Cooperation between PwC and Noveras Tax Reporting for international Banking Clients

PwC and Noveras Services AG have agreed to cooperate in providing offshore tax reports for banks located in Switzerland and in foreign countries. This cooperation results in the following benefits:

Benefits for Banks:

  • Able to offer truly country-specific, high-quality tax reports to clients
  • No need to build up and maintain tax reporting infrastructure
  • No need to follow tax laws around the world
  • Tax reporting provided even for small numbers of clients
  • Flexible, cost-efficient cooperation

Benefits for Clients:

  • Client receives a high-quality tax report for their offshore account
  • Reports deliver all of the necessary information for client’s tax return in their country
  • Overall lower costs for the client due to saving the expense of local tax support

Statement by the Leaders

  • This unique cooperation ensures several high-quality services (such as highly skilled tax reporting products).
  • The synergy between PwC as leading expert advisor in tax-related topics and a practice-oriented boutique with profound knowledge of wealth management / cross-border banking, IT and international tax law creates a unique market solution.

Find out more

Contact

Dieter Wirth
Partner
+41 58 792 4488
dieter.wirth@ch.pwc.com

Michael Taschner
Senior Manager
+41 58 792 1087
michael.taschner@ch.pwc.com

Swiss Federal Council Adopts Dispatch on AEOI with 41 Jurisdictions

On 16 June 2017, the Swiss Federal Council agreed to adopt the dispatch on the introduction of the Automatic Exchange of Information (“AEOI”) with 41 states and territories. Switzerland will activate the AEOI with each individual state/territory via specific federal decrees within the framework of this dispatch.

This dispatch strengthens Switzerland’s international position, as its AEOI network has extended to most of the G20 and OECD states, in addition to the already existing agreements with 38 states and territories, including all EU member states.

As part of this dispatch, collection of information will begin in 2018 for a first data exchange in 2019. Brazil, China, Liechtenstein, and Russia are notable states included within the list of 41 states and territories.

Please refer to the following link for the Swiss Federal Council’s official media release:

Englishhttps://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-67079.html
Germanhttps://www.admin.ch/gov/de/start/dokumentation/medienmitteilungen.msg-id-67079.html

Synopsis of the most important regulatory developments in the banking and asset management industry

Status as of June 2017

The most important regulatory developments with comments to important aspects/changes and status:

  • Interdisciplinary issues
  • Banks/securities dealers
  • Fund management companies/investment funds/representatives of foreign collective investment schemes

Download

Contact

Bruno Gmür
Technical Partner Financial Services Banking
PwC Schweiz
+41 58 792 7317
bruno.gmuer@ch.pwc.com

FFIs should renew their FATCA agreements by 31 July 2017

IRS reminds FFIs to renew their FATCA agreements on the FFI Registration System

On 7 June 2017, the U.S. Internal Revenue Service (“IRS”) reminded foreign financial institutions (“FFIs”) that the FATCA FFI Registration system has been updated to include the ability for FFIs to renew their agreement with the IRS.

FFIs that are required to renew their FFI Agreements should resubmit their registration applications by 31 July 2017, in order to be treated as having the FFI Agreements in effect as of 1 January 2017.

In addition, FIs around the world have been receiving messages from the IRS FATCA Registration System reminding them to update their agreements, if required. To make this process simpler, a “Renew FFI Agreement” now appears on the account home page after logging in.

For more information regarding which FFI’s are required to register, please see Table 17 on page 85 in Publication 5118.

IRS releases revised FATCA Online Registration User Guide

In June 2017, the U.S. Internal Revenue Service (“IRS”) released a revised Publication 5118 Foreign Account Tax Compliance Act Online Registration User Guide. Under the “What’s New” section, the IRS has provided the following information:

  • The FATCA Online Registration System now allows FIs to renew their foreign financial institution (FFI) agreement with the IRS. Certain financial institutions (FIs) must complete the renewal by July 31, 2017. All registered entities should use the system to determine whether they need to renew their agreement. (Table 17: Self Determination for Renewal of FFI Agreement can assist FIs with their determination.)
  • The FATCA Online Registration System adds account home page information regarding Renewal of FFI Agreement information including updates to account information such as the renewal due date and submitted date.
  • The IRS has discontinued the limited status for new or renewing FI applicants. Existing branches will no longer be marked as being in limited status.
  • Additional updates include:
    • A warning banner added to the login steps.
    • The number of attempts allowed to login to the registration system is reduced from five to three attempts.

Latest Level 3 ESMA Q & As related to MiFID II/MiFIR

ESMA published and updated in the last couple of days additional Level 3 Q&A papers. Due to the specification and clarification purposes of the Level 3 papers, this should help you during the implementation phase and could clarify open questions. Please find the relevant June and May 2017 Q&As below.

PwC provides you with this Newsletter an overview of the latest questions related to the following topics:

  1. Investor Protection
  • Information on costs and charges
  • Post-sale reporting
  • Appropriateness / complex financial instruments
  1. Transparency
  • None-Equity transparency
  • Pre-trade transparency waivers
  • The systematic internaliser regime
  • Data reporting services providers
  • Third country issues
  1. Market Structure
  • Direct Electronic Access (DEA) and algorithmic trading
  1. Commodity Derivatives
  • Position Limits
  • Ancillary Activity
  • Third country issues

Read the whole article.

We are happy to discuss with you any thoughts and issues or are happy to review your solutions with regard to MiFID II and MiFIR. Please do not hesitate to contact us.

Günther Dobrauz
Partner
Leader Legal FS Regulatory &
Compliance Services
+41 58 792 14 97
guenther.dobrauz@ch.pwc.com

Michael Taschner
Senior Manager
PwC Legal FS Regulatory and
Compliance Services
+41 58 792 23 25
michael.taschner@ch.pwc.com

Orkan Sahin
Senior
PwC Legal FS Regulatory and Compliance Services
+41 58 792 1994
orkan.sahin@ch.pwc.com

Swiss Withholding Tax Refund on Equity Finance Transactions: New Decision of the Federal Supreme Court

On 5 April 2017, the Swiss Federal Supreme Court issued a new decision concerning the Swiss withholding tax refund right of an Italian bank that was engaged in a combination of buy-sell and derivatives transactions with shares of Swiss issuers around dividend payment dates. To a large extent, the decision of the Court concentrated on the evaluation of taxpayers’ compliance with the concept of beneficial ownership requirements aimed at assessing whether relevant transactions entered into by the taxpayer constituted the mere setup of a dividend stripping. Subsequently, the Court denied Swiss withholding tax refund claims due to the failure of the taxpayer to provide the Federal Tax Authorities (“FTA”) with the required information for the identification of the counterparties to the relevant trades, considering this a failure of the taxpayer to cooperate since such information is, in the view of the Court (and of the FTA), an essential element of proof within beneficial ownership testing.

Previous jurisprudence

The judgment represents the further evolution of previous cases delivered by the Federal Supreme Court in similar situations, and in particular, with regard to two Swiss withholding tax refund lead cases dealing with Danish Banks (for further details, please see the following blog posts).

Decision of the Federal Supreme Court of 5 April 2017

Relevant facts:

A bank incorporated in Italy entered into a number of buy/sell and derivatives transactions (futures) with Swiss shares. The bank acquired these securities shortly before the dividend payment date and sold them shortly after the dividend receipt. Further to the dividend payments, the Italian bank filed several withholding tax refund requests with the FTA regarding dividends distributions arising from securities held on ex-dividend dates. While the claims were under consideration, the FTA requested the bank provide additional information regarding the transactions, and in particular, to disclose information enabling the identification of the counterparties to the transactions with underlying securities prior and post the dividend payment event.

Because the Italian bank was unable to provide this information, the FTA and the Federal Administrative Court rejected its Swiss withholding tax refund claims.

Federal Supreme Court decision highlights:

In its decision, the Swiss Federal Supreme Court reiterated its jurisprudence regarding the concept of beneficial ownership, and provided the following arguments:

  • The Federal Supreme Court re-established that Swiss withholding tax refund claim eligibility in the context of the application of a double taxation treaty requires that the claimant be the beneficial owner of the underlying income.
  • To qualify as a beneficial owner of income (a dividend in the case in question), the recipient should be free in determining further faith of income received (this means that the taxpayer should not have any contractual or legal obligation to pass on such income to third parties). The notion of beneficial ownership should be considered while taking into account economic circumstances and not just pure tax reasons (such as the attempt of the recipient of the dividend to benefit from a double tax treaty withholding tax reduction). Consequently, the Court mentioned that although the tax savings is effectively not present, this is not relevant for the double tax treaty eligibility analysis, which precluded the line of reasoning that all counterparties involved in the transaction were residing in treaty countries with the same residual Swiss withholding tax rate under the relevant treaty with Switzerland.
  • Moreover, the Federal Supreme Court recalled that Swiss Tax Law imposes information-sharing and cooperation duty on taxpayers. This duty should apply both to resident and non-resident taxpayers, even if the double tax treaty does not have a specific provision in this respect. The Court stated that during the procedure, the FTA may request information and documentation enabling it to appropriately review and assess a Swiss WHT refund claim. The rules are that the requested evidence must not be obviously inappropriate to make the required assessment (i.e., it must be reasonable and offer suitable proof) and should not result in disproportionate costs for the claimant. The absence of cooperation cannot create a comparative benefit for the taxpayer, and will have negative consequences if the case cannot be properly reviewed and assessed by the authorities.
  • The Federal Supreme Court also stated that brokers used in equity finance transactions will not be recognized as counterparties but only as intermediaries, and that it is the claimant’s duty to provide proof of the effective counterparty behind the broker.

After analysing the facts of the case, the Court found that:

  • The taxpayer could not establish its compliance with Swiss beneficial ownership requirements for double tax treaty benefits application purposes just by providing the names of the counterparties effectively involved in the transactions.
  • The FTA may request information and documentation to make a proper assessment of the facts and circumstances of the transaction which resulted in a Swiss WHT claim. The claimant must provide reasonable documentation as part of his information and cooperation duties. These duties are limited by the principle of proportionality, which means that the requested information should neither be obviously inappropriate to make the required assessment nor result in disproportionate costs for the claimant. Of course, these principles are open for legal interpretation and subject to scrutiny.
  • Moreover, the Court ruled that, by not providing the requested information, the Italian bank deliberately hid essential elements of the facts required for the analysis of its transactions by the authorities, meaning non-cooperation was in fact established. Without the documentation by the claimant, the FTA was put in a position where it was impossible to understand the effective flows and structure, or to analyse the claim against the practice established by the Court. Hence, the claimant was forced to face the consequences of the missing proof of its tax mitigating elements.

Further to the above, the Federal Supreme Court concluded that the withholding tax refund should be denied to the Italian bank (only a non-material claim was sent back to the tax authorities for reassessment due to violation of the formal requirements of the procedure).

What does it mean for you?

The new Court decision clearly shows, in line with previous jurisprudence, an overall trend for assessing compliance with beneficial ownership requirements, and for the detailed review of relevant documentation when withholding tax refund claims are filed within the scope of financial services industry transactions. Market participants using brokers in similar transactions will be required to disclose the effective parties behind the broker, which will in practice make it difficult to establish proof.

The recent jurisprudence makes it clear that all cases should be analysed on the basis of individual facts and circumstances, and that outcomes may vary depending on the analysis of transactions.

We encourage you to review present and previous withholding tax claims filed for similar transactions to determine whether any risks are present, and to develop and implement risk mitigating strategies for the future.

Martin Büeler
Partner, Tax & Legal
martin.bueeler@ch.pwc.com
+41 58 792 43 92
Luca Poggioli
Director, Corporate Tax
luca.poggioli@ch.pwc.com
+41 58 792 44 51
Victor Meyer
Partner, Tax & Legal
victor.meyer@ch.pwc.com
+41 58 792 43 40
Dieter Wirth
Partner, Tax & Legal
dieter.wirth@ch.pwc.com
+41 58 792 44 88
Dmitri Deniskin
Director, Tax & Legal
dmitry.deniskin@ch.pwc.com
+41 58 792 8258

The Future of Wealth Management

PwC’s 4th FS-Talk

Wealth managers are challenged by shifting client segments and disruptive technologies PwC experts discuss the key success factors for wealth managers today. Private client re-segmentation makes value-added services more important. Demands on relationship managers are increasing. Operations are under pressure to deliver higher efficiency. Listen in for pointers of where the challenges are and which technologies provide opportunities to gain a competitive edge.

Watch the latest video of our FS-Talk:

Get in contact with the speakers:

Dieter Wirth
Partner / Financial Service Leader
+41 58 792 4488
dieter.wirth@ch.pwc.com

Marcel Tschanz
Partner Advisory
+41 58 792 2087
marcel.tschanz@ch.pwc.com

Marcel Widrig
Partner / Private Wealth Leader
+41 58 792 4450
marcel.widrig@ch.pwc.com

SuisseTax Online Portal Open for AEOI Registration

As of this week, ESTV SuisseTax, the Swiss Federal Tax Administration’s online portal, has opened its AEOI registration function for reporting Swiss Financial Institutions (“FIs”). Reporting Swiss FIs must register by the end of 2017 for an initial AEOI data exchange in 2018.

Please note that a registration for AEOI purposes is only possible via the online portal. Swiss FIs can enter the ESTV SuisseTax portal by referring to the following link:  https://www.estv.admin.ch/estv/de/home/estv-suissetax/estv-suissetax.html.

The Swiss Federal Tax Administration is expecting to provide a data exchange test phase for reporting Swiss FIs in the summer of 2017.

Please refer to the link below for the official media release: https://www.admin.ch/gov/de/start/dokumentation/medienmitteilungen.msg-id-65920.html

Good, but could do better – Key learnings from the FAFT AML&CFT Mutual Evaluation Report of Switzerland

On 7 December 2016, the Financial Action Task Force (FATF) published the results of the Mutual Evaluation Report on Switzerland, concluding their assessment performed from 25 February to 11 March 2016. The results, extending to 245 pages, make interesting reading for AML practitioners and compliance officers.

FAFT concluded,Overall, Switzerland’s Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime is technically robust and has achieved good results. It would still benefit from some improvements in order to be fully effective.”

PwC  analysed the key findings and identified learnings for regulated firms together with options for regulatory development. The key learnings concern:

  1. Suspicious Transaction Reporting (“STR”)
  2. Due diligence on longstanding customers
  3. AML&CFT customer risk classification
  4. AML&CFT Risk Assessment
  5. Penalty Sanctions

Read our findings and perspective here

For more information please contact our experts

Michèle Hess
Assurance Director
michele.hess@ch.pwc.com
+41 58 792 46 67

Daniel Cicetti
Assurance Senior Manager
daniel.cicetti@ch.pwc.com
+41 58 792 23 92

Alister Smith
Advisory Senior Manager
alister.smith@ch.pwc.com
+41 58 792 47 96