Structuring alternative investments in the post-BEPS era - cycle of 4 modules
Module 1 - 20/04/2023 - 2 to 5 PM : structuring of alternative investments
Over the last decades, Luxembourg has developed and cemented its position as the location of choice for asset managers implementing Alternative Investments such as private equity, private debt, real estate and infrastructure.
Although these investment activities where never in the focus of the OECD when developing new tax rules as a result of the organisation’s Base Erosion and Profit Shifting (“BEPS”) Project, the changes that have been/will be implemented in the domestic tax laws of Luxembourg and foreign jurisdictions as well as the changes to bilateral tax treaties and the OECD Transfer Pricing Guidelines will have an impact on the taxation of alternative investments.
This is the first of four workshops on “Alternative Investments in Luxembourg” which focuses on the impact of different BEPS measures, the European Anti-Tax Avoidance Directives (ATAD/ATAD 2) and related Luxembourg tax law changes on contemporary investment structures.
Typical investment structures
The OECD BEPS Project and ATAD/ATAD 2
Impact of ATAD/ATAD 2 on investments
Interest limitation rules
Hybrid mismatch rules
Reverse hybrid mismatch rule
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.
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
Considerations regarding appropriate substance
Substance requirements in an EU context
Substance requirements from a tax treaty perspective
Principal Purposes Test (PPT)
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
Module 3 - 04/05/2023 - 2 to 5 PM : transfer pricing and related documentation requirements
The arm’s length principle is the international transfer pricing standard that OECD member countries have agreed should be used for tax purposes by MNE groups and tax administrations. The arm`s length principle requires that the remuneration for any transaction between related parties conform to that what would have been agreed if the transaction were to have taken place between unrelated parties under comparable circumstances.
The arm’s length principle is firmly ingrained in Luxembourg tax law and has been explicitly stated in article 56 of the Luxembourg Income Tax Law (LITL). In addition, several concepts and provisions under Luxembourg tax law require the arm’s length standard to be respected by Luxembourg companies (the concepts of hidden dividend distributions and hidden capital contribution, etc.).
Over the last years, transfer pricing has become the hot topic in Luxembourg taxation in an environment that relies increasingly less on tax rulings. In the past, tax rulings were viewed as a way to provide certainty and to avoid risks when implementing investments or intra-group transactions. However, for a number of reasons this is no longer the case and transfer pricing documentation is more and more filling the gap as a tax risk management tool.
This workshop will provide an overview of transfer pricing in the context of Alternative Investments and the importance of related documentation.
Introduction to transfer pricing
The arm’s length principle
The OECD Transfer Pricing Guidelines
Luxembourg transfer pricing rules
Transfer pricing adjustments
Typical controlled transactions in Luxembourg
Fund management services
Scope of the Transfer Pricing Circular
Determining an arm’s length remuneration
Transfer pricing analysis
Structure alignments in relation to existing investments
Treatment in the corporate tax returns
Advance pricing agreements (APAs)
Reporting obligations in the corporate tax returns
Recent case law
Transfer pricing documentation
Review of transfer pricing and a taxpayer’s co-operation duties
The OECD Transfer Pricing Guidelines
Best Practice recommendations
Module 4 - 11/05/2023 - 2 to 5 PM : the mandatory disclosure regime (DAC6)
Under the mandatory disclosure regime (“MDR”), tax intermediaries such as tax advisers, accountants and lawyers that design, promote or provide assistance in regard to certain cross-border arrangements have to report these to the tax authorities. Since the implementation of the MDR, the analysis of potential reporting obligations has become an integral part of each and every tax analysis.
The MDR operates through a system of hallmarks that may trigger reporting obligations and the main benefit test (“MBT”) that functions as a threshold requirement for many of these hallmarks. As such, the MBT should filter out irrelevant reporting and enhance the usefulness of the information collected because the focus will be on arrangements that have a higher probability of truly presenting a risk of tax avoidance.
However, how are reportable cross-border arrangements determined? How should some of the more ambiguous hallmarks be interpreted? And, what is a reasonable approach towards the interpretation of the main benefit test (MBT)? All these questions will be answered during this webinar organised in co-operation with Legitech.
Key features of the disclosure regime
Arrangements, intermediaries and other interpretation issues
The hallmarks of reportable arrangements
The main benefit test (MBT) – Developing a reasonable approach
Managing DAC 6 obligations in practice
The Real Estate Fund
The Private Equity Fund
DAC6Connect – The IT solution for DAC 6 reporting obligations
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.
ROMAIN TIFFON Tax Partner, ATOZ Tax Advisers
Romain is a Partner in the International & Corporate Tax department at ATOZ.
A tax professional since 2006, Romain has experience in structuring Pan-European alternative investment funds across all asset classes, as well as coordinating tax structuring advice and implementation for a wide range of institutional investors. He has also extensive experience in structured finance, mergers & acquistions transactions, and sovereign wealth funds.
Romain is a member of the Tax Committee of the American Bar Association (ABA), New York State Bar Association (NYSBA), International Bar Association (IBA), and of the Tax Group of the British Chamber of Commerce (BCC) in Luxembourg.
Romain is admitted to practice as an Attorney and Counselor-at-Law in New York State, the United States. He holds a Master’s degree in Tax Law from the Université Panthéon Sorbonne (Paris I), a Master’s degree in Business Law from Université Panthéon Assas (Paris II) and a LLB degree from the London School of Economics and Political Science.
He speaks English and French.
Tax Prinicpal, ATOZ Tax Advisers
Fanny is a Principal in the International & Corporate Tax department at ATOZ, and is a member of the core Transfer Pricing team.
A tax professional since 2011, Fanny worked in the accounting sector for 2 years in France before focusing on international tax in Luxembourg. She has experience in relation to the structuring of alternative investments via Luxembourg (private equity, real estate, hedge funds, etc) as well as mergers & acquisitions, in particular for multinational groups. She provides tax advisory services to clients in the Luxembourg banking area with a particular focus on the treatment of transactions under Luxembourg GAAP and IFRS.
Fanny holds a post-graduate degree in Luxembourg Tax, a Master’s degree in Accounting (French GAAP, IFRS), Finance and Management and a Master’s degree in Business and Tax Law from the University of Strasbourg in France.
She speaks French and English.
La société Legitech a obtenu l'agrément du Barreau de Luxembourg
Mme Carole Verdicq
Tél: 0032 10 42 02 96
Email: [email protected]