumer protection through banning the promotion of Unregulated Collective Investment Schemes (“UCIS”) and similar products to the majority of retail investors. The details are in consultation paper (“CP 12/19”) which follows on from its Product Intervention discussion paper (DP 11/1) issued in January 2011. The FSA’s conclusion is that such products must be restricted to sophisticated investors and high net worth individuals that are properly assessed and are aware of the risks if it is to mitigate the risks and reduce the level of miss-selling that the FSA has observed in the market. The FSA assesses that current regulation does not provide sufficient protection to “ordinary” retail investors. It has gathered evidence that only one in four advised sales of a UCIS to retail customers was suitable. In addition it concludes that other products, with similar risks to UCIS, which are not covered by the rules on the marketing of UCIS, can be widely promoted in the retail market. The FSA is concerned that failures of non-mainstream pooled investments in recent years have lead to a total investment losses for customers. Overall the conclusion of the FSA is that promotion of UCIS and similar products can fall substantially short of the standards required and that it must take action to protect ordinary retail customers from unsuitable products and potentially large losses. It highlights that since 1 September 2010 it has issued 22 Final Notices and four Decision Notices in relation to UCIS failures and summarises these on its website: http://www.fsa.gov.uk/smallfirms/your_fi rm_type/financial/investment/ucis- enforcement-notices.shtml The FSA identifies such investments as being esoteric; potentially illiquid; and susceptible to catastrophic loss of value. Examples of esoteric investments include: traded life policies; fine wines; crops; unlisted shares; timber; and UCIS and other schemes investing in such assets. In addition securities in special purpose vehicles which have similar risks should also be restricted on their promotion. The FSA proposes that firms should only promote these products to people for whom a UCIS or similar is more likely to be appropriate. The FSA draws attention to the fact that it has issued warnings to investors concerning UCIS, including the protections available and not available when investing in a UCIS: http://www.fsa.gov.uk/consumerinforma tion/product_news/saving_investments/ ucis but clearly considers it must now go further in meeting its statutory objective and making rules and guidance that protect retail investors. In what many may consider to be a controversial move (and notably one ranked as a three star consultation by Fund News – August 2012 8 the FSA) the effect of these proposals, should they come into force as drafted, would be: • The introduction of glossary definitions for certified high net worth investor, certified sophisticated investor, sophisticated investor and non mainstream pooled investment to restrict and align current eligible investor criteria, removing the existing firm discretion in assessing investor sophistication. • Implementation of specific marketing restrictions including mandatory risk discloses which aim to create a level playing field between different types of investment product and to provide some protection against retail investors being inappropriately classified. • Requirements for firms to document and maintain records of the precise basis on which they make each promotion to a retail client, including setting out the basis on which the client meets the marketing exemptions. • Requirements for Individuals responsible for the Compliance Oversight Function within affected firms to confirm the compliance of each financial promotion with the marketing restriction rules. In addition, the proposals include: • Handbook guidance: to clarify that personal recommendations (i.e. the provision of advice) generally amount to financial promotion and therefore are subject to the relevant marketing restrictions; and • updating of the definition of retail investment product under the Retail Distribution Review to clarify that UCIS and similar products do not necessarily have to be considered as ‘substitutable’ investments when firms/advisers are evidencing independence of advice. It is important to note that execution only sales and incoming cross-border financial promotions of these investments are not affected by the proposals. The consultation is for three months to the 14 November after which the FSA will publish a Policy Statement and its finalised Rules and Guidance in quarter one 2013. CP 12/19 (92 pages) is available via this web link in which the FSA provides a summary of why it is consulting at this time: http://www.fsa.gov.uk/library/policy/cp/2 012/12-19.shtml Tax News European Union VAT treatment of portfolio management services – the Deutsche Bank case On the 19 July the European Court of Justice (ECJ) released its Judgment in the “Deutsche Bank case” (C44/11). The Judgment confirmed the Advocate General's Opinion that discretionary portfolio management services are subject to VAT and are not exempt either as a dealing in securities or, alternatively, as a service similar to fund management. Background Deutsche Bank provided discretionary portfolio management services, the relevant portfolio assets being shares and other securities. Subject to certain parameters, Deutsche Bank bought and sold assets without requesting approval from the client. It charged a total fee based on 1.8 percent of the assets under management. This comprised 1.2 percent for advisory services and 0.6 percent for securities dealing activities. Deutsche Bank sought clarification from the ECJ on whether: 1. Portfolio management services should be VAT exempt either as a dealing in securities or as a service which is similar to fund management; 2. The bundle of advisory and execution services constituted a single supply for VAT purposes or Fund News – August 2012 9 not; and whether 3. Previous European legislation covering the place of supply of financial services covered services which fell outside the VAT finance exemption. The Judgment The ECJ’s Judgment follows the Advocate General’s Opinion and confirms that: 1. Portfolio management represents a single, taxable supply for VAT purposes. In reaching this view, the ECJ held that Deutsche Bank’s execution and advisory elements ought to be placed on an equal footing and, taken together, they form a single, inseparable supply which it would be artificial to split. This being the case, the ECJ considered whether the package of services fell to be exempt or not. The ECJ held that portfolio management services clearly do not fall within the exemption for the management of special investment funds. 2. Turning to the exemption for transactions in securities, the ECJ noted that this exemption covers transactions to “create, alter or extinguish” rights in relation to securities. The ECJ stated that as this was only part of the overall service and because of the requirement to strictly interpret the scope of EU VAT exemptions, Deutsche Bank’s services must fall to be taxable. It was also noted that if the exemption for transactions in securities already covered the management of those assets, there would have been no need for EU VAT legislation to provide for a separate fund management exemption. 3. On the last question, the ECJ confirmed that, prior to the introduction of the VAT Package in 2010, EU VAT legislation governing the place of supply of financial services was not limited to supplies which fall within a relevant exemption. As such, discretionary portfolio management services fell under this heading and, in a business-to-business context, were taxed according to the customer’s location. Implication Whilst the ECJ’s decision follows the VAT treatment applied by a number of investment managers and private banks, many institutions (particularly in the UK) have historically split their mandates such that a separate exempt fee is charged for execution services. The extent to which this treatment can continue is now in doubt, albeit the Judgment does acknowledge that advisory and execution services may be separately engaged for, depending on the customer’s underlying aims and profile. These judgments, considered together, suggest that investment management comprises a spectrum of activities, with exempt execution and introductory services at one end and taxable discretionary management at the other. Quite where services such as execution with advice would sit is not wholly clear and may require further case law or guidance. National responses to the ECJ’s Judgment and, in particular, whether institutions can continue to exempt execution fees are awaited. Institutions should also assess the status of any protective claims they may have submitted. Where the tax collector does not reject a claim there is merit in maintaining that exemption can apply. Prior to the introduction of the new place of supply rules on 1 January 2010, a number of jurisdictions viewed certain taxable financial services (such as non- exempt fund management and investment management services) as being taxed according to the supplier’s location. Businesses which have incorrectly been charged VAT on cross- border supplies of these services should, therefore, consider whether to revert to their supplier for a refund. Double taxation will have arisen where the supplier has charged local VAT and the business has simultaneously self- accounted for home state VAT under the reverse charge. Clearly, whether a refund is appropriate would depend on a range of factors including complex time limitation issues in each relevant jurisdiction. If you have any questions about this case and its implications for your business, please contact your usual KPMG VAT adviser. Fund News – August 2012 10 Ireland Ireland’s Double Taxation Agreement Network Continues to Grow Ireland has recently agreed DTAs with Egypt, Qatar and Uzbekistan in addition to those signed with Albania, Bosnia & Herzegovina, Hong Kong and Montenegro last year. This continued focus on Ireland’s DTA network has significantly increased the number of DTAs within the Irish network. To date Ireland has signed comprehensive DTAs with 68 countries. Ongoing negotiations with several other jurisdictions will see the network continue to grow. Ireland has DTAs with most of the major investment markets. The agreements cover direct taxes, which in the case of Ireland are income tax, corporation tax and capital gains tax. A comprehensive DTA network is important for international financial services businesses and is of particular interest to investment funds where withholding taxes on dividends and interest have a direct impact on investment yields. Moreover for investment countries that impose capital gains tax on nonresident investors (or where there is uncertainty in relation to the application of capital gains taxes), having access to a DTA network is important to help reduce such taxes and exposures. The text of the Ireland’s DTAs can be found on the Irish Revenue Commissioners website here: Luxembourg Aberdeen E-alert The Aberdeen E-Alert Issue 2012-11 (tax newsletter focusing on withholding tax reclaims based on the Aberdeen case law) discusses the abolishment in France of WHT on dividend payments to foreign investment funds The full text of the e-alert is available via the following web link:: The Aberdeen E-Alert Issue 2012-12 (here) looks at new guidance from the German Ministry of Finance regarding the competence of tax offices Risk in case of an omission to file WHT reclaims based on the ECJ decisions in the Aberdeen and in the Santander case in Germany. Turkey The Private Pension Savings and Investment System Law The Law numbered 6327 amended the Private Pension Savings and Investment System Law and various other Laws has been enacted by the Parliament and put into effect on 28 June 2012 upon being published on the Official Gazette. The Law introduced new provisions on how to attract more participants to the pension system and to tax gains from the system. One of the major incentives to attract more people in to the system is “State contribution”. State contribution • The law removed the existing advantages in the current system regarding the exemptions at the exit and availability of wage tax deductions for the individuals whereas it intends to bring long term incentives through employer contributions and state contributions. The state will also be contributing an amount equivalent to 25% of the contributions made to the system for an individual (employee or employer contributions) although such contribution will still be capped at the gross minimum wage per annum. It is expected that more participants will be joining the system and thus the pension fund market will be developed. • The law removed an uncertainty and after August 29, 2012, the withholding taxes on gains at exit from the system will only be applicable over the yields but not the principal amounts invested into the system. The individuals will be able to access to the principal amount of contributions and their returns depending on their duration of stay in the system. The schedule is as follows: a) The employee will be accessing to 15% of principal and return if he/she stays in the system for minimum 3 years. b) The employee will be accessing to 35% of principal and return if he/she stays in the system for minimum 6 years. c) The employee will be accessing to 60% of principal and return if [...]... carry follows and these provisions have been distinction is introduced for the income portfolio transactions in regulated or related to some incentives to create derived through the purchase-sale and non-regulated financial markets through more employment and increase savings holding of financial instruments issued their intermediary activities, will not be in Turkey abroad and taxation in relation to... Parliament and put into issuance of financial instruments is exemption The portfolio management effect on 15 June 2012 upon being covered in scope of withholding taxation companies, governed under the rules of published on the Official Gazette The under Temporary Article 67 of Turkish Capital Markets Law and enabling the Law introduced new provisions as Income Tax Code However, a non-resident investment...Fund News – August 2012 • he/she stays in the system for In addition to this, the dividend income minimum 10 years received from these venture capital company nor the persons affiliated investment funds and companies are to that company holds any rights in also exempted from corporate taxes excess of 20% in the non-resident d) Full access to the principal and returns in the case of retirement... Revenue Administration Directorate within the deadlines for filing the corporate tax return by the portfolio management company 11 Fund News – August 2012 We have launched a new channel “Fund Views” on our KPMG TV platform In regular videos we outline the latest regulatory developments affecting European Asset Managers Contact us Charles Muller Partner T: +352 22 5151 7950 E: charles.muller@kpmg.lu Dee... nathalie.dogniez@kpmg.lu Tax Georges Bock Partner T: + 352 22 5151 5522 E: georges.bock@kpmg.lu Advisory Vincent Heymans Partner T: +352 22 5151 7917 E: vincent.heymans@kpmg.lu www.kpmg.lu Publications The evolution of an industry – 2012 KPMG/AIMA Global Hedge Fund Survey here: Analysis of UCITS IV tax implications – updated version here: Evolving Investment Management Regulation here: The information contained herein is... for the non- instrument is being parallel to the resident investment funds if the Treasury bonds issued abroad following conditions are fulfilled Incentives for Venture Capital Investment Funds together: • ordinary activities of the portfolio The venture capital funds established management company in Turkey under the Capital Market Law are intended to be incentivized through the upcoming changes The... disability investment funds Neither the portfolio management investment funds Income Derived by Asset Management Companies Law 6322 to increase savings in Current government has a vision and Turkey project for Istanbul, which is “making The income derived by the asset Istanbul a new financial centre” The Law numbered 6322 has been management companies through the Therefore, there is a newly introduced... from their corporate tax base determined on arm’s length basis with respect to the funds that that will parallel to the relations between be set aside to be invested into the independent third parties Turkish venture capital investment exceed 10% of their taxable profits and 20% of their shareholders equity Those funds will be kept under special fund accounts in their balance sheets, and which needs to... nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination... capital investment partnerships or funds until the end of the year in which the funds are left aside The relations between the investment funds and portfolio taxpayers will be available to get an partnerships or funds which should not Portfolio management is among the • The fees are determined on arm’s length basis and this is supported with a transfer pricing report to be submitted to Revenue Administration . August 2012 Investment Fund Regulatory and Tax developments in selected jurisdictions Issue 95 – Regulatory and Tax Developments in August 2012 Regulatory. purchase-sale and holding of financial instruments issued abroad and taxation in relation to such instrument is being parallel to the Treasury bonds issued abroad. Fund News – August 2012 12. taxes, which in the case of Ireland are income tax, corporation tax and capital gains tax. A comprehensive DTA network is important for international financial services businesses and is of