key european regulatory changes regulatory …...firms (jan 2014) ucits v voted first fatca...

Key European regulatory changes

Nicolas Hennebert, Audit Partner and Eric Centi, Tax Partner, Deloitte Luxembourg

Regulatory turbulence?

1

Agenda

Introduction

A global shift towards tax transparency

UCITS

Alternative Investment Fund Managers Directive (AIFMD): Impacts for Asset Managers in Singapore

© 2015 Deloitte & Touche LLP 2

Introduction

3

Worldwide Investment Funds Assets

Expressed in EUR Tn

Including Funds of Funds

Source: International Investment

Funds Association

Funds domiciles (% of AUM)

Global Market European Market

Source: International Investment Funds Association Source: EFAMA

5

Investment management – Some statistics

Introduction

4 © 2015 Deloitte & Touche LLP

6

Legal forms and asset classes

Luxembourg funds

5

7

Focus on UCITS – Legal forms and asset classes

Luxembourg funds

6

8

Luxembourg funds Focus on Alternative Funds – Legal forms and asset classes

9

Interaction in the IM industry

Singapore and Luxembourg

• Luxembourg funds distributed in Singapore:

− All major international fund houses have at least 1 fund registered for distribution in Singapore, making Singapore the

top place for distribution of Luxembourg investment funds in the Asia Pacific region;

− Over 1800 Luxembourg funds are registered for distribution in Singapore, representing more than 42% of Luxembourg

fund registrations in the entire Asia Pacific region;

− Luxembourg fund registrations in the Asia Pacific region keep growing at a steady rate, driven mainly by registrations in

Singapore (+13% in 2014 vs. +7,15% for the entire Asia Pacific region)

• In contrast, there are still few Singapore players acting as sponsors of Luxembourg funds

− AUM of Luxembourg funds sponsored by Singapore players were approaching USD 2Bn at December 31, 2013, i.e.

3,5% of funds sponsored by Asia Pacific players

− Asset classes remain mainstream and focused on Asian markets

− All the Luxembourg investment funds sponsored by Singapore players have been created with a corporate form, mostly

under the UCITS framework

Sources: ALFI, Monterey Survey and Deloitte analysi


Regulatory timeline

© 2015 Deloitte & Touche LLP

2013 2015 2016 2017 2018

Implementation

of Securities Law

Directive

Market Abuse Directive II

Implementation

of AIFMD

Financial Transaction Tax

Securities Law Directive

Solvency II

ELTF

PRIIPS

AIFMD

Short Selling & CDS

Dodd-Frank Act

UCITS V

UCITS VI

MiFID II

MiFID II

EMIR

Venture capital regulation

Implementation

of EMIR

Implementation of MAD ll

Implementation of ESMA

guidelines on ETFs

ESMA guidelines

Automatic exchange of

information

Implementation of

ESMA guidelines on

compliance

Implementation of

EU passport for

European Venture

Capital Funds

Deadline Lux ManCo

Compliance

2015

Implementation of

Solvency II for

firms (Jan 2014)

UCITS V

voted

First FATCA reporting

regarding 2014

Deadline for AIFM to

seek authorisation

Amended EU

Savings Directive

approved

PRIIPS voted

AIFMD EU

passport for non-

EU managers

MiFID II delegated

act

Switch to

automatic

exchange of

information in

Luxembourg

under current

EUSD

UCITS VI

proposition

MiFID II national

transposition

Transposition of

UCITS V in

national regime

MiFID II in

application

Amended EU

savings

directive (but

likely to be

abolished in

view of CRS

reporting as

from 2016)

Solvency II entry

into force

PRIIPS entry into

Luxembourg

AIFMD

end of national

placement regime

General implementation

date for Volcker rule

(conditional extensions

MiFID II EU

Parliament vote

Implementation

of ELTF

CRS

implementatio

n needs to be

ready to go

live

First CRS reporting

regarding 2016

2014

9

A global shift towards tax

transparency

10


A move initiated by the US with FATCA

FATCA:

• Aim: tracking down US Persons hiding assets in any

jurisdiction outside the US, directly held or held through

intermediary structures

• Means: obligatory exchange of information on US Persons by

financial intermediaries, directly to the US IRS (non-IGA and

IGA 2 countries), or through local competent authorities (IGA

1 countries)

• Sanctions: punitive 30% withholding for non-participants or

clients not disclosing sufficient information to determine

FATCA status (lighter withholding obligations in IGA 1

countries)

• When: annual exchange of information - first exchange on

2014 taking place in 2015 (generally due May or June 2015 in

IGA 1 countries)


Achieving FATCA compliance:

11


… enhanced by the OECD Common Reporting Standard (CRS)


AS

IA

P

AC

IF

IC

Australia

Brunei Darussalam

China

Hong-Kong

India

Indonesia

Japan

South Korea

Macao

Malaysia

Marshall Islands

Nauru

New Zealand

Philippines

Singapore

Vanuatu E

UR

OP

E

M.

EA

ST

&

A

FR

IC

A Albania

Andorra

Austria

Azerbaijan

Bahrain

Belgium

Bulgaria

Cameroon

Croatia

Cyprus

Czech Republic

Denmark

Estonia

Faroe Islands

Finland

France

Gabon

Georgia

Germany

Ghana

Gibraltar

Greece

Greenland

Guernsey

Hungary

Iceland

Ireland

Isle of Man

Israel

Italy

Jersey

Kazakhstan

Latvia

Liechtenstein

Lithuania

Luxembourg

Malta

Mauritius

Moldova

Monaco

Morocco

Netherlands

Nigeria

Norway

Poland

Portugal

Qatar

Romania

Russia

San Marino

Saudi Arabia

Seychelles

Slovak Republic

Slovenia

South Africa

Spain

Sweden

Switzerland

Turkey

Ukraine

United Kingdom

United Arab Emirates

AM

ER

IC

AS

Anguilla

Antigua and Barbuda

Argentina

Aruba

Bahamas

Barbados

Belize

Bermuda

Brazil

British Virgin Islands

Canada

Cayman Islands

Chile

Cook Islands

Colombia

Costa Rica

Curacao

Grenada

Guatemala

Mexico

Montserrat

Panama

Saint Kitts and Nevis

Saint Lucia

Saint Martin

Saint Vincent and the Grenadines

Samoa

Turks and Caicos Islands

”Early adopters” – First exchanges by 2017 on calendar year 2016

Jurisdictions undertaking first exchanges by 2018 on calendar year 2017

Other jurisdictions participating in the convention on mutual assistance in tax matters

Jurisdictions that have not indicated a timeline or that have not yet committed

12

Create added value to clients out of this evolution

Tax reporting – Private Banking industry


TAX REPORTING

• More and more complex international and domestics tax environments where tax rules can change

at any time.

• Increasing demand from customers to :

- Understand how financial transactions they carried out impact their domestic tax position;

- Assist them in the preparation of their domestic tax returns.

TAX REPORTING PROCESS

Banking operations:

Dividend & interest payments,

transactions in securities, etc.

Identification of

fiscal events

Determination of the

fiscal results

Production of tax statements

/ returns in accordance with

the local requirements

Shipment of tax statements /

returns to clients in advance

of local filing deadlines

13


EU tax reclaims – IM industry


EU Tax Reclaims

• Prohibition of discriminatory

treatment between

domestic payment and

cross-border payment

under EU free movement of

capital and freedom of

establishment

• Tax Reclaims opportunities

further several decisions of

the European Court of

Justice

• Reclaims opportunities in

+10 countries

• Substantial refunds granted

by key Member States

(France, Spain, Sweden,

Finland, Belgium etc.)

EU Tax Reclaims opportunities

Refund experienced to date

FOKUS BANK DENKAVIT AMURTA ABERDEEN SANTANDER

2004 2006 2007 2009 2012 2014

EMS DFA


Tax treaty reclaims – IM and Private Banking industries


• In search for new profit sources,

personal cross border investment

becomes an attractive option

• Each time an investment is realised on a

cross border basis, there is a risk that

the income can be taxed twice

• It is common that a dividend payment is

taxed in the country of source by way

of withholding tax (WHT) in a first

instance and then subject to income

taxation in the investor’s country of

residence by way of a tax assessment

• Most of the countries agree via Double

Taxation Treaty (DTT) to levy lower

withholding tax rates on dividend and

interest outbound payments than the

default rate applicable to foreign

investors

• Increasing number of DTTs signed

worldwide offer opportunities for the

investors to benefit from preferential

tax rates

• Depending on the income source

country the refund methods may differ

Tax Relief

• Upfront benefit offered

through applicable DTT tax

rate on taxable events

• Subject to client’s country of

residence and validity of the

tax documentation provided

to the local depositary bank

Tax Reclaim

• Immediate deduction of

the withholding tax at a

maximum rate applicable to

foreign investors

• Benefit of the tax treaty rate

can be reclaimed via tax

reclaim procedure defined

by local tax authorities

TAX RELIEF & RECLAIM

Euro Stoxx 50

Country profile

France

Germany

Italy

Netherlands

Spain

Belgium

Ireland

38%

26%

10%

8%

12%

2%

2%

38

26

10

8

12

2

2

Non weighted yield

per country

Domestic dividend

Withholding Tax Rate

30%

26.4%

20%

15%

21%

25%

20%

5.7

4.2

1.5

1.2

1.8

0.3

0.3

100

Usual reduced WHT

rate under DTTs

15%

15%

15%

15%

15%

15%

15%

(15)

11.4

6.9

2

1.2

2.52

0.5

0.4

(24.9)

75.1 85

Gross Yield

~ 10%

WHT Leakage

Net Yield

Example

15

UCITS

16

Second-biggest investment fund domicile in the world

Luxembourg UCITS around the world

UCITS distribution is accepted by the

regulator

Countries that very recently opened

up to UCITS distribution, or that are

working on a cooperation agreement

TOP DOMICILES FOR

CROSS-BORDER UCITS

Bermuda 100%

Canada 71%

Chile 68%

Mexico 50%

Panama 48%

Peru 98%

Brazil tbc

Hong Kong 72%

Japan 60%

Lebanon 75%

Macao 73%

Singapore 69%

South Korea 96%

Taiwan 76%

UAE 70%

Australia tbc

China tbc

Oman tbc

World map shows the penetration ratio

of Luxembourg UCITS among all

foreign investment funds authorised in

a selection of countries

© 2015 Deloitte © 2015 Deloitte & Touche LLP 17

The evolution of the UCITS framework

Success story continued


• Key Investor Information

Document

• Management Company

Passport

• Cross-border mergers

• Master-feeder structure

• Simplified notification

process

UCITS IV

UCITS V

2010

• Harmonisation of the

depositary function ensuring

that investors receive the

same level of protection of

their assets in custody

across all EU MS

• Rules on the remuneration

of risk takers and senior

management

• Minimum harmonisation of

the sanctions regime for

breach of the main investor

protection sanctions in the

UCITS Directive

2015 UCITS VI

• Eligible assets and the use of

derivatives

• Assessment of the criteria for efficient

portfolio management (EPM) techniques

need to be modified

• Opportunity for OTC derivative

transactions to be dealt with when

assessing UCITS limits on counterparty

risk

• Extraordinary liquidity management

rules and need of a common framework

liquidity bottlenecks in exceptional

cases

• Discussion about the introduction of a

depositary passport and areas which

require further harmonisation

• Specific regulatory framework for

Money Market Funds (MMF) and

assessment of whether produce a

systemic risk and require EU

harmonisation

• Long term investments and how these

can be available to retail investors

201?

• Alignment of the UCITS regime with

the alternatives regime to provide

retail investors with an increased

level of protection.

• New custodian rules (for

Alternatives and UCITS) are a key

step towards harmonisation, a

number of challenges still need to

be addressed.

• Expected benefits are increased

investor protection against non-

financial risks, clarification of

custodian roles and responsibilities,

more consistency across alternative

and UCITS funds and reduction of

regulatory uncertainty across EU

member states

• Major challenges will reside in the

maintenance of a pragmatic

operating model for the investment

fund sector, ensuring responsibility

of those entities controlling the

assets, avoid duplication of tasks in

the asset servicing value chain,

• Clarification on specific investment

types and ensuring continuous

access to various markets

UCITS I 1988

• Substance requirements for

Management Companies

and self-managed

investment funds

• Fund-of Funds

• Cash funds

• Some use of derivatives

allowed

• Money Market Funds

UCITS III

2002

• Creation of a pan-European harmonised framework for

Undertakings for Collective investment in Transferable

Securities

• Introduction of the passport for EU-wide distribution of

UCITS to retail investors

• Strong emphasis on investor protection

THE ORIGINS THE CURRENT STATUS IN THE MAKING....

18

UCITS V Not only a depositary regime


Depositary regime Remuneration provisions Sanctions regime

Key aims of UCITS V

• Harmonise UCITS depositary regime clarifying duties and liability

• Harmonise remuneration rules with other sectors

• Harmonise sanctions regime for UCITS breaches

• Eligibility criteria

- credit institution or MiFID authorised investment firm subject to extensive

conditions, with a 2 year grandfathering period

• “Safekeeping”

- distinguishing between custody duties and asset monitoring duties (see

AIFMD) and depositary oversight

• Liability

- For UCITS depositaries liability currently extends to “unjustifiable failure”

to perform its duties (left to the Courts to interpret)

• “Strict Liability” for assets held in custody

- in the event of loss anywhere in the sub-custody network these assets

must be returned (financial instrument of an identical type or of

corresponding amount) by the depositary “without undue delay”

• Discharge of liability

- “external event beyond its reasonable control, the consequences of

which would have been unavoidable despite all reasonable efforts to the

contrary”

• Insolvency

- Assets held on behalf of the UCITS will not form part of the body of

assets available to the depositary's creditors

• Remuneration policies

- Should promote sound and effective risk management, discourage risk

taking and avoid conflicts of interest

• Applies to staff whose professional activities may have a material

impact on the risk profile of the UCITS:

- senior management,

- risk takers,

- individuals performing controlled functions, or

- any employee receiving total remuneration which takes them in the

same remuneration bracket as senior management and risk takers

• Applies only to staff within the UCITS management company,

not to delegated portfolio managers

• Rules for guaranteed variable remuneration

• Rules for fixed and variable components of total

remuneration

• Rules on pension benefits

• Rules for payments related to termination of employment

• Minimum catalogue of administrative sanctions, fines and

measures

• Minimum list of sanctioning criteria

• Whistle-blowing mechanisms for national regulators and

management companies

• National regulators will be required to publish details of

sanctionable offences detailing the nature of the breach and the

party involved

Draft

paper

Commission

proposal

Parliament

& Council

EU

trilogues

Adopted Technical

measures

Implemented

Commission

consultation

Commission

proposal

Adoption by

parliament

Transposition

in national

regime

Entry into

force

Dec 2010 Jul 2012 Apr 2014 Jul 2014 2016

19

UCITS VI

Rolling back complexity?


Only days after the release of the UCITS

V proposal, the European Commission

published a consultation document on

UCITS on 26 July 2013. This was a very

open-ended consultation, inspired largely

by the regulatory concerns over the

potential risks and impacts of “shadow

banking”.

Shadow banking refers to non-bank credit

activity, which performs important

functions the financial system. The

consultation paper covered eight wide-

ranging areas and sought more

information on market practices. This

initial consultation paper has been

dubbed “UCITS VI” as it is seen as the

origin of a further set of amendments to

the UCITS Directive.

Since that consultation paper, two areas

(money market funds and long-term

investments) have been addressed

separately outside of the UCITS

framework. The delay in adopting UCITS

V has undoubtedly impacted further

progress on UCITS VI, which has yet to

issue as a formal proposal.

Consultation Commission

proposal

Parliament &

Council EU trilogues Adopted

Technical

measures Implemented

Eligible assets EPM techniques Liquidity

management

OTC

derivatives

Addressing

UCITS IV

Depositary

passport

Money market

funds

Long term

investments

Money Market Funds

Regulation

European Long Term

Investment Fund

OVERVIEW CURRENT STATUS

Rowback on eligible assets

• The UCITS III reforms enabled UCITS to gain exposure to a range of otherwise ineligible assets through the use of derivatives structuring.

• A look though to underlying assets or a limitation on the scope of derivatives that may be used could have a significant impact on the investment profiles of many UCITS.

• Many UCITS employing leverage under the commitment approach would be unable to comply with the 100% global exposure limit of NAV if they used the commitment approach.

• The reforms could lead some providers to exit UCITS in favour of setting up more flexible AIFs.

• It is unclear whether grandfathering would be provided for existing UCITS.

KEY CONSIDERATIONS

AREAS COVERED IN THE ORIGINAL UCITS VI CONSULTATION

20

AIFMD: Impacts for Singaporean

Asset Managers

21

The Alternative Investment Fund Managers Directive (AIFMD) is an important piece of EU-wide

regulation that governs many aspects of the organisation, supervision, responsibilities and

delegation possibilities relating to Alternative Funds (AIFs).

AIFMD

Overview


Key Objectives

• Extend appropriate regulation

and oversight to all

alternative actors

• Improve financial stability

• Monitor systemic risk

• Increase transparency

towards and protection of

investors and stakeholders

• Create a European market

for alternative investments

via passports for

management and marketing

activities

1 Who is impacted?

• Managers

- Alternative Investment Fund

Management Companies

• Investors

- Professional Investors

- Retail investors are not in

scope

• Funds

- Retail non-UCITS funds

- Non-EU funds managed or

marketed in the EU

• Depositary

• Other Service Providers

How?

• AIFM will need to apply for

authorisation in order to

manage AIF

• AIFMD introduces a

“passport” enabling AIFMs to

offer their management

services and market their

AIFs throughout the EU

• Regulation of publically

distributed AIFs in the EU to

professional investors

• Effective marketing across EU

2 3

AIFMD HAS AN IMPLICIT

EXTRA-TERRITORIAL

COMPONENT:

Asset managers will be impacted

if they:

• Have alternative Investment

Management Activities within

the European Union, or

• Have Alternative Investment

Funds domiciled in the

European Union (regardless of

the location of your investment

management activities), or

• Market one of your

Alternative Investment Fund

to European Investors

(regardless of the domicile of

your fund or location of your

investment management

activities).

The scope is wide, the impacts

are significant. Asset managers

are well advised to carefully

assess if and to what extent they

are impacted by AIFMD

22

AIFMD key compliance areas

Considerable and extensive impacts

SCOPE

Almost everyone is impacted

All the Managers of :

• Private equity funds

• Hedge funds

• Real estate funds

• Retail non-UCITS funds

• Non-EU funds managed or marketed in the EU

Potential exclusions

Thresholds:

• Asset managed by the AIFM is not exceeding

€100 million (or ≤ 500 million if unleveraged and

5 year lock-up period)

• Sub-threshold AIFMs are still subject to

registration and regulatory reporting under

AIFMD

Vehicle types:

• Holding companies

• Securitisation SPVs

• Pension funds

• Employee savings scheme

AIFM

Authorisation

as AIFM

Organisational

rules Distribution

Remuneration

Risk,

liquidity,

valuation

Reporting

and disclosures

Delegation

Depositary and

prime broker

arrangements

Conduct of

business

rules

Capital

and

professional

indemnity

AREAS REGULATED BY AIFMD

KEY CHANGEMENT

MANAGEMENT AREAS

• Cost minimisation

• Business strategy

• Regulatory

• Tax

• Organisational

• Operational

• People

• Processes


Distribution under AIFMD

AIFMD


AIFM AIF Distribution AIFMD Scope Compliance Cost EU Market Access

• Distribution only via passport

• Only in home state of AIF

• Reverse solicitation

• National Placement Regime **

• Passport (only as of 2015 *)

Not applicable




• Only in home state of AIF




AIFMD does not apply

EU

EU

Non-EU

EU

Non-EU

EU

Non-EU

Non-EU

EU

Non-EU

EU

Non-EU

EU

Non-EU

Access to EU

Investors

depends on

the domicile of

the AIFM and

of the AIF:

* Passport anticipated end 2015 / early 2016 depending on ESMA opinion to be issued in July 2015

** Member states may decide at their own discretion to end National Placement regimes anytime prior to 2018

24

Conclusion


2013 2015 2016 2017 2018

Implementation

of Securities Law

Directive

Market Abuse Directive II

Implementation

of AIFMD

Financial Transaction Tax

Securities Law Directive

Solvency II

ELTF

PRIIPS

AIFMD

Short Selling & CDS

Dodd-Frank Act

UCITS V

UCITS VI

MiFID II

MiFID II

EMIR

Venture capital regulation

Implementation

of EMIR

Implementation of MAD ll

Implementation of ESMA

guidelines on ETFs

ESMA guidelines

Automatic exchange of

information

Implementation of

ESMA guidelines on

compliance

Implementation of

EU passport for

European Venture

Capital Funds

Deadline Lux ManCo

Compliance

2015

Implementation of

Solvency II for

firms (Jan 2014)

UCITS V

voted

First FATCA reporting

regarding 2014

Deadline for AIFM to

seek authorisation

Amended EU

Savings Directive

approved

PRIIPS voted

AIFMD EU

passport for non-

EU managers

MiFID II delegated

act

Switch to

automatic

exchange of

information in

Luxembourg

under current

EUSD

UCITS VI

proposition

MiFID II national

transposition

Transposition of

UCITS V in

national regime

MiFID II in

application

Amended EU

savings

directive (but

likely to be

abolished in

view of CRS

reporting as

from 2016)

Solvency II entry

into force

PRIIPS entry into

Luxembourg

AIFMD

end of national

placement regime

General implementation

date for Volcker rule

(conditional extensions

MiFID II EU

Parliament vote

Implementation

of ELTF

CRS

implementatio

n needs to be

ready to go

live

First CRS reporting

regarding 2016

2014

25

Speakers’ profile

26

Audit Partner, Deloitte Luxembourg

+352 451 454 911

[email protected]

Nicolas is a Financial Services Audit Partner

with Deloitte Luxembourg. He specialises in

the audit of investment funds vehicles

including the Undertakings for Collective

Investment in Transferable Securities

(UCITS), alternative investment funds and

their advisory, and management companies

for more than 15 years. His clients include

large asset manager houses as well as

smaller boutiques from the Australian, French,

Japanese, U.K. and U.S. local markets. He

also leads a taskforce focusing on net asset

value (NAV) errors and their resolutions.

Nicolas is Belgian and a Chartered

Accountant. He speaks French, English and

Spanish.

Nicolas Hennebert

Tax Partner, Deloitte Luxembourg

+352 451 452 162

[email protected]

Eric is a Financial Services Tax Partner with

Deloitte Luxembourg. He has been advising

leading Financial Institutions on Luxembourg

and international tax issues for more than 10

years. Eric has deep expertise in Operational

Taxes where he assists financial institutions

on various topics including Tax Reporting and

Tax Reclaims services as well as Financial

Transaction Taxes. In addition, Eric has strong

experience in group reorganisation (merger,

spin-off, branch business model etc.) and the

acquisition of new business. He was involved

in numerous due diligence engagements to

assess the tax position of target

companies/group and structure the

acquisition.

Eric Centi

Deloitte contacts


mailto:[email protected]

mailto:[email protected]

Appendix

28

FATCA vs CRS – Similarities and differences

Main differences that can lead to complexity


FATCA CRS

IRS registration required unless exempt or (certain) deemed

compliant status. Additional registration may be required to local

tax authorities in certain countries.

No registration required except local specificities to transmit CRS

reports to local tax authorities. Registration

FI scope Broad scope of financial players: banks, certain insurance

companies, funds, certain holding companies... Certain

exceptions apply.

Broad scope of financial players: banks, certain insurance

companies, funds, certain holding companies... Certain FATCA

exceptions not available or defined slightly differently.

Due diligence De minimis threshold: $50.000. No de minimis threshold.

Due diligence

Individuals (for early adopters)

• 31 December 2016 for high value accounts

• 31 December 2017 for low value accounts

> No de minimis threshold

Entities (for early adopters)

• 31 December 2017

> De minimis threshold: $250.000 (subject to local approval), but

no $1.000.000 threshold.

Based on broad US Person definition: US residents and non-

residents meeting the Specified US Person criteria. Based on tax residence(s). Criteria

W-9 or W-8 forms. Possibility to use an equivalent self-

certification in IGA Model 1 juridictions.

Systematic self-certification to collect date & place of birth, tax

residence(s) and TIN(s) unless local authorities allow Financial

Institutions to rely on data gathered for AML/KYC.

Individuals

• 30 June 2015 for high value accounts

• 30 June 2016 for low value accounts

> De minimis threshold of $50.000

Entities

• 31 December 2014 for prima facie FFIs (for non-IGA context)

• 30 June 2016 for other entities

> De minimis threshold of $250.000, and no change in de minimis

status as long as $1.000.000 not exceeded.

New

clie

nts

Documentation

Exis

tin

g c

lients

Documentation

Systematic self-certification to collect date & place of birth, tax

residence(s) and TIN(s).

W-9 or W-8 forms and/or other evidence may be required to cure

US indicia. Possibility to use an equivalent self-certification in IGA

Model 1 jurisdictions.

29

FATCA vs CRS – Similarities and differences

Main differences that can lead to complexity


FATCA CRS

Funds can be sponsored by sponsoring entities No sponsoring regime F

unds Sponsoring

regime

Deemed

Compliant status Variety of deemed-compliant statuses for funds Single deemed-compliant status for funds

• Notion of NPFFI and Recalcitrant is not present under CRS.

• Investment Entities in Non-Partner Jurisdictions and cases where Financial Institutions cannot establish the CRS classification of an entity account

would be treated as Passive NFEs. Consequently, the Controlling Persons of such entities need to be identified and will be subject to automatic

exchange of information if they are reportable for CRS purposes.

New principles under CRS

Investment entity

Panama Fund

Singapore

Bank

Singapore Considered as Passive NFE - Controlling Persons identification

Need to identify, classify and potentially report them

May be considered as Deemed-Compliant or

Reporting Financial Institution depending on its status

When

CRS in

force

Not yet

a CRS

partner

Reporting

• 2015: Account balances or values

• 2016: Previous scope + income

• 2017: Previous scope + gross proceeds

No phased implementation: account balances/values, income

and gross proceeds from day one

Some processes implemented for FATCA will need to be amended to fit with CRS requirements

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