2017 has started under the sign of geopolitical uncertainty, adding to the challenges the fund industry was already dealing with. As an unpredictable political era unfolds in Washington, new economic policies put forward by the Trump administration could have substantial effects on funds, deal making and portfolio companies in the US and abroad. The situation doesn't look more encouraging in Europe, especially with signals sent by Theresa May's Cabinet to go forward with their so called "hard" Brexit. This will further shake things up in the M&A world in the coming years and impact PE around the world. From a more local perspective, the new Transfer Pricing Circular has been issued and it will have an impact on deal structuring.
All these to say that we might have a bumpy ride in 2017, as the uncertainty built up in 2016 carries on. Navigating through changing tax, legal and regulatory aspects may require more and more time and attention, as well as changes in the business model to adapt to the new reality.
In this edition we shed some light on some of the most relevant recent developments, including the new Luxembourg Transfer Pricing rules mentioned above.
Enjoy your reading!
PwC Luxembourg Private Equity Team
On 6 January 2017, the OECD published a five-page paper, entitled "BEPS Action 6 -Discussion Draft on Non-CIV Examples". "Non-CIV" is the term used by the OECD BEPS Project to refer to the wide variety of PE and other alternative investment fund vehicles, pension funds, SWFs and similar institutional funds that do not meet the OECD's strict criteria for "collective investment vehicles" ("CIVs"). (CIVs are funds that are widely held, own a diversified portfolio of securities, and are themselves subject to investor-protection regulation – in other words, UCITS-type funds.) [...]
As from 2017, the determination of the taxable income for Luxemburg intra group financing activities has changed. Whilst under the TP Circular from 2011 it was possible to apply a rather straight forward approach to determine the compensation for functions, assets and risks, the new TP Circular published on 27 December 2016 by the Luxembourg Tax Authorities ("LTA") eliminates the 2011 approach. Effective since 1 January 2017, the full principles of the OECD TP Guidelines apply (i.e. the arm's length principle, comparability, substance over form). [...]
The interest shown by the alternative investments industry to the Reserved Alternative Investment Fund ("RAIF") has not faltered since its launch in July 2016. At the end of February, we counted up to 53 RAIFs distributed on the European market. [...]
The depositary has various responsibilities defined in art. 19 of the Luxembourg AIFM law of 13 July 2013 (the "AIFM Law") and in the Commission Delegated Regulation N° 231/2013 (the "AIFM Regulation"). [...]
With the release on November 24 of the multilateral instrument, BEPS is now a tangible reality. Among the various action points of BEPS, there is one key element to significantly impact the organisation of the asset management industry as a whole. This is action 7. [...]
The reality of a Private Equity firm keeps moving further away from the self-regulated environment the industry is so accustomed with, driven by evolving regulations, such as AIFMD. [...]
In the past few months, professionals have wrote a lot on investment entities [...]
The Luxembourg tax authorities have recently changed their practice related to the filing of the corporate tax returns for companies in liquidation. Companies in liquidation now have to file one tax return per fiscal period instead of a single tax return for the full liquidation period. [...]
The tax reform for 2017 has introduced new VAT measures. The possible consequences for the private equity sector results from the increase of penalties and the introduction of a personal liability for managers/directors of Luxembourg companies. It is more than ever critical for taxpayers to review their VAT position and ascertain they comply with their VAT obligations. [...]
On 6 February 2017, the Luxembourg tax authorities (LTA) issued a new Circular ECHA 4 ("the Circular"), regarding the modalities for preparing and filing the annual report under the Common Reporting Standard ("CRS") schema. [...]
With the entry into force of AIFMD, the European distribution of funds for non-authorised managers has become a lot more complex. In the context of "Europe 2020", the European Parliament and the European Council jointly adopted the final text of the European Venture Capital Funds Regulation (EuVECA Regulation) in April 2013. [...]
On 5 January 2017, the decision to initiate a formal investigation procedure on alleged state aid in favour of GDF Suez (now Engie) was published on the EU Commission's website. The case concerned the treatment of a financial instrument within the same jurisdiction (Luxembourg). [...]