Structuring alternative investments in the post-BEPS era - module 2: substance requirements

PRESENTATION

Substance is a key element in international taxation and is relevant for the application of both domestic tax law and tax treaties. The notion of substance involves a number of elements such as (i) infrastructure (equipment, facilities and employees, etc.), (ii) corporate governance (directorship, involvement of Luxembourg directors, the place where decisions are taken, etc.), (iii) functional and risk profile, (iv) legal documentation and contractual aspects, (iv) transfer pricing documentation, (iv) the actual conduct of business activities and (v) business purpose. 

Substance is crucial for managing the Luxembourg tax residency of companies and to avoid a situation in which a corporate structure is (partially) disregarded under foreign anti-abuse provisions. The notion of substance also concerns the beneficial ownership concept that is employed under tax treaties and, in some cases, under domestic tax law with the objective to avoid tax treaty or EU directive shopping. Appropriate substance is further relevant in order to avoid the application of the PPT or the beneficial ownership concept in tax treaties.

Substance is also in the focus of a new EU Directive (ATAD 3, the so-called Unshell Directive) that may result in reporting obligations and severe tax consequences once applicable.

This workshop will provide a comprehensive overview of the importance of substance in international taxation.

>>> Program 

• Introduction

• The notion of substance

• Substance requirements in international taxation

• • Substance requirements from a Luxembourg (tax) perspective

• • • Managing tax residency

    • Luxembourg finance companies

    • Requirements from a regulatory perspective

    • The proposed regime on shell entities (ATAD 3)

• • Substance requirements from a foreign tax perspective

• • • Anti-abuse legislation

    • Considerations regarding appropriate substance

    • Substance requirements in an EU context

• • Substance requirements from a tax treaty perspective

• • • Principal Purposes Test (PPT)

    • Beneficial ownership

    • Avoiding unintentional permanent establishments

• • Substance requirements from a transfer pricing perspective

• • • The arm’s length principle

    • Supply chain management 

    • Transfer pricing documentation

• • Managing reputational risks

• Managing substance in practice

• Excursus: The Draft ATAD 3 

• • Scope of ATAD 3

  • Potential reporting obligations

  • Tax treatment of shell entities

• Conclusion

OLIVER R. HOOR
Tax Partner and Head of Transfer Pricing, ATOZ Tax Advisers

Oliver is a Partner in the International & Corporate Tax department at ATOZ.

A tax professional since 2003, Oliver has experience in Luxembourg and international taxation with a focus on alternative Investments (private equity, real estate, sovereign wealth funds, hedge funds), mergers & acquisitions and multinational groups. He advises clients on all direct tax aspects regarding deal structuring, maintenance, reorganisations and exit planning. He also holds the titles of Head of Transfer Pricing and of the German Desk.

Oliver is the author of more than 250 articles and books on Luxembourg and international taxation including Transfer Pricing and related documentation requirements, the OECD Base Erosion and Profit Shifting (BEPS) Project and the EU Anti-Tax Avoidance Directives (ATAD 1/ATAD 2), reporting obligations of tax intermediaries (DAC6), the OECD Model Tax Convention and Tax Treaties, EU Law and the State Aid investigations of the EU Commission (see www.atoz.lu/media-room). He is also a regular speaker at conferences as well as being a lecturer with Legitech and ILA.

Oliver is qualified as a Chartered Accountant in Luxembourg ("Expert-Comptable") and is a certified German tax adviser (Steuerberater). He holds a post-graduate degree in Luxembourg Tax and a degree in Business Administration with a major in Tax from the University of Applied Sciences of Trier, Germany.

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