Tax

tax

The global tax landscape continues to change rapidly as the world’s tax authorities focus on efforts to increase transparency and combat tax avoidance. This results in more complex rules that need to be considered when making cross-border investment decisions, as well as an increase in tax compliance obligations and disclosure requirements.

At PwC Luxembourg, we have an experienced team that specializes in helping alternative investment players navigate the intricacies of tax regulations in order to mitigate the financial and reputational risk that may arise.

 

The tax services we offer include:

Fund structuring services

We are able to provide you with tailor-made fund structuring advice to help you select the most suitable fund vehicle for your investors and investments, taking into account factors such as:

  • Preference for regulation;
  • Need to access EU marketing passport;
  • Efficient repatriation/ distributions to investors;
  • Nature of investments;
  • Corporate governance and operational efficiency (e.g. whether compartments are required);
  • Taxation of the vehicle: subscription tax, corporate income tax, municipal business tax, net wealth tax, VAT, WHT on distributions to investors etc;
  • Consideration of potential impact (if any) of investors’ profiles on the fund and/ or the underlying investment holding vehicle;
  • Regulatory constraints.

 

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Mergers & Acquisition (M&A) Tax

For organisations and advisers involved in a deal, maximising value is always paramount. PwC has commercially focused tax specialists who consistently deliver innovative cross border solutions and can support you at every stage of the deal cycle, including the following transactions:

  • Acquisition or disposal of assets/ investments
  • Public to private initiatives
  • Management buy-out/in
  • Refinancing
  • Restructuring of investments

Our M&A tax services include:

  • Tax due diligence services
  • Tax support on financial modelling
  • Review of legal documentation from a tax perspective
  • Advice on appropriate investment holding and financing structures, taking into consideration cross-border tax, accounting and regulatory requirements
  • Advice on cash/ profit repatriation strategies
  • Advice on exit strategies
  • Management incentive planning
  • Carry structuring

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Corporate tax compliance, accounting and reporting services

We can help you manage your global tax compliance obligations, support you on building shareholder value and dealing with the impact of the tax take on your business.

We also offer the following accounting and reporting services:

  • Bookkeeping & reporting services which may include:
    • Taking care of the bookkeeping and preparing the periodical reports and consolidation package under Lux GAAP, IFRS or US GAAP;
    • Setting up your chart of accounts under Lux GAAP, as well as the accounting methods and policies that are most suitable to your business;
    • Maintaining your books and records in accordance with the accounting framework (Lux GAAP, IFRS, US GAAP, etc.);
    • Preparing/reviewing your accounting entries/year-end entries;
    • Converting your trial balance to Lux GAAP accounting principles;
    • Preparing/reviewing your group accounting manual to ensure that it complies with a specific GAAP;
    • Preparing/reviewing your forecasts, cash-flow statements, etc.;
    • Preparing/reviewing your central bank reporting and any other reporting (e.g. cost accounting, INREV reporting, etc.) required by legislation;
    • Liaising with your auditors (including preparing audit trails);
    • Providing tax accounting services;
    • Ensuring global coordination from Luxembourg
  • GAAP conversion, and more specifically:
    • Converting your trial balance from a foreign GAAP (e.g. UK GAAP, US GAAP, etc.) to Lux GAAP or IFRS (or vice versa) by designing/reviewing your GAAP conversion file;
    • Analysing the key differences between your foreign GAAP and Lux GAAP;
    • Understanding the impact on tax and distributable reserves; and
    • Designing/reviewing your GAAP conversion file.
  • Preparing and compiling annual stand-alone and/ or consolidated accounts. More specifically:
    • Preparing/reviewing your balance sheet and profit and loss accounts in e-CDF format or another layout (e.g. management format); and
    • Preparing/reviewing your notes to the annual accounts
    • Preparing consolidated accounts to facilitate the analyses of a group's financial performance, and to provide insights to support the strategic decisions of top management and investors.
  •  Provision of accounting training by offering:
    • A wide range of accounting training courses on specific topics, for specific industries or on the latest legislative updates;
    • Tailored in-house training courses; and/ or
    • Workshops tailored to your exact needs.
  • Provision of an accounting technical helpline to render support on the application and interpretation of complex accounting standards and regulations. Your queries will be addressed in the format you prefer - by phone, by email or by providing you with detailed memoranda on:
    • The accounting impact of new and/or amended standards and future transactions planned;
    • Specific accounting treatment, such as mergers, contributions, group restructuring, classification, etc.

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VAT advisory and compliance services

VAT can be a significant cost to the alternative investment industry. Funds and investment vehicles must consider both VAT risks and opportunities when setting up and developing their product range. In general, a VAT exemption applies to the management of alternative investment funds, making Luxembourg a location of choice for setting up alternative investment funds. However, entities that cannot benefit from the exemption may run into VAT risk. Funds, investment vehicles and holding companies may have to deal with VAT compliance obligations and liabilities or, depending on their profile, incur VAT charged by their suppliers (at the VAT rate applicable in their country). Holding vehicles face issues in determining whether they can recover VAT on their purchases and finding methods to calculate the extent of such recovery.

We can help you on the following matters:

  • Tackle indirect tax issues your organisation faces on a day-to-day basis, including the determination of the appropriate VAT treatment applied to income and expenses;
  • Structure solutions in the framework of reorganisations and acquisitions, including assistance in implementing efficient structuring in relation to transaction costs, recharges and shared services;
  • Identify and monitor VAT exposures and opportunities - this includes due diligence/ “health checks" to assess VAT risks;  identification of opportunities for the recovery of input VAT and assistance in calculating input VAT adjustments;  and identification of opportunities to use of VAT exemptions on services purchased;
  • Review financial flows and related documentation from a VAT perspective;
  • Design and improve your indirect tax strategy;
  • Design and improve internal controls and indirect tax risk management;
  • Manage your compliance and reporting obligations, including registering for VAT and opting for tax as required in a timely manner;
  • Improve automation, digitisation and the management of FAIA;
  • Assist in discussions with the VAT authorities regarding VAT refunds, reporting and/ or the prevention of litigation;
  • Provide general training with PwC's Academy or custom-made trainings specific to your needs;
  • Update you on the latest VAT developments via GlobalVATOnline.

 

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Transfer pricing

Transfer pricing is increasingly an area of focus as countries push for tax transparency.  We can support you as follows:

  • Advise you on the key transfer pricing matters to consider when entering into related party transactions. In the case of intercompany debt, we can advise you on the impact of Luxembourg transfer pricing regulations around intra-group financial transactions as well as assist you in the review and development of a transfer pricing policy for all your financial transactions including loans, cash pooling arrangements, guarantees, etc.
  • Develop new transfer pricing policies and/ or perform risk reviews on your current transfer pricing policies and subsequently documenting those policies in line with local and OECD requirements.
  • Support you in the execution of your transfer pricing policy by helping you reinvent your E2E (End-to-End) strategy and processes, leading to a more streamlined approach, reduction in workload, increased accuracy of charges, significantly enhanced transparency, and - not least - well-positioned documentation to support future reviews, including local statutory audits.
  • Assist in obtaining Advance Pricing Agreements (APAs) from the tax authorities in Luxembourg to reduce uncertainty on a prospective tax position. In addition, where a multi-country approach is more appropriate, we can assist in obtaining multi-lateral APAs.
  • Work closely together with our Tax Controversy and Dispute Resolution team to assist you in dealing with transfer pricing disputes, tax audits or information requests that involve two or more territories through the various dispute resolution procedures.

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Tax information reporting

Tax regulatory reporting obligations are technically complex and may impact the whole value chain and most policies and procedures of your organisation. Understanding the regulatory framework and adapting the internal processes and controls accordingly requires resources and expert knowledge.  The implementation of a reporting system within your company can also be time consuming and expensive.

Our Tax Information Reporting (TIR) multi-disciplinary team delivers tax consulting, risk, compliance and quality reviews and submits your reports on time to the relevant tax authority. We can assist you on the following matters:

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Tax Controversy and Dispute Resolution

While taxpayers are under constant competitive pressure to structure their operations efficiently, fiscal demands on developed and emerging countries have placed considerable pressure on governments to raise revenue and prevent the erosion of their tax bases.

Governments worldwide are cooperating to share taxpayer and industry information, assist other countries with document and information requests, and participate in separate multi-country audits. This has resulted in a substantial increase in the number and depth of audits, assessments and disputes with fiscal authorities worldwide, who are engaged in enforcement activities across the entire tax spectrum including international structuring, transfer pricing, direct tax and indirect tax matters.

Our Tax Controversy and Dispute Resolution team assists clients to prevent, and/ or efficiently manage and favourably resolve tax audits and disputes. Integrated in a worldwide network, our specialists not only focus on the Luxembourg aspects, but also integrate cross-border risks and impacts, deriving for example from claims of dual residency / permanent establishment, conflicts of qualification under a treaty and exit charge claims in relation to a transfer of functions to Luxembourg.

Examples of the support we can render at each stage of a tax controversy/ dispute are as set out below:

  • Pre-audit prevention services, which may include:
    • reviewing your transfer pricing policies;
    • reviewing your transfer pricing or VAT supporting documentation;
    • submitting Advance Pricing Agreements;
    • reviewing your operational model and processes;
    • coordinating "course of conduct" reviews to ensure that post-structuring operations align with initial implementation plans;
    • assisting in transactional due-diligence to identify tax audit and controversy risks and exposures;
    • carrying on pre-audits to identify transfer pricing and tax audit impacts;
    • once risks are identified, develop and implement other option to the current business model to mitigate your company's risk profile; and
    • training your company personnel.
  • Assistance during the audit/ examination phase, including providing support on the following matters:
    • Managing and responding to investigations, audits and examinations initiated by tax authorities, including dealing with routine and complex management of audit information requests;
    • Document production; and
    • Discussions with the tax authorities.
  • Post-audit settlement/ resolution services in case tax disputes are unresolved, including:
    • Submission of pre-litigation claims with the tax authorities;
    • Preparation of litigation support for court proceedings;
    • Assistance in mediation;
    • Advance Pricing Agreement negotiations using "roll-back" features to resolve pre-existing disputes; and
    • Assess if there is any opportunity to use Competent Authority and Mutual Agreement Proceedings to resolve international tax disputes, i.e. cases of double taxation, as well as inconsistencies in the interpretation and application of a double tax treaty and assistance to negotiations in these proceedings.

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Accounting, reporting and consolidation for Alternative Investment Funds

Our team of experts can assist regulated and unregulated alternative investment funds manage and oversee their accounting and reporting requirements, as well as deal with their fund administration needs. Our range of services include the following:

  • Fund accounting and consolidation services
    • Assistance to the NAV computation
    • Preparation of Annual and consolidated accounts under required accounting standards (LUX GAAP, IFRS, US GAAP)
    • INREV reconciliation
    • Identification of all necessary adjustments to have harmonisation of the accounting policies
    • Bookkeeping
    • Coordination with the various parties involved
    • Investor reporting/communication
    • Calculation and payment of all relevant fees/taxes
    • Valuation of portfolio
    • Designing and implementation of the consolidation process
    • Coordination with local accountants in other countries
    • Review of the subsidiaries accounting records
    • Reconciliation of intercompany transactions
  • Investor and other reporting services
    • Preparation of investor or other reporting
    • Preparation of investor communications
    • Coordination of AIFM reporting
    • Risk management and compliance reporting
    • Ability to develop or adapt reporting models to your needs
  • Client relationship management services
    • Provision of a single point of contact to manage all needs, and who speaks English, French or German
    • Possibility to coordinate all services management may need (fund accounting, transfer agent, domiciliation, fund setup, property managers, the valuations team, tax compliance, tax structuring)
    • Setting up the reporting process and implementation of weekly calls to ensure each counterparty is on track and able to deliver
    • Available as and when you require, with focus on timely communication and real customer service

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Contact us

Vincent Lebrun

Alternatives Leader, Tax Partner, PwC Luxembourg

Tel: +352 49 48 48 3193

Isabelle Dauvergne

Alternatives Assurance Leader, PwC Luxembourg

Tel: +352 49 48 48 2435

Thierry Braem

Alternatives Tax Leader, PwC Luxembourg

Tel: +352 49 48 48 5106

Benjamin Gauthier

Alternatives Advisory Leader, PwC Luxembourg

Tel: +352 49 48 48 4137

Vincent Ball

Clients and Markets and Alternatives COO/CFO Leader, PwC Luxembourg

Tel: +352 49 48 48 2254

René Paulussen

Clients and Markets Leader, PwC Luxembourg

Tel: +352 49 48 48 2385

Amaury Evrard

Alternatives Network, PwC Luxembourg

Tel: +352 49 48 48 2106

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