Dear FS professional,

This issue of our FS Tax Newsletter contains event summaries of two of our recent seminars, as well as recent developments within the Financial Services sector, such as the mutual agreement between the Netherlands and Switzerland on the application of the double tax treaty regarding Dutch and Swiss investment institutions. If you would like to stay updated on other tax-related topics, please visit our website.

If you would like to know more about the matters addressed in this newsletter please contact us.

Niels Groothuizen, Partner, Financial Services Tax Group

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Table of Contents

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1. 10th Meijburg FS VAT seminar - “from Retro to Robot”

On Thursday, April 12, 2018, our annual Meijburg FS VAT seminar celebrated its 10th anniversary in Amstelveen. The theme of the seminar was “from Retro to Robot”. Under this banner, attention was paid to the constantly changing dynamic that has taken place within the FS VAT sector in recent years and to potential future developments.

A broad spectrum of players in the FS sector were present, including Dutch banks and insurers and foreign financial institutions, as well as various Fintech parties.

The seminar began with a presentation about combinations of goods and services within VAT. During this session, various ballots were used to trigger the active participation of participants.

This session was followed by three workshops: i) Banking & Investment management, ii) a bird's eye view of FS VAT developments and iii) Insurance & Asset management. The interactive sessions were greatly appreciated by the participants.

The workshops were followed by a presentation by Simon Lelieveldt (payments specialist; formerly of DNB and NVB) as guest speaker. He gave an enthusiastic and interesting explanation of the developments within the payment sector from the year 1400 up to the present. Simon also looked to the future with topics such as the Payment Services Directive 2, 24/7 real time payment systems and regulations that are now playing catch-up in this respect.

We concluded our seminar with an informal get-together, enabling participants to catch up on and personally discuss a number of topics in more detail.

If you would you like to be kept informed about the next seminar, please send an email to singeling.marloes@kpmg.com.

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2. Meijburg seminar – “Client Tax Integrity”

Last month, Meijburg & Co hosted two seminars on ‘Client Tax Integrity’ in response to the 2017 Dutch Central Bank survey into aggressive tax planning and customer anonymity at several trust offices, and their survey into the use and operation of the systematic integrity risk  analysis of banks in practice. The seminar was divided into two separate editions for trust offices and banks. We were very happy to see a great attendance and to have great speakers from the Dutch Central Bank as well as from the industry. Following the seminar, we have already built considerable relevant experience with helping our clients in establishing their tax risk appetite and setting up their Client Tax Integrity process. The presentations are available to share. Please contact me, if you would like to receive a copy.

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3. Insurance premium tax: Request for a preliminary ruling on location of risk

Please follow the link to read a summary of the facts, the Finnish court’s questions and their consequences for the insurance premium tax practice.

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4. Draft 2018 Decree implementing the Wwft provides greater insight into the specifics of the UBO register

Please follow the link for an up-to-date overview of the scope of the proposed UBO register legislation.

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5. Important changes for investment funds with German dividends and rental income

From 2018 onwards, under the Investment Tax Reform Act 2018, German and foreign investment funds are subject to a 15% German corporate income tax when they receive German dividend payments (or earnings from lending German stocks) and they are subject to a 15.825% German withholding tax when they receive rental income or capital gains from real estate located in Germany. The discrimination of foreign investment funds for income received from 2018 onwards has been abolished. However, it is crucial that foreign and German investment funds apply for a “fund-status certificate” in order to obtain a reduction of the 26.375% corporate income tax to 15%.

The taxation of certain German source income at the level of the foreign or German investment fund is accompanied by a partial tax exemption at the level of the German fund unit holders, in order to make sure that the overall tax burden for German investment fund unit holders does not increase. There are strong arguments that foreign and German funds are (still) discriminated from 2018 onwards to the extent they have foreign (non-German) fund unit holders. As a result, for German dividend payments from 2018 onwards, investment funds should file claims under EU law to the extent that they have non-German fund unit holders.

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6. VAT applies to loan under hire purchase agreement

Please follow the link for a case summary, the Advocate-General’s Opinion and its consequences for the tax practice.

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7. Abolition of Dutch dividend withholding tax for FBIs still a good decision according to State Secretary of Finance

In October 2017, the Dutch government announced that the dividend withholding tax was envisaged to be abolished as per January 1, 2020, and to be replaced by a conditional withholding tax for abuse and low-taxed situations. The Dutch State Secretary of Finance was recently asked for his view as to whether it would be wise to maintain the current dividend withholding tax regime, just for Dutch fiscal investment institutions (in Dutch: ‘fiscale beleggingsinstelling’, hereinafter: FBI), as a result of which foreign source tax can be credited (in Dutch: ‘afdrachtsvermindering’). In his reply he states that he currently sees no reason to make an exception for FBIs. He argues that the Netherlands’ biggest competitors (regarding investment climate) do not provide for a credit for foreign source tax either. Secondly, he argues that enforcing the maintenance of the current dividend withholding tax regime just for FBIs would be too burdensome and administratively challenging in relation to the 300 to 400 FBIs that would make use of such a regime. Thirdly, he argues that maintaining the credit for foreign source tax would result in a tax deficit that would have to be compensated elsewhere.

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8. Revised mutual agreement regarding (Dutch) FBI, (Swiss) FCP and (Swiss) SICAV

In March 2018 the competent authorities of Switzerland and the Netherlands have reached a new, revised, mutual agreement regarding the application of the convention between the Netherlands and Switzerland for the avoidance of double taxation with respect to a Dutch FBI, a Swiss contractual fund (‘FCP’) and a Swiss open ended investment fund (SICAV) (abbreviated CIV’s).

This agreement will replace the Competent Authority Agreement regarding CIV’s, which was signed in March 2016 and shall apply to all pending and future claims for refunds. The purpose of this agreement is to clarify the application of the provisions of the convention and to establish accompanying procedures with respect to refund of withholding taxes on items of income received by the CIV’s.

The competent authorities agree that in principle the entitlement to treaty benefits should not be restricted in case of investments through CIV’s. However, the competent authorities agree that an entitlement to the treaty benefits that would not have been available in case of a direct investment, should be avoided. Furthermore, the agreement is complemented with an administrative procedure for a refund of withholding taxes under the treaty. 

If you would like to read more, please click here.

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