EUDTG Newsletter September – October 2015

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 opportunities.

 

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

 

CJEU Cases

  • Austria: CJEU Judgment on Austrian goodwill amortization: Finanzamt Linz
  • Netherlands: CJEU Judgment on discriminatory treatment of foreign shareholders receiving dividends from Dutch sources: Miljoen, X and Société Générale

National Developments

  • Finland: Proposed changes to domestic dividend taxation based on amendment to the EU Parent-Subsidiary Directive
  • Italy: New provisions on value attribution to assets of companies transferring place of residence to Italy
  • Italy: New provisions on horizontal tax consolidation
  • Italy: New branch exemption provisions
  • Spain: National High Court of Justice judgment on tax discrimination of UK UCITS
  • Spain: High Court of Justice of Madrid judgment on US investment funds
  • United Kingdom: First Tier Tribunal judgment about tax treatment of the statutory interest on repaid VAT
  • United Kingdom: 45% corporation tax on restitution interest

EU Developments

  • EU: EU-28 political agreement on automatic exchange of information of advance cross-border tax rulings and APAs
  • EU: European Commission launches public consultation on new proposal for CCCTB

Fiscal State aid

  • EU: European Commission final decisions on Starbucks Manufacturing BV and Fiat Finance and Trade
  • Spain: Amendment to General Tax Act regarding the State aid recovery procedure
  • Spain: Two High Court judgments on State aid regarding exemption from Spanish immovable property tax

 

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

 

World of FTAs – Part 3

On 4 August 2015 the successful finalization of the Free Trade Agreement (FTA) negotiations between the EU and Vietnam have been announced (as mentioned in the blog). The intention is that the FTA will be signed beginning of December 2015.

However, many things happened since August.

As announced too, the negotiations of the Trans-Pacific Partnership (TPP) have been successfully finalised. The future will show what impact the TPP will have on the negotiations between the EU and the U.S. on the TTIP (Transatlantic Trade and Investment Partnership). It is obvious that the political landscape and the pressure has much increased for both parties, internally (will TPP standards find its ways into the TTIP?) as well as externally (protests in Berlin of over 150,000 citizens).

Nonetheless, the EU continued to be focused and active:

The European Commission announced on the 15 November 2015 that the relationship with Australia will be deepened and that it is planned to start FTA negotiations in a very near future.

On the 16 November 2015 the European Council announced its approval to start FTA negotiations with the Philippines. This will be the third ASEAN country with whom the EU will negotiate a FTA (still to be ratified: Singapore and Vietnam). Others will come, since the EU has started FTA negotiations with Malaysia in 2010 (seven rounds of negotiations have been held) and with Thailand in 2013.

The last one to be mentioned is the EU – Japan FTA. The negotiations started in 2013 and the EU has pushed Japan to finalize those negotiations towards the end of 2015. However, in the last months Japans trade negotiators were kept busy with the TPP negotiations. Returning to the EU negotiations with new confidence, Japan pushes now for similar standards such as the ones mentioned in the TPP and the TTIP, to which the EU may not easily agree with. To cut a long story short, it has just been announced that the negotiations will not be finalised in 2015.

It will be interesting to see the future developments. The EU keeps its trade agenda busy and continues its efforts to enhance trade for companies. Not only on the FTA side, but also with the upcoming Unions Customs Code, which will enter into force on 1 May 2016. We will keep you posted.

To the above mentioned topics:

EU-Vietnam FTA

UCC 1 (only in German)

UCC 2 (only in German)

Process Intelligence: better control, better performance, better processes

Be it for procurement, for sales or for insurance claim approvals, processes drive the main cycles in your company. There is, however, often a gap between how processes are intended to be and what they are in reality. Identifying and understanding these gaps is imperative to boosting your operational effectiveness and efficiency, ensuring quality and compliance, standardising workflows, as well as detecting anomalies or fraud.

PwC’s Process Intelligence analyses the data from your IT systems and makes them fully transparent for you. Curious to understand the main propositions and added value of Process Intelligence?

Check out our video, the related blog post and the technical demos in English and French.

Video

Demo

More information here

Flash News: Potential delays for some parts of MiFID II/MiFIR

ESMA announced on 10 November 2015 that it pleaded with the Commission to delay certain parts of MiFID II/MiFIR. The entire MIFID II/MiFIR framework was supposed to be applicable as of  January 2017. However, all the final Level 2 texts are still not ready. The Commission hasn’t yet endorsed the Final technical advice and the Final drafts of Regulatory and Implementing Technical Standards RTS/ITS), submitted by ESMA in 2014 and 2015  espectively. ESMA has yet to prepare many others RTS/ITS in 2016.

Delays to some parts of MiFID II/MiFIR?

Steve Maijoor, the ESMA Chair delivered a statement to the Economic and Monetary Affair Committee (ECON) at the European Parliament on 10 November 2015. He provided the Eurodeputies with an update on the ESMA work on MiFID II/MiFIR II and the consequences on the implementation timeline.

The ESMA Chair insisted on the fact that the delay to build the necessary – MiFID II/MiFIR compliant- IT systems is hardly compatible, and in some aspects even incompatible, with the initial regulatory timeline. Moreover, there are still some uncertainties related to what will be in some of the final texts:

“The timing for stakeholders and regulators alike to implement the rules and build the necessary IT systems is extremely tight. Even more, there are a few areas where the calendar is already unfeasible. This relates to the fact that it will take some time, and well into 2016, before the text of  the RTS will be stable and final. […] We have therefore raised these timing issues with the European Commission, and the fact that some IT systems will not be ready in January 2017, and the uncertainty this will create as they are needed for the execution of certain elements of MIFID II. Related to that, we have raised with the Commission whether this uncertainty would need a legislative response with delaying certain parts of MIFID II, mainly related to transparency, transaction and position reporting.” (Steve Maijoor, Speech to ECON, 10 November 2015)

ESMA has thus suggested to the European Commission to postpone the implementation timeline for some aspects of the MiFID II/MiFIR:

1.      Transparency
2.      Transaction reporting
3.      Position reporting

With respect to transaction reporting, ESMA highlights that both ESMA/Supervisors and the investment firms/trading venues need to build complex IT systems “(almost) from scratch” to allow the former to determine aggregate positions in commodity  derivatives at group level, and the latter to reshape their transaction and reference data  reporting systems.

When it comes to transparency and position reporting, ESMA explains that the assessment of the pre-transparency waivers and of the proposals for setting position limits will be “extremely resource-intensive” if the initial deadline is kept, “given the sheer volume of financial instruments covered”.

The EU institutions will have to decide whether to postpone these aspects of the MiFID II/MIFIR framework.  

Based on the latest ECON discussions, held on 11 November 2015, the European Commission appears to agree with ESMA “that a delay is needed” and that “the simplest and most legally sound approach would be a one-year delay”. The European Parliament, however, appears to strongly oppose the delay. Its rapporteur, Markus Feber, mentions that “postponement of implementation of the cornerstone legislation of financial markets in the EU is not in line with G20 commitments”.

How PwC can help

PwC can support you in assessing the impacts of MiFID II/MiFIR and identifying the gaps. Our qualified professionals can also directly support or re-enforce your teams in the implementation of these requirements.

PwC will keep you informed of any updates regarding the MiFID II/MiFIR timeline.
If you have any further questions do not hesitate to contact us.

Stable tax location with untapped potential

Tax processes are becoming more efficient across the world. Switzerland has yet to unlock its full potential as an attractive location in this regard, ranking 19th in the world in terms of the “ease of paying taxes”. Switzerland’s main competitors (Singapore, Ireland, Canada, Denmark, Norway and the UK) rank significantly higher in terms of the number of tax payments made. These are the results of the study entitled “Paying Taxes 2016”, jointly published by PwC and the World Bank.

Zurich, 26 November 2015 – The tax burden for Swiss companies has remained stable. At 28.8 percent (previous year 29 percent), Switzerland remains significantly below the global average of 40.8 percent (previous year 40.9 percent). Compared with the EU and EFTA countries, it remains where it has been for several years – in 7th place. Croatia continues to lead the EU and EFTA countries with a tax burden of 20 percent (previous year: 18.8 percent).

Greater efficiency worldwide
In order to make tax processes more efficient, more countries have launched online platforms. As a result, companies across the world have now reduced the amount of time spent on tax compliance by a further two hours a year. In the EU and EFTA countries, the average time required is now 173 hours (previous year: 176 hours), while SMEs in Switzerland still spend 63 hours on it.
Tax systems have been simplified around the world. Over the last 10 years, for example, the number of tax payments required fell from an average of 144 in 2004 to 67 today. With 19 payments, Switzerland is in joint 27th place with Croatia and San Marino, out of the 32 examined EU and EFTA countries. That is significantly above the European average of 11.5 payments (previous year 12.3).
“Switzerland must take action if it wants to remain an attractive tax location”, says Armin Marti, Head of Corporate Tax at PwC Switzerland. “Corporate Tax Reform III will help Switzerland to remain one, particularly for innovative companies. The planned introduction of a cantonal patent box will reduce the burden on innovative companies. In addition, spendings on research and development are to become more than 100% deductible. Both measures will also benefit the many innovative SMEs we have in Switzerland, but tax processes must also become simpler.”

Capture

Simpler tax system needed
In the overall evaluation of the “ease of paying taxes” Switzerland dropped another place to 19th. In order to break into the top 10, the country would need to reduce the number of payments from 19 to 12. In Europe, Finland has now overtaken Switzerland, occupying 7th place.

This media release is also available in

German
French

Armin Marti
Partner, Leader Corporate Tax
PwC Switzerland
ch.linkedin.com/in/arminmarti
armin.marti@ch.pwc.com
Claudia Sauter
Head of PR & Communications
PwC Switzerland
ch.linkedin.com/in/claudiasauter
claudia.sauter@ch.pwc.com

Reforms to the Schengen agreement anticipated by the end of the year

Following the emergency meeting in Brussels on 20 November 2015 between European Union Ministers, stricter border security measures have been confirmed, ensuring “systematic controls” on all individuals entering the Schengen area.

Previously, EU nationals were subject to minimal identification procedures when entering the Schengen area. The new security measures will enforce verification of biometric information and systematic document checks against criminal and security databases. These measures apply to both EU and Non-EU citizens entering the Schengen area.

Since the Paris attacks, checkpoints have also been implemented on major routes between France and Belgium, where individuals are subject to passport checks. This comes after Germany, Austria, Sweden and Hungary reinstated internal border controls in order to control the influx of migrants this summer.

The European Commission has agreed to reform the Schengen border code by the end of the year to allow checks at all external borders, for all travellers (including EU nationals). It is anticipated, however, that the reform may take months to finalise. Currently, Police are allowed to make targeted ‘security’ checks on the border and emergency border controls can be imposed for up to 30 days only.

world map

Non-Schengen countries are also considering the implementation of additional border control measures following the Paris attacks. The United States, for example, has implemented a worldwide travel alert which will remain in place until 24 February 2016. The United Kingdom has also stated that it would be looking into “its own national system”.

PwC Legal are continuing to monitor developments closely and will issue further updates once further information is available.

Please do not hesitate to reach out to your usual PwC Legal contact or e-mail me

EU Ministers at the Brussels summit in talks to re-introduce border controls within the Schengen area

European Union Ministers are meeting in Brussels 20 November 2015 to discuss the tightening of Schengen borders following the attacks in Paris on 13 November 2015.

It is anticipated that the EU Ministers will re-introduce checks on both EU and Non-EU travellers at the borders of the 26 countries of the Schengen zone.

Latest reports are stating that sources have confirmed that the Interior ministers of the EU members are backing France’s call for the re-introduction of increased and systematic checks of all citizens at the borders.

Expected changes include a push for enhanced use of technology to better control external and internal borders, in addition to the implementation of a passenger information register. Collection of passenger information will likely be checked against a database of known or suspected terrorists and criminals. The Ministers will also be looking to examine and restrict the movement of firearms within the EU.

In addition, there will be increased requirements for Schengen visa applications. From today, biometric data collection and personal appearance has become a mandatory requirement for obtaining visas for Germany, Italy, Portugal and the Netherlands. This process is also in place for France, Spain and Switzerland. We expect that increased application requirements will also be implemented and formally announced by other Schengen countries following the summit.

We are monitoring developments as they happen, and will provide further updates on the outcome of the summit once they are formally announced.

Please do not hesitate to reach out to your Swiss legal team or e-mail me

Action required: the new regulations on OTC

Action required: the new regulations on OTC derivatives will enter into force on 1 January 2016, affecting entities in all industries – including non-financial services.

The new Swiss Financial Market Infrastructure Act (FMIA) will impose new obligations on entities in many industries, such as (but not limited to) banking, finance, pharmaceuticals, chemicals, consumer goods and others with derivatives on their books. The first obligations of the FMIA will begin to take affect as soon as 1 January 2016.

Which derivatives are affected?

All derivatives, meaning financial contracts whose value depends on one or several underlying assets and which are not cash transactions, are subject to the clearing, reporting and risk-mitigation obligations, with the exception of:

  • Structured products
  • Securities lending and borrowing as well as repurchase agreements
  • Commodities derivatives if physically delivered, not traded on a venue, and not settled in cash upon unilateral choice
  • Currency swaps and forwards settled on a payment versus payment basis (the reporting obligation however still applies)

Will I be affected?

You will be affected if you are either a (small) financial counterparty or a (small) non-financial counterparty. A financial counterparty (FC) is any (Swiss-domiciled) bank, securities dealer, insurance and re-insurance company, parent company of a financial or insurance group or financial or insurance conglomerate, fund management company, or asset manager of collective investment schemes, collective investment schemes, occupational pension schemes and investment foundations (art. 48 et seq. OPA). To be classed as small, an FC requires a rolling average for its gross position in all outstanding OTC-derivatives transactions, calculated over 30 working days, that is below the threshold of CHF 8 billion of all outstanding OTC derivatives of all group companies.

A non-financial company (NFC) is any company which operates outside the finance industry. To be classed as small, an NFC requires gross positions in relevant outstanding OTC-derivatives transactions, calculated over 30 working days, that are below the following thresholds: CHF 1.1 billion (equity and credit) and CHF 3.3 billion (interest rate, commodities and other derivatives).

 What are my obligations?

In general, companies trading in derivatives subject to the FMIA must comply with the following obligations:

  • Clearing: clearing of certain derivatives which are designated OTC derivatives by the Swiss Financial Market Supervisory Authority (FINMA) via a FINMA-approved or recognised central counterparty is required, unless a small FC/NFC is involved.
  • Reporting: all derivatives (including exchange-traded derivatives) must be reported to a trade repository no later than one working day following the transaction.
  • Risk mitigation: OTC derivatives not being cleared are generally subject to risk-mitigation duties such as confirmation, reconciliation, dispute resolution, portfolio compression, valuation and an exchange of financial guarantees, unless exemptions apply to the small FC/NFC in question.
  • Trading on a trading venue: certain FINMA-designated derivatives might, at some point in the future, be subject to the obligation to be traded on a trading venue.

When do my obligations enter into force?

According to the consultation documents, the first obligations under the FMIA will enter into force on 1 January 2016.

These obligations require written documents setting forth how you clear over a central counterparty, establish the thresholds, report to the trade repository, implement risk measures and carry out trading. In case of a bank, it must ensure that an arranged postponement of termination of contracts by FINMA (based on Art. 30a BA), is enforceable.

What are my key considerations?

  • An impact analysis of how your business activities/group will be affected by the FMIA.
  • To what extent will you be able to rely on the processes and documentation that have been set up for EMIR purposes?
  • To what extent will you be able to rely on foreign legislation to fulfil your obligations under the FMIA?
  • To what extent will you be able to outsource the fulfilment of your obligations to a group company or third party?
  • To what extent will you have non-cleared derivatives on your books requiring the implementation of complex risk-mitigation measures?
  • Which OTC-derivatives obligations are affecting your activities?
  • With which financial market infrastructure(s) in which jurisdiction(s) do you want to fulfil your obligations?
  • When will you have to implement these obligations?

 

Find out how the new regulations on OTC derivatives are affecting your business and contact:

Guenther Dobrauz, Partner
Leader Legal FS Regulatory & Compliance Services
Office: +41 58 792 14 97
Email: guenther.dobrauz@ch.pwc.com
PricewaterhouseCoopers AG Birchstrasse 160 | Postfach | CH-8050 Zurich

Martin Liebi, Senior Manager
Head Capital Markets within Legal FS Regulatory & Compliance Services
Office: +41 58 792 28 86
Email: martin.liebi@ch.pwc.com
PricewaterhouseCoopers AG Birchstrasse 160 | Postfach | CH-8050 Zurich

International Transfer Pricing 2015/16

There have continued to be significant changes in the area of transfer pricing since our prior edition, with several new countries implementing either formal or informal transfer pricing documentation requirements and significant regulatory changes in many other countries over the past twelve months. Most significantly, the deliverables released as part of the OECD’s Base Erosion & Profit Shifting (BEPS) Action Plan have resulted in the need for companies to re-evaluate and reconsider their transfer pricing strategies in light of the proposed new guidance.

International Transfer Pricing 2015/16, now in its 15th edition is an easy to use reference guide covering a range of transfer pricing issues in nearly 100 territories worldwide. It explains why it is vital for every company to have a coherent transfer pricing policy which is responsive to the rapidly changing markets in which they operate. The book not only shows why sound transfer pricing policies should be developed, but also why such policies need to be re-evaluated regularly. It offers practical advice on a subject where the right amount of effort can produce huge benefits in the form of a competitive and sustainable tax rate, and leave the company well positioned to defend against aggressive tax audits.

You can also download your customised PDF from the global site.

Please feel free to get in touch with your Swiss Transfer Pricing team or e-mail me

Be ready: the new global P&U Thought Leadership report is coming…

We are pleased to announce the global launch of our new Thought Leadership report:

“The changing role of the CFO
How energy transformation is shifting the CFO focus”

The changing role of the CFO: how energy transformation is shifting the CFO focus shows how CFOs in the power sector are shifting from stewardship to  strategy, value realisation and optimisation. The new report, which forms part of a series of PwC publications on energy transformation, looks  at how the power sector CFO role is evolving, the challenges it needs to address and the capabilities that will be crucial for delivering first-class performance.

The report emphasises that the historical CFO capabilities related to management reporting, performance management and investor relationships will continue, but they will become more akin to minimum requirements. Alongside them, CFOs need to be better at communicating where strategy is taking the company and the link between strategy and value realisation.

Be ready for the launch on 24 November 2015!