Private Equity Information Brief - June 2017

 

2017 continues amid geopolitical uncertainty in Europe and the US. The tax reform recently announced in Washington would without a doubt have a substantial impact on the fund industry and how managers structure their fees. The question is to what extent the Trump administration would be successful in pushing the reform through the US Congress. In Europe, the messages are mixed. On the one hand, pro-European Emmanuel Macron won the final round of the French presidential election by a large margin, further reducing perceived European political risk. On the other hand, Theresa May has called an early parliamentary election in the UK in June, seeking a stronger Brexit mandate. The results of that election may further complicate the already very complex and somewhat bitter divorce proceedings between the UK and the EU.

This edition sheds some light on the most relevant recent developments. Among other items, our specialists provide you with some insight on the status of the Brexit process. We also comment on the recent ruling issued by the CJEU related to Luxembourg independent groups of persons (IGPs). The consequences for the Luxembourg cost-sharing arrangement in the financial sector are likely to be significant.

We hope you enjoy reading the newsletter!

The PwC Luxembourg Private Equity Team

 


Hot topics for Private Equity for June 2017


Transfer pricing for private equity

In 2017, there was a change in the way in which taxable income for Luxemburg intra-group financing activities is determined. Whilst under the 2011 TP Circular, a rather straightforward approach could be applied to determine compensation for functions, assets and risks, the new TP Circular[1] published on 27 December 2016 by the Luxembourg Tax Authority ("LTA") revokes the 2011 approach. With an effective date of 1 January 2017, all of the principles of the OECD TP Guidelines apply (i.e. the arm’s-length principle, comparability, and substance over form). [...]

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Liquidation procedures

In a changing environment, entity groups must carry out restructuring, including winding up some of their entities. Two different liquidation procedures exist in Luxembourg: a standard liquidation procedure, which has been part of Luxembourg law for a long time; and simplified dissolution, which was merely market practice before being implemented into the updated Law on commercial companies that entered into force on 23 August 2016. [...]

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Protecting personal data in the private equity industry

Data is at the heart of any business. While IT infrastructures and operations can be outsourced because they are a means to achieve a purpose, data is the purpose that gives value to business. Especially in the private-equity (PE) industry, big data and data analytics are on the rise. Here, rationalising data enables you to have a comprehensive and clear perspective of the business context, and drives speed in due-diligence processes. [...]

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Luxembourg cost-sharing VAT exemption not compliant with EU law, CJEU rules (C-274/15 Commission v Luxembourg)

On 5 May 2017, the Court of Justice of the European Union (CJEU) ruled that the Luxembourg rules on independent groups of persons (also referred to as the cost-sharing VAT exemption) were not compliant with the EU VAT Directive.  [...]

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Focus on the new audit report - what are we talking about?

The EU audit reform was adopted in April 2014, taking effect in Luxembourg for accounting periods starting on or after 17 June 2016. This reform is enters into force in Luxembourg together with the revised International Standards on Auditing ("ISA"), notably ISA 700 and ISA 701 (form of the audit report and Key Audit Matters). [...]

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Substance for pure holding entities - Quick update - Case law from the Italian Supreme Court

Treaty shopping refers to the practice of structuring a multilateral business to take advantage of more favourable tax treaties available in certain jurisdictions.
The instrument to combat this phenomenon is contained in a specific anti-abuse provision included in the treaties themselves and consists of the so-called "beneficial owner" clause.
However, the absence of a clear definition of a beneficial owner has often led to debate and uncertainty between taxpayers and tax authorities. [...]

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A new investment boom phase in SMEs driven by start-ups and tech

Equity investments in SMEs have been growing steadily over the last few years. The main drivers are the accumulation of capital in investors’ hands, new technologies and low interest rates.  [...]

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Brexit update

On 29 March 2017, the British Prime Minister invoked Article 50 of the Treaty on European Union, in line with the timetable that she previously announced. This put into motion the two-year period for completing exit negotiations provided under the Treaty (with a possibility for extension only if agreed by all Member States). [...]

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Vincent Lebrun
Private Equity Leader
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