EU Benchmarks Regulation and Market Impact as of 1 January 2018

The new EU Benchmarks Regulation (BMR) was published in June 2016 and most rules will apply as of 1 January 2018. The BMR introduces new compliance requirements for benchmark administrators, contributors, and users, with regard to interest rate, foreign exchange, security, commodity, and other benchmarks used in financial transactions. The BMR was enacted in response to public pressure resulting from the aftermath of the LIBOR scandals and follows the recommendations of the IOSCO and ESMA EBA Principles.

Executive summary

Functioning benchmarks are key to ensuring the smooth functioning of financial markets. However, they lead to conflicts of interest and other integrity issues on the part of contributors of input data and administrators. The scope of the BMR covers all published benchmarks which are used in the European Union with regard to associating financial instruments, financial contracts and/or fund managers. The BMR defines obligations and conduct requirements for both administrators and contributors to ensure market integrity. The Regulation has an extraterritorial dimension in cases where third country administrators request market access. Market access can be granted on the basis of equivalence, recognition, and endorsement by an EU supervised entity. All the legal requirements of the BMR will phase-in on 1 January 2018 and take effect on 1 January 2020 – except for the EURIBOR, which is subject to the BMR today.

What is a benchmark?

A benchmark is defined as “a reference index, to which the amount payable under a financial instrument or a financial contract, or the value of a financial instrument, is determined, or an index that is used to measure the performance of an investment fund with the purpose of tracking the return of such index or of defining the asset allocation of a portfolio or of computing the performance fees” (Article 3(1)(3) BMR).  Such an index is a figure, fulfilling one of the following criteria:

  1. Published or made publicly available;
  2. Determined at a regular interval by either:
    • partially or entirely applying a formula or any other method of calculation, or another means to assess it by; and
    • on the basis of the value of one or more underlying assets or prices, including estimates of prices, actual or estimated interest rates, quotes and committed quotes, or other values or surveys.

Derivatives as defined in Section C, Annex I, Directive 2014/65/EU do not qualify as an index where there is only a single reference value. Such is the case where a single price or value is used as a reference for a financial instrument, e.g. the reference price for a future or option, without any calculation, input data or discretion. Equally, reference or settlement prices produced by central counterparties are not considered to be benchmarks.

Who will be affected?

While the IOSCO Principles are the basis of the BMR, the Principles included the concept of “comply or explain”; this exemption with respect to proportionality and the nature of the benchmark is only included to a limited extent in the BMR. In order to comply with the new Regulation, administrators of a benchmark will either have to apply for registration or for authorisation, depending on the type of benchmark they provide. The provision of critical and significant benchmarks, as well as commodity and interest rate benchmarks, requires an application, while in all other cases registration with the designated authority will suffice.

  • Administrators: An administrator can be either a natural person or a legal entity with control over the provision of a benchmark, in particular by administering the arrangements determining the benchmark, by collecting and analysing the input data, as well as by determining the rate of the benchmark, and by publishing it. While specific functions of the administrator can be outsourced to a third party, the sole act of publishing or referring to an existing benchmark is insufficient for an individual or an entity to be considered as the benchmark administrator. Control of provision of the benchmark is a necessary regulatory requirement for the provider to become subject to the BMR.
  • (Supervised) Contributors: The two types of contributors are differentiated in that any natural person or legal entity can contribute input data as a “contributor”, but only a “supervised contributor” can contribute input data to an administrator located in the EU as a supervised entity and the contributor has to comply with more stringent requirements, in accordance with Article 16 BMR. The quality and reliability of any benchmark is based on the integrity and accuracy of the input data, which is provided by the contributor. To prevent manipulation at data contribution level, contributors are subject to stringent rules under the BMR. The administrator has to ensure contributors adhere to the code of conduct and that input data is of the required integrity and can be validated, even if the contributor is located in a third country. Any omission by a contributor providing input data to a critical benchmark can undermine the credibility and representativeness of such a benchmark, with severe impact on the underlying market and economic reality. As such, national authorities are given the power to demand mandatory contributions from supervised contributors to critical benchmarks.
  • User of a benchmark: A supervised entity may use a benchmark or a combination of benchmarks in the EU if the benchmark is provided by an administrator located in the Union and included in the register or is a benchmark which is included in the register. Where the object of a prospectus is transferable securities or other investment products that reference a benchmark, the issuer, offeror, or person asking for admission to trade on a regulated market shall ensure that the prospectus also includes clear and prominent information stating whether the benchmark is provided by an administrator included in the register.

Which benchmarks will be affected?

The BMR subdivides the benchmarks into various subcategories, based on the type of market they reproduce. The Regulation contains specific additional requirements for both commodity and interest rate benchmarks. The following provides an overview of the various subcategories of benchmarks:

Type of Benchmark Description
Regulated Data Benchmark Data input for the benchmark is provided directly from regulated venues. Certain provisions of the BMR do not apply to regulated data benchmarks, and they cannot be classified as critical.
Interest Rate Benchmark An IR Benchmark is determined on the basis of the rate at which banks may lend or borrow from other banks or agents in the money markets. They are subject to the requirements set out in Annex I BMR. Provisions of the BMR relating to significant and non-significant benchmarks do not apply.
Commodities Benchmark The basis for the benchmark is a commodity as defined by MiFID II. Commodity Benchmarks are subject to the requirements of Annex II BMR, unless the benchmark also qualifies a regulated data benchmark, or is based on submissions from mainly supervised entities. Provisions of the BMR relating to significant and non-significant benchmarks do not apply.
Critical Benchmark To qualify as a critical benchmark, the value of the underlying contracts needs to be at least EUR 500 bn, or it has to have been recognised as critical in a member state. Critical benchmarks are subject to more stringent and specific requirements than other types of benchmarks.

A framework has been developed by ESMA to determine Interbank Offered Rates benchmarks (IBORs) and the Euro Over Night Index Average (EONIA) as critical benchmarks. To date, only EURIBOR has been qualified as such by the EC.

Significant Benchmark Requires the value of underlying contracts to be at least EUR 50 bn, or there to be none or very few market-led substitutes, leading to significant impact on financial stability, if the benchmark ceases to be produced.
Non-Significant Benchmark All other benchmarks where the benchmark is neither a commodity nor an interest rate benchmark and the value of underlying contracts of the benchmark is less than EUR 50 bn.

How will a Switzerland-based benchmark provider be affected?

Non-EU administrators are subject to BMR rules where they intend to obtain EU market access; non-compliance will likely lead to these non-EU benchmarks being denied EU market access. There are three ways for third country administrators to become compliant: equivalence, recognition, and endorsement. Firstly, an equivalence decision with regard to foreign jurisdictions can be made by the European Commission if the requirements of Article 30(1) BMR are met and this results in benchmarks from relevant third country jurisdictions being eligible for use by supervised entities in the EU. Secondly, where an administrator located in a third country provides proof of compliance with the IOSCO Principles and said compliance is equivalent to the BMR, the administrator should be recognised as an administrator within the EU. An administrator located in a third country, such as Switzerland, must have a legal representative in the reference member state, if the entity intends to obtain recognition. The legal representative must oversee the provision of benchmarks as performed by the administrator and is accountable to the competent EU member state authority. Finally, market access as a third country administrator can be gained through an endorsement by an administrator of a supervised entity located in the EU. Endorsement will permit market access where the third country administrator adheres to the IOSCO Principles and such adherence results in equivalent compliance with the BMR.

Obligations for administrators and contributors

The BMR directly imposes a variety of obligations on persons involved in the provision, contribution, and use of benchmarks throughout the EU to prevent conflicts of interest and manipulation of benchmarks as well as to ensure maximum harmonisation in cross-border applications. If tasks are outsourced to an external service provider the provider also has to adhere to the BMR. In particular, the administrator is required to provide a code of conduct specifying the requirements and responsibilities regarding input data and to supervise adherence to the code, even if the contributor is located in a third country.

The obligations include the following provisions for administrators:

  • Robust governance arrangements, including a clearly organisational structure with well-defined, transparent and consistent roles and responsibilities for all involved, preventing conflicts of interest (Article 4 BMR).
  • Develop and maintain robust procedures to ensure oversight of all aspects of the provision of a benchmark and communication with the relevant competent authorities (Article 5 BMR).
  • Ongoing control of benchmarks to ensure they are provided, published and/or made available in accordance with the Regulation, and maintained through an accountability framework, record-keeping, auditing, and review and complaints handling process (Article 6 to Article 9 BMR). These frameworks must include any third party to which a task has been outsourced (Article 10 BMR).
  • The administrator is also responsible for overseeing the quality of input data and reporting any infringements without delay to the competent authority (Article 11 to Article 15 BMR).

The obligations include the following provisions for contributors:

  • The contributor must adhere to the code of conduct provided by the administrator and the specific requirements prescribed with respect to the contribution of input data (Article 15 BMR).
  • Supervised contributors must also ensure input data is not affected by any existing or potential conflicts of interest and that all discretion is exercised in an independent and honest way (Article 16 BMR).

Typical products in scope

Entry into force

The BMR will enter into force on 1 January 2018. There is a transition period for certain new and existing benchmarks until 1 January 2020. In accordance with the transitional provisions of Article 51(3) BMR, ESMA considers existing benchmarks as including benchmarks “existing on or before 1 January 2018”, including those provided for the first time on or before 1 January 2018. Thus, an EU index provider may provide a benchmark created between 30 June 2016 and 1 January 2018, including updates and modifications, to supervised entities in the EU until 1 January 2020, even if authorisation or registration has not yet been granted, unless authorisation or registration has been refused.

The BMR has applied to the EURIBOR since 12 August 2016, following qualification as a critical benchmark.

Impact

The BMR is a highly complex regulation with implications for all market participants. It requires considerable time to plan, structure, and implement the requirements set forth in accordance with the IOSCO Principles and EU regulations. The requirements have a direct impact on the usage of benchmarks, provision of input data, and cross-border market access.

Please contact our experts on this topic for a free consultation:

Martin Liebi
Director
Tel: +41 58 792 2886
martin.liebi@ch.pwc.com

Alexandra Balmer
Consultant
Legal FS Regulatory & Compliance Services
Tel: +41 58 792 1424
alexandra.balmer@ch.pwc.com

The New EU Prospectus Regulation and its impact on Swiss-based issuers and their KIDs under PRIIPs

The new EU Prospectus Regulation (“PR”) was adopted by the European Council on 16 May 2017 and will enter into force on 20 July 2017. The PR is the latest regulation issued by the European Capital Markets Union (“CMU”) and should become reality by 2019. The PR is based on and further clarifies the existing EU Prospectus Directive. It contains provisions that are directly applicable in all EU member states without discretion, but that also apply in particular to Swiss-based issuers and their agents offering securities in the EU or admitting transferable securities to trading on regulated markets located in the EU such as EUREX. One of the main goals of the PR is to reduce the length of prospectuses by providing clear and detailed guidelines of how to create a prospectus. This newsletter gives a short overview of the key content of the PR and explains in particular how it will be applicable to Swiss-based issuers and their agents.

1. Executive Summary

The PR particularly affects Swiss-based issuers and their agents publicly offering transferable securities in the EU and admitting transferable securities to EU regulated markets such as EUREX.

Most financial instruments, such as shares, bonds, warrants and structured products come under its scope, except for units in collective investment schemes which are not close-ended. There are detailed new requirements related to the content, scope, length, formalities and other requirements of a prospectus.

The summary of a prospectus can be used instead of a KID created under PRIIPs. Issuers should therefore investigate operational and legal synergies between the PR and the KID. Consequently, the PR should be addressed now despite the fact that most provisions will not enter into force until 21 July 2019.

2. When a prospectus is required

A prospectus must be published when transferable securities are offered to the public in the EU or admitted to trading on regulated markets located in the EU by means of a communication to persons in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe to the securities in question.

The prospectus obligation applies to both equity and non-equity securities entitling the holder either to acquire transferable securities or to receive a cash amount through a cash settlement determined by reference to other instruments, notably transferable securities, currencies, interest rates or yields, commodities or other indices or measures. It covers in particular warrants, covered warrants, certificates, structured products, and securities convertible at the option of the investor, but not units in collective investment schemes other than the closed-end types.

No public offer of transferable securities is deemed an offer to qualified investors in the sense of MiFID II (safe harbour). Any resale to the public of transferable securities first placed with qualified investors or admitted to trading on a regulated market will however require the publication of a prospectus. Offers to fewer than 150 natural or legal persons per EU Member State are not deemed to be public, nor are offers of securities with denominations per unit amounting to at least EUR 100,000 or offers of securities addressed to investors who acquire securities for a total consideration of at least EUR 100,000 per investor. There are also multiple exemptions applicable to securities traded on a regulated market.

Resales of transferable securities in the scope of the PR are generally treated as separate offers and are subject to a prospectus, unless an exemption applies. No additional prospectus is required as long as a valid prospectus is available. A prospectus is valid for 12 months from the date of approval of the offer or the admission to trading and the date on which the issuer or the person responsible for drawing up the prospectus consents to its use in written form.

It is possible to voluntarily draw up a prospectus in accordance with the provisions of the PR even if the offer would be outside the scope of application of the PR. Such prospectuses are subject to all the rights and obligations of a prospectus created according to the PR.

3. The issuer of a prospectus

The issuer who issues or proposes to issue securities, the offeror who offers securities to the public, or a mandated third party such as a bank, is responsible for ensuring that the prospectus provides sufficient information to enable investors to make informed investment decisions.

The liability for the information given in the prospectus, and any supplement thereto, lies at the very least with the issuer, or its administrative, management or supervisory bodies, the offeror, the person asking for the admission to trading on a regulated market, or the guarantor. The persons responsible for the prospectus must be clearly identified in the prospectus. Civil liability remains with the individual EU member states.

4. When do Swiss-based issuers have to issue a prospectus?

Any non-EU domiciled issuer, such as a Swiss issuer, bank or intermediary, can offer transferable securities in the EU or seek admission to trading of securities on a regulated market established in the EU, such as EUREX, if a prospectus is drawn up and approved by the competent authorities according to the PR. It is to be expected that the corresponding Swiss prospectus requirements will be equivalent to the prospectus requirements under the PR. The Swiss requirements are currently undergoing a revision in the context of the debate on the Swiss Financial Services Act (FinSA) in the Swiss parliament. As a result, competent authorities may in future even approve prospectuses issued under Swiss law if certain additional requirements are met.

5. The Key Types of Prospectuses

6. The prospectus approval process

Any prospectus and all its constituent parts must be approved by the competent authority prior to publication. Any of the constituent parts can be approved separately. The competent authority is generally the EU member state where the issuer has its registered office or, in the case of a third-country issuer such as a Swiss bank, the member state where the securities are intended to be offered to the public for the first time or where the first application for admission to trading on a regulated market is made.

The prospectus has to be made available to the public by the issuer, offeror or person asking for admission to trading on a regulated market in advance of, and at the latest at the beginning of the offer to the public or the admission to trading of the securities concerned. The prospectus is regarded as public if it is published in electronic format or on certain web pages.

The approving authority will then notify the competent authorities of the EU member states in which the securities will be distributed.

7. The rules for advertisements

Any advertisement regarding either an offer of securities to the public or an admission to trading on a regulated market must be clearly recognisable as such. All information disclosed in the context of an advertisement must be consistent with the information contained in the prospectus.

8. When are updates required?

Every significant new factor, material mistake or material inaccuracy relating to information included in the prospectus which may affect the assessment of securities and which arises between the time of the approval of the prospectus and the closing of the offer period or when trading on the regulated market begins, must be mentioned in a supplement to the prospectus and must be approved by the competent authority. In such cases, investors who have already agreed to purchase or subscribe to the securities have two days in which to withdraw their acceptance.

9. When will the PR enter into force?

The PR will enter into force on 20 July 2017. There will be a transitional period until 21 July 2019 for most requirements under the PR. Certain provisions will already apply as of 21 July 2018 and 20 July 2017 respectively, such as the exemption from publishing a prospectus for shares which represent less than 20% of the number of shares of the same class admitted to trading on the same regulated market over a period of 12 months.

Please contact us for your free consultation:

Martin Liebi
Director
Tel: +41 58 792 2886
martin.liebi@ch.pwc.com

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

Anne Batliner
Manager
Legal FS Regulatory & Compliance Service
+41 58 792 2955
anne.batliner@ch.pwc.com

EUDTG Newsletter May – June 2017

EU direct tax law is a fast developing area. This presents taxpayers, in particular groups and multinational corporations that have an EU or European Economic Area (EEA) presence, with various challenges.

The following topics are covered in this issue of EU Tax News:

CJEU Cases

  • Belgium: CJEU judgment in X concerning the Belgian fairness tax
  • Belgium: CJEU judgment in Van der Weegen and Pot concerning the tax exemption applicable to income from savings deposits
  • France: CJEU judgment in AFEP concerning the French contribution tax
  • Luxembourg: CJEU judgment in Berlioz concerning exchange of information upon request

National Developments

  • Austria: Administrative High Court disallows import of foreign (final) losses despite transfer of place of management
  • Germany: Federal Fiscal Court refers §6a RETT Act to CJEU as potential State aid
  • Germany: Federal Fiscal Court denies deduction of final losses according to EU law
  • Italy: Amendments to the NID and Patent Box Regime: conversion into law with revisions
  • Poland: Ministry of Finance publishes warning on aggressive tax planning structures
  • Spain: Supreme Court issues preliminary ruling about tax on activities that affect the environment
  • Switzerland: Federal Council presents basic parameters of the renewed planned tax reform
  • United Kingdom: Upper Tribunal Tax and Chancery decision on the Coal Staff Superannuation Scheme Trustees

EU Developments

  • EU: ATAD II Directive formally adopted
  • EU: European Commission proposes mandatory disclosure rules for intermediaries
  • EU: ECOFIN Council of 23 May 2017: agreement on Double taxation dispute resolution mechanism in the EU
  • EU: ECOFIN Council of 16 June 2017: Main results
  • EU: European Parliament PANA Committee issues draft report and draft recommendations
  • EU: Public CBCR: European Parliament ECON and JURI Committees adopt joint report
  • Italy: EU Tax Commissioner Moscovici concludes that Italian flat tax for high net worth individuals does not appear to constitute harmful tax competition
  • Spain: European Commission starts infringement procedure on state liability for breach of EU law

Fiscal State aid

  • EU: European Commission and China start dialogue on State aid control
  • EU: European Commission adopts annual Competition Policy Report for 2016
  • Hungary: Advertisement Tax Act aligned to comply with EU State aid rules
  • Spain: CJEU judgment on tax exemptions for Catholic Church
  • United Kingdom: CJEU judgment on the Gibraltar Betting and Gaming Association

 

Read the full newsletter

 

This EU Tax Newsletter is prepared by members of PwC’s international EU Direct Tax Group (EUDTG).

Further information about our service offerings in EU taxes: www.pwc.com/eudtg


Contact

Armin Marti
Partner Tax & Legal Services, Leader Corporate Tax Services
+41 58 792 43 43
armin.marti@ch.pwc.com

Anna-Maria Widrig Giallouraki
Senior Tax Manager
+41 58 792 42 87
anna-maria.widrig.giallouraki@ch.pwc.com

New Swiss FinTech rules

Switzerland adopts revised banking regulations in order to facilitate the business activities of “FinTech” companies

On February 1, 2017 the Federal Council initiated a public consultation suggesting modifications to Swiss banking regulations. The purpose of the proposed revision was to create appropriate regulations for FinTech companies operating outside the traditional financial sector, taking into account the specific risk potential of their respective business models. The proposed revision included amendments to both the Banking Act (“BA”) and the Banking Ordinance (“BO”). The public consultation lasted until May 2017.

On July 5, 2017 the Federal Council finally adopted the new Swiss regulatory framework with regard to the BO. The new regime will formally enter into force on August 1st, 2017 so that FinTech companies will be able to benefit from these new rules as quickly as possible.

The amended rules provide for the following:

  1. Settlement account exemption: An exemption for settlement accounts will be created. This will allow companies to hold funds in a settlement account for 60 days without the operation of such account being deemed an acceptance of public funds subject to licensing under the BA (Art. 5 para 3 let. c BO). The BO in its current version did not contain a 60-day period of this kind, thereby creating some uncertainty.
     
  2. Innovation space (“sandbox”): Companies are allowed to hold public deposits of up to CHF 1 million without having to obtain a banking license (“sandbox”). Consequently, holding public funds of less than CHF 1 million does not qualify as “operating on a commercial basis”, which is a requirement in order to fall within the scope of the BA and the BO (Art. 6 para 2 let. a BO). According to the BO in its current version, taking public funds from more than 20 persons is deemed as “operating on a commercial basis”. Under the revised version of the BO, the number of persons providing funds is irrelevant as long as the threshold of CHF 1 million is not exceeded. Furthermore, the funds raised may neither be invested nor be subject to interest payments (Art. 6 para 2 let. b BO). Finally, the persons providing the funds must be informed that the respective business model is not subject to supervision by the Swiss Financial Market Supervisory Authority (FINMA) and that the rules on deposit insurance do not apply (Art. 6 para 2 let. c BO). This new innovation space will enable FinTech companies to try out experimental new business models without immediately having to obtain a banking license.

All in all, these innovative amendments to the BA and the BO will substantially facilitate the operation of FinTech business models in Switzerland. Moreover, the revision of the BA and the BO is further evidence of the Swiss government’s commitment to constantly improving and redesigning the regulatory environment in order to boost Switzerland as a major FinTech hub.

Your contacts:

Guenther Dobrauz
Partner|Leader PwC Legal Services Switzerland
Tel. +41 58 792 1497
guenther.dobrauz@ch.pwc.com

Tina Balzli
Director|Legal FS Regulatory & Compliance Services
Tel. +41 58 792 1554
tina.balzli@ch.pwc.com

Simon Schären
Manager |Legal FS Regulatory & Compliance Services
Tel. +41 58 792 1463
simon.schaeren@ch.pwc.com

MIFID2: Are you ready for the new era in record-keeping?

With the MIFID2 regulatory regime beginning on 3 January 2018, EU-based financial firms will not only face a new era of heightened record-keeping involving many more records than was previously required, but also the negative effects of new oversight, monitoring, e-discovery and forensics processes for the firm’s clients and regulators. MIFID2 recordkeeping will not just be about expanded content archival – it will deal with its implementation in a way that will help firms best execute processes in a strategic and efficient manner.

The task faced by management teams to ensure their firms are compliant with MIFID2 record-keeping may be daunting given the complexities of the directive and its regulations. We feel this task is best completed by way of an overall approach to record-keeping operations, culminating in the decision to create a firm-level “programme” that is designed to handle all the new requirements posed by MIFID2 – as opposed to ad-hoc, tactically focused processes, which ensure minimal compliance with great risk and little preparation for the processes of oversight, monitoring, e-discovery and forensics. With a strategic programme, firms will have the means to ensure record-keeping compliance and be prepared to effectively deal with the negative effects of MIFID2.

Ultimately, a robust and strategic recordkeeping programme should encompass a process of integrating content archiving into the management of line-of-business applications from the very first day of MIFID2. This process should put operational archiving best practices into place to ensure that records are archived in such a way that their state and inventory are always known – thus making oversight, searching and retrieval easier in the future.

Read the whole article

Contacts PwC:

Guenther Dobrauz
Partner|Leader PwC Legal Services Switzerland
Tel. +41 58 792 1497
guenther.dobrauz@ch.pwc.com

Michael Taschner
Senior Manager|Legal FS Regulatory and Compliance Service
Tel. +41 58 792 1087
michael.taschner@ch.pwc.com

Philipp Rosenauer
Manager|Legal FS Regulatory and Compliance Services
Tel. +41 58 792 1856
philipp.rosenauer@ch.pwc.com

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

Contacts KSF Technologies:

Michael Imfeld
Managing Partner, Business Development
michael.imfeld@ksftech.com

Allen Frasier
Director of Compliance
allen.frasier@ksftech.com

EU: Anti-Tax Avoidance Directive II (“ATAD II”) formally adopted

On 29 May 2017 the Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (“ATAD II”) was formally adopted by the EU Council. Political agreement on this Directive had already been achieved at ECOFIN level on 21 February 2017.

The amended Directive (ATAD II) has a broader scope than ATAD I (adopted in 2016 and effective as of 2019) as it also covers hybrid mismatches with third countries and extends the hybrid mismatch definition to cover more categories of mismatches (e.g. to include arrangements involving PEs, hybrid transfers, imported mismatches, reverse hybrid entities and rules on tax residency mismatches). The terms and concepts contained in ATAD II are very similar to those in the OECD’s BEPS Action 2 recommendation as it currently stands.

The EU Member States will need to transpose the provisions of ATAD II by 31 December 2019 into their national laws and apply them per 1 January 2020. Only exception is the reverse hybrid entity rule for which the EU Member States will need to transpose by 31 December 2021 and apply per 1 January 2022. Nevertheless, payments to reverse hybrids will no longer be deductible from 1 January 2020.

We strongly recommend multinationals with Swiss & EU operations to review their structures to consider whether any of the new rules applies. In particular also Swiss entities benefiting from e.g. the Swiss finance branch and the Swiss principal taxation rules (to the extent still applicable in 2020 depending on timing and outcome of the Swiss Corporate Tax Reform 17 project) should review a potential impact by these rules on a case by case basis.

For more information please find below the newsletter from our EUDTG Network:

Download

Contact

Armin Marti
Partner Tax & Legal Services, Leader Corporate Tax Services
+41 58 792 43 43
armin.marti@ch.pwc.com

Anna-Maria Widrig Giallouraki
Senior Tax Manager
+41 58 792 42 87
anna-maria.widrig.giallouraki@ch.pwc.com

The countdown is on: one year to get ready for the EU General Data Protection Regulation GDPR

On 25 May 2016 the EU General Data Protection Regulation (GDPR) entered into force. After the elapse of the 2-year transposition period, it will become directly applicable on 25 May 2018.

The new EU data protection legislation introduces substantial changes for companies dealing with personal data: As a selection, the new requirements on transparency, on proportionality as well as on documentation when processing personal data are among the key changes. These are significant challenges for companies. In addition, the new legislation substantially improves the rights of the concerned individuals – the data subjects. Thanks to the GDPR, they now have clear-cut rights with regard to companies processing their data. Inter alia the key rights include the right on information, on rectification and deletion of personal data, on restriction of processing, on portability as well as the right to object processing. As data controllers, companies have to be able to comply with all these rights.

Besides new duties and compliance obligations for companies, data protection authorities are given new competences and enforcement instruments. Standing out are the new sanctions of up to the amount of EUR 20m or 4% of the international annual turnover of the concerned company, whichever is higher.

Recommendation

Swiss companies that (e.g. because they do business in the EU) are subject to the GDPR now have one year to make the necessary adaptions to comply with the GDPR. The new requirements are to be analyzed, gaps to be identified and mitigation actions to be planned and implemented. It is important to be prepared.

Contacts:

Susanne Hofmann
Legal Compliance Leader
+41 58 792 17 12
Email

Michael Adrian Meyer
Legal Services – Senior Manager
+41 58 792 51 31
Email

Reto Häni
Partner and Leader Cybersecurity
+41 58 792 75 12
Email

Idir Laurent Khiar
Legal Services – Assistant Manager
+41 58 792 17 51
Email

EUDTG Newsletter March – April 2017

EU direct tax law is a fast developing area. This presents taxpayers, in particular groups and multinational corporations that have an EU or European Economic Area (EEA) presence, with various challenges.

The following topics are covered in this issue of EU Tax News:

CJEU Cases

  • Belgium: CJEU judgment on interpretation of the subject-to-tax requirement of the Parent-Subsidiary Directive: Wereldhave
  • Belgium: AG Opinion on interest deduction limitation in light of the Parent-Subsidiary Directive: Argenta
  • Germany: CJEU referral on the German CFC rules: X

National Developments

  • Belgium: Supreme Court does not allow withholding tax refunds for dividends received by investment companies before 12 June 2003
  • Belgium: CJEU referral by the Commission of Belgium over the discriminatory tax treatment of foreign real estate income
  • Finland: Supreme Administrative Court confirms tax treatment of dividend income from third countries to be in line with Articles 63 and 65 TFEU
  • Italy: Amendments to the NID and Patent Box Regime
  • Norway: Government’s response to ESA’s decision on the compatibility of the Norwegian interest limitation rules with the freedom of establishment
  • Poland: Supreme Administrative Court judgment on the settlement of foreign branch losses
  • Spain: Supreme Court judgment on State aid recovery procedure
  • United Kingdom: England and Wales High Court judgment regarding repayment of stamp duty reserve tax: Jazztel plc v The Commissioners for HMRC
  • United Kingdom: The Great Repeal Bill White Paper

EU Developments

  • EU: European Parliament clears way for formal adoption of ATAD II by the ECOFIN Council
  • EU: Update on EU proposal for public country-by-country reporting
  • EU: Council adopts conclusions on EU relations with the Swiss Confederation
  • EU: Informal ECOFIN Council held in Malta in early April

Fiscal State aid

  • Greece: CJEU judgment on State aid implemented by Greece: Ellinikos Chrysos AE
  • Italy: CJEU judgment on Italian bankruptcy procedure: Marco Identi

Read the full newsletter here.

This EU Tax Newsletter is prepared by members of PwC’s international EU Direct Tax Group (EUDTG).

Further information about our service offerings in EU taxes: www.pwc.com/eudtg

Switzerland: New social security treaty between Switzerland and China

A social security treaty between Switzerland and the People’s Republic of China (China) will enter into force on 19 June 2017. The maximum posting period is 72 months. For the duration of the posting employees (regardless their nationality) are exempt from the compulsory insurance obligations of the country of occupation which are covered in the social security treaty. As from 19 June 2017 it will be possible to obtain a Certificate of Coverage.

 

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Contact

Véronique Schaller
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veronique.schaller-wiesli@ch.pwc.com

Natalia Graf
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natalia.graf@ch.pwc.com

 

EUDTG Newsletter January – February 2017

EU direct tax law is a fast developing area. This presents taxpayers, in particular groups and multinational corporations that have an EU or European Economic Area (EEA) presence, with various challenges.

The following topics are covered in this issue of EU Tax News:

CJEU Cases

  • Netherlands: CJEU judgment on pro-rata personal deductions for non-resident taxpayers: X
  • Netherlands:  CJEU judgment on the application of Article 64 (1) TFEU concerning the extended recovery period for foreign assets: X

    National Developments
  • Belgium: New Innovation Income Deduction replaces the Patent Income Deduction
  • Finland: Supreme Administrative Court confirms withholding tax treatment for non-UCITS and non-listed Maltese SICAV
  • Hungary:  Hungarian implementation of ATAD’s CFC rules
  • Italy: Italian Tax Court of First Instance judgment on the compatibility of withholding tax levied on dividends distributed to a US pension fund with EU law
  • Sweden: Swedish Supreme Administrative Court judgments on the denial of refund of Swedish withholding tax
  • Switzerland: Corporate Tax Reform III rejected by the Swiss voters
  • United Kingdom: Supreme Court judgment in R (on the application of Miller and another) v Secretary of State for Exiting the European Union

EU Developments

  • EU: ECOFIN Council agreement on ATAD II
  • EU: European Parliament Resolution of 14 February 2017 on the annual report on EU competition policy
  • EU: Public CBCR: European Parliament’s joint ECON & JURI Committee issues draft report
  • EU: EU Member States send letter to non-EU 92 countries in context of common EU list of non-cooperative tax jurisdictions
  • Spain European Commission requests Spain to amend its law implementing reporting obligations for certain assets located outside of Spain

Fiscal State aid

  • Luxembourg: Non-confidential version of the European Commission’s State aid opening decision in GDF Suez
  • Spain: AG Opinion on tax exemptions for Church-run schools

Read the full newsletter here.

This EU Tax Newsletter is prepared by members of PwC’s international EU Direct Tax Group (EUDTG).

Further information about our service offerings in EU taxes: www.pwc.com/eudtg