Issue 84 – Regulatory and Tax Developments in September 2011

FUND NEWS September 2011 Investment Fund Regulatory and Tax developments in selected jurisdictions Issue 84 – Regulatory and Tax Developments in September 2011 Regulatory Content European Union ESMA publishes updated measures regarding short selling Page 1 ESMA launches a call for evidence on empty voting Page 1 Ireland Fitness & Probity for directors and staff Page 2 UK FSA issues PS 11/10 on its Transposition of the revised UCITS Directive Page 2 FSA quarterly consultation includes minor amendments for the operation of Authorised Funds Page 2 Tax Content European Union European Commission proposes a Financial Transaction Tax Page 3 Regulatory News The full list of measures is available via the following web link: Netherlands New bill on reclaims of Dutch dividend withholding tax Page 4 European Union ESMA publishes updated measures regarding Short Selling On 29 September 2011 ESMA published an updated list of measures adopted by competent authorities on short selling. This update includes measures taken by France, Greece, Italy and Spain. http://www.esma.europa.eu/popup2.ph p?id=7696 ESMA launches a Call for Evidence on empty voting On 14 September ESMA launched a Call for Evidence on empty voting. Currently there are no specific rules relating to empty voting at the European level. ESMA’s objective is to collect Poland Proposed amendments to the tax exemption regime applicable to EU and EEA funds Page 4 Spain Royal Decree 1145/2011 amending the General Regulations on tax management and inspection actions and procedures Page 5 Switzerland Switzerland and the UK initial tax agreement Page 8 UK Authorised Investment Funds amending tax regulations published Page 8 HM Treasury confirms it will introduce a protected cell regime for OEICs by November 2011 Page 8 Fund News – September 2011 UK information and evidence on the extent to which empty voting practices exist in practice within the EU and the effects of such practices. The Call for Evidence is available via the following web link: http://www.esma.europa.eu/popup2. php?id=7819 Ireland Fitness & Probity for directors and staff The Central Bank of Ireland has issued new Fitness and Probity Standards for all Irish regulated firms. These rules apply to two categories of staff – Pre-Approved Control Functions (“PCFs”) and Controlled Functions (“CFs”). These new rules are being introduced on a phased basis over the next year in order to allow for the introduction of new internal controls and procedures. FSA issues PS 11/10 on its Transposition of the revised UCITS Directive On 2 September, the Financial Services Authority (“FSA”) issued its policy statement explaining its transposition of the revised UCITS Directive (“UCITS IV”) into UK regulation. This policy statement is relevant not only to the UK industry but also to those firms, in the UK and overseas, looking to passport services whether through the cross-border marketing of UCITS funds or those non-UK UCITS managers seeking to use the management company passport to manage UK-authorised UCITS schemes. PS 11/10 reports on implementing the revised directive in the UK and summarises the feedback received to the questions the FSA “asked” when it issued the implementation consultation paper of December 2010. PS 11/10 publishes the final rules that have already been implemented by the transposition deadline through statutory instrument (SI 2011/1613) and the FSA Board approved Handbook changes (see Fund News Issue 81). The new features of UCITS IV have http://www.fsa.gov.uk/pubs/policy/ps11 _10.pdf Note that from page 37 of PS 11/10, the document comprises the “Made rules”, i.e. the implementing legal instrument: UCITS IV Directive Instrument (FSA 2011/39), and, while these 257 pages were published in July and are already included in the updated FSA Handbook in a wide range of places, document FSA 2011/39 provides a useful “black line” version showing the changes made by the FSA across the FSA Handbook to implement the UCITS IV Directive. FSA quarterly consultation includes minor amendments for the operation of Authorised Funds On 7 September the FSA issued CP 11/18, its quarterly consultation paper 30, in which it proposes minor amendments to the Rules and Guidance in its handbook. In September the quarterly consultation included amendments with respect to authorised funds set out in chapter 6. The FSA’s quarterly CP proposes changes for authorised funds as follows: already been extensively discussed, however, the FSA re-emphasises that the Key Investor Information Document (“KIID”) will be a shorter and clearer document to help consumers compare funds and make more informed choices before they make their investment decision. It reiterates that firms have until 30 June 2012 to introduce the KIID. The policy statement (295 pages) is available via this web link:  umbrella Non-UCITS retail schemes (“NURS”) will be permitted to combine sub-funds that operate as FAIFs (Funds of Alternative Investment Funds) alongside sub-funds that are not FAIFs;  the FSA proposed to require that when the final sub-fund of an umbrella ICVC is terminated such that there is no remaining property in the ICVC then the ICVC will be automatically wound up. As 2 Fund News – September 2011 TAX News proposed, this would prevent the ICVC becoming an empty shell that the Authorised Fund Manager may then repopulate with a new range of authorised funds;  the FSA proposes to issue new guidance for managers to assist with determining if interests in syndicated loans are eligible investments; and  following the implementation of UCITS IV into the COLL sourcebook the FSA seeks to make two clarifications: European Union European Commission proposes a Financial Transaction Tax On 28 September, the European Commission published a proposed Directive for a tax on financial transactions. The scope of the tax is wide, aiming at covering transactions relating to all types of financial instruments. The scope covers instruments which are negotiable on the capital market, money-market instruments (with the o which ongoing charges figure should be published in the short report and the next update of the KIID provided that it is not misleading as an indication of future charges; and o that with respect to COLL 9.4.2R(1) and Documents, that for a section 264 recognised scheme only the KII document must be in English in accordance with the Directive’s translation requirements. exception of instruments of payment), units or shares in collective investment undertakings (which include UCITS and alternative investment funds) and OTC derivatives agreements. The scope of the tax is focused on financial transactions carried out by financial institutions acting as party to a financial transaction, either for their own account or for the account of other persons, or acting in the name of a party to the transaction. The definition of financial institutions is broad and essentially includes investment firms, organised markets, The quarterly consultation is available via the link below – the relevant Chapter for funds is Chapter 6 (on pages 28 to 33) and the draft COLL amendments are in Annex 6 (on pages 77 to 84) of the 102 page document. Comments on credit institutions, insurance and reinsurance undertakings, collective investment undertakings and their managers, pension funds and their managers, holding companies, financial leasing companies, special purpose the proposed changes should be entities, and where possible refers to provided to the FSA by 6 November 2011, details on page 33 of the CP. http://www.fsa.gov.uk/pubs/cp/cp11_18 .pdf the definitions provided by the relevant EU legislation adopted for regulatory purposes. Taxation will take place in the Member State in the territory of which the 3 Fund News – September 2011 Poland establishment of a financial institution is located, on condition that this institution is party to the transaction, acting either for its own account or for the account of another person, or is acting in the name of party to the transaction. Two rates of tax are proposed:  A rate of not lower than 0.01 percent on the notional amount in respect of derivatives transactions; and  A rate of not lower than 0.1 percent on the consideration paid for the transaction (or the arm`s length market price, if higher) for all other eligible financial transactions. The full text of the proposed directive is available via the following web link: http://ec.europa.eu/taxation_customs/re sources/documents/taxation/other_taxe s/financial_sector/com(2011)594_en.pdf Netherlands New bill on reclaims of Dutch dividend withholding tax The Dutch government has published a bill introducing a reclaim possibility for Dutch dividend withholding tax withheld on dividend payments to tax exempt entities resident outside the European Union / European Economic Area (for Main beneficiaries of the reclaim possibility are pension funds and charities. Tax exempt entities that have a function comparable to that of entities with an exempt investment institution or fiscal investment institution status (articles 6a and 28 Dutch CITA) are excluded. This new reclaim possibility only applies to portfolio investments. For the definition of portfolio investments the bill refers to the free movement of capital as defined in article 63 of the Treaty of the functioning of the European Union (and not being direct investments as referred to in article 64 of that treaty). Furthermore, the Dutch Ministry of Finance must have designated the country of residence as a qualifying country. Only countries that have concluded a tax treaty with the Netherlands that provides for the exchange of information (a Tax Information Exchange Agreement) can qualify. It is envisaged that this new legislation will be in force as of 1 January 2012. Further information re this bill (in Dutch) is available via this link: http://www.rijksoverheid.nl/onderwerpe n/belastingplan-2012 Proposed amendments to the tax exemption regime applicable to EU and EEA funds The Polish Government recently published further proposed amendments to the Polish Corporate Icome Tax Act. More specifically, as an additional condition to benefit from the exemption regime currently applicable to foreign investment funds, such foreign funds will have to be managed by an entity operating on the basis of a permission issued by the competent financial sector authorities of a given state. This additional general comparability requirement (i.e. existence of an authorized management company) will be imposed on all foreign funds, and one cannot exclude that it will lead to the exclusion of self-managed corporate funds from the exemption regime. In addition, it seems that the Government intends to apply the exemption also to close-ended funds which do not operate on the basis of a permission issued by the competent financial sector authorities of a given state but must only notify about initiation of investment activities. To benefit from the withholding tax exemption in Poland such funds will have to meet the following additional requirements:  such funds are close-ended funds Dutch, EU and EEA resident tax exempt entities this reclaim procedure is already applicable). Earlier, the tax authorities announced to repay dividend withholding tax after claims were filed based on EU law. For information on earlier claims follow this link: http://www.kpmg.com/Global/en/What WeDo/Tax/Documents/EU-tax-flash/etf- 165.pdf  investment certificates (units) in a given fund are not offered publically (traded on the stock exchange) or traded on any regulated market or other multilateral trading facilities  in case investment certificates can be acquired by individuals, such 4 Fund News – September 2011 Spain  individual purchases must have a minimum value of EUR 40,000. Royal Decree 1145/2011 amending the General Regulations on tax scope of the exemption of the Non- Resident Income Tax (“NRIT”) Law for The proposed amendments are currently being discussed at Government level and, if accepted, will be submitted for consideration to the Parliament. These proposed provisions further depart from the EU Commissions` standpoint (formal request dated 11 June) according to which current legislation, by introducing numerous exemption requirements, remains discriminatory with respect to foreign funds. management and inspection actions and procedures Simplification of formal obligations in connection with investors in fixed-income financial instruments (Government and Qualifying Public Debt). Modification of the obligation to obtain a Spanish Tax Identification Number. On 30 July 2011 the Official State Gazette published Royal Decree 1145/2011, dated 29 July, (“RT 1145/2011”), which amends the General Regulations on tax management and inspection actions and procedures, approved by Royal Decree 1065/2007, dated 27 July (“RD 1065/2007”). As described in the Preamble, RD 1145/2011 introduces a simplification of the reporting obligations for non-resident investors of fixed-income financial instruments. RD 1145/2011 also simplifies the obligations for Spanish Resident Corporate Income Tax (“CIT”) taxpayers in respect of investments of specific fixed-rate financial instruments and clears up certain doubts in connection with the obligation for non-resident investors to obtain a Spanish Tax Identification Number (“TIN”) when investing in securities. Modification of information duties of non-resident investors Royal Legislative Decree 2/2008, dated 21 April, which sets forth measures to boost economic activity, extended the Government Debt and other financial instruments to all non-resident investors regardless of their country of residence (including investors which are resident in jurisdictions considered tax havens for tax purposes). On the other hand, Law 4/2008, dated 23 December, which abolishes Net Wealth Tax, eliminated the obligation of providing information on income derived from Government and private Debt issued in accordance with Law 13/1985, dated 25 May, on investment ratios, equity and information duties of financial intermediaries (hereinafter, “Qualified Corporate Debt”) obtained by non-resident investors without a permanent establishment in Spain. However, until the recently approved RD 1145/2011, no Regulations developing amendments introduced by Law 4/2008 were approved. In this regard, in accordance with the tax rulings issued by the General Directorate of Taxation (“Dirección General de Tributos”), dated 20 January 2009, information duties relating to the identity of beneficial owners as laid down in RD 1285/1991, dated 2 August, and article 44 of RD 1065/2007 remained applicable in order to apply the NRIT exemption to income derived from Government Debt and Qualified Corporate Debt obtained by non-resident investors acting without a permanent establishment in Spain. As a result, until the recently approved RD 1145/2011 the onerous information obligations applicable in respect of non-resident investors that existed prior to the enactment of Law 4/2008 were maintained. 5 ... - tailieumienphi.vn