Dear FS professional,

In the final FS Tax Newsletter for 2015 we would like to update you on recent developments within the Financial Services sector.

We would also like to inform you that KPMG recently released the CRDIV app and the IFRS app. The IFRS app provides insight into the International Financial Reporting Standards.  The huge advantage of the app is that it is much more accessible than traditional publications. The app has a glossary with terms that are further explained via links, uses ‘decision trees’ to  elaborate on accounting questions and includes a comprehensive search function. The CRD IV app is an easy portal to the content of CRD IV and CRR. It enables the user to search for articles and within articles, to forward information to other users and to save information. 

Both apps are available for downloading via the following links: 

We wish you a happy, healthy, and successful 2016!

Niels Groothuizen,

Partner, Financial Services Tax Group

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Table of Contents

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1. CoCo: another case of state aid?

Recently, contingent convertibles (also referred to as CoCos) have drawn the attention of journalists, politicians and tax lawyers. A CoCo is a hybrid form of capital. It is a debt with the special ability to convert into equity if a pre-specified triggering event occurs. Within certain limits and conditions as specified in CRD IV/CRR, CoCos form part of Tier 1 capital.

CoCos are used by banks and insurance companies to fulfill the new post-crisis capital requirements that were agreed during the Third Basel Accord (Basel III). Questions have been raised about whether the possibility for banks and insurance companies to deduct the coupon on CoCos should be considered state aid. The Dutch Minister of Finance (Jeroen Dijsselbloem) responded to these questions in a letter to the Dutch parliament, dated November 5, 2015 (DB/2015/388).

Letter from the Minister of Finance

Under Basel III, the conditions for qualifying hybrid capital have become stricter and the coupon in respect of hybrid capital such as CoCos would not be deductible, according to the Minister of Finance. In order to stimulate competition between Dutch banks and foreign European banks, the Dutch government has decided to make the coupon on CoCos deductible for banks and insurance companies.

The Minister of Finance is of the opinion that this deductibility provision with regard to coupons on CoCos does not constitute state aid. He substantiates this as follows. 

A measure is considered state aid if four conditions are met:

  1. the measure should benefit enterprises;
  2. be granted by a Member State or through state resources;
  3. be selective; and
  4. lead to a potential distortion of competition and unfavorably affect trade between Member States.


According to the Minister of Finance, the deductibility provision is not a priori selective, since the measure does not differentiate between enterprises that are in a comparable legal and factual situation, given that specific supervisory regulations (CRD IV/CRR and Solvency II) apply to banks and insurance companies. Moreover, there is no potential distortion of competition nor is there a negative effect on trade between Member States since, as far as is known, the coupon on CoCos is deductible in all other European countries. Consequently, the Minister of Finance concludes that the deductibility provision is not selective and does not distort competition and trade between European Member States. 

Please contact Niels Groothuizen if you would like to know more about this topic.

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2. Common Reporting Standard (“CRS”) effective as of January 1, 2016

On January 1, 2016, Financial Institutions in the Netherlands must comply with the OECD’s Common Reporting Standard, a global standard for the automatic exchange of information.

The Common Reporting Standard (CRS) is an information standard for the automatic exchange of information (“AEoI”), developed by the Organisation for Economic Co-operation and Development (OECD). The CRS principles and its definitions are very similar to those of the Foreign Account Tax Compliance Act (FATCA). However, under CRS, Financial Institutions (i.e. Depository Institutions, Custodial Institutions, Specified Insurance Companies and Investment Entities) are, in principle, obliged to report information about financial accounts held by a tax resident of one of the 90+ countries that has adopted CRS. The scope of CRS is therefore much broader than that of FATCA, as under FATCA only US persons have to be identified. 

In the Netherlands, CRS will be implemented into Dutch law and will take effect on January 1, 2016. Financial Institutions should comply with due diligence and reporting requirements as of that date. Starting in 2017, Dutch Financial Institutions will report information about their account holders annually to the Dutch tax authorities. The first international exchange of CRS information between local tax authorities must take place before September 30, 2017. Unlike FATCA, no (30%) withholding tax will be levied in case of non-compliance. Financial Institutions may ask their account holders to disclose their CRS status and country of tax residence. Please note that the CRS status of an entity could be different from its FATCA status. We recommend assessing in the short term the extent to which CRS may have an impact on your business.

Please click on this link to read our memo on the CRS implementing order.

For CRS-related Frequently Asked Questions please click here.

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3. Court of Justice of the European Union rules in case on the VAT treatment of Bitcoins

In a recent court case, the Court of Justice of the European Union (CJEU) ruled that the exchange of traditional currency for units of the ‘bitcoin’ virtual currency, and vice versa, constituted a VAT-exempt supply of services.

The case

The taxpayer, Mr. Hedqvist’s company, wished to provide services consisting of the exchange of traditional currency for bitcoins and vice versa. In legal proceedings before the Swedish Supreme Administrative Court, the Court had to rule on whether VAT must be paid on the bitcoin exchange services. Because there was uncertainty about the correct VAT treatment of the transactions, the Supreme Administrative Court decided to refer questions to the CJEU for a preliminary ruling.

Do the exchange services fall under the scope of VAT?

The first question referred to the CJEU concerned whether the transactions carried out by Mr. Hedqvist’s company constitute the supply of services for a consideration, which would be subject to VAT. According to the CJEU, there is a legal relationship between Mr. Hedqvist’s company and its clients, whereby the company performs exchange services for which it receives a consideration equal to a certain margin on the transactions. The CJEU therefore ruled that the transactions constitute a supply of services that fall under the scope of VAT.

Are the exchange services VAT-exempt?

The second question referred to the CJEU concerned whether the supply of services by Mr. Hedqvist’s company is VAT-exempt. The CJEU looked at several VAT exemptions, but concluded that only the VAT exemption covering transactions involving currency, bank notes and coins used as legal tender may be applicable.

According to the CJEU, it follows from the context and the aims of this VAT exemption that to interpret this provision as including only transactions involving traditional currencies would deprive it of part of its effect. The CJEU therefore ruled that the exchange services carried out by Mr. Hedqvist’s company fall under the scope of the aforementioned exemption and are therefore VAT-exempt.


framework for using bitcoin technology to make their operations faster, more efficient and more transparent.

We expect that this will not be the last case about new means of payment in the expanding digital environment. Our professionals would be happy to be of assistance with any questions you may have regarding VAT and financial technology.

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4. Provision of market data and supply of technical services separately VAT taxable

According to the Amsterdam Court of Appeals, the provision of market data and the supply of technical services should be considered separate VAT-taxed activities.

The Amsterdam Court of Appeals recently rendered judgment on the VAT treatment of various web trading activities (such as market data, connectivity, broker services and ‘rack space / co-location’). According to the Court, the services should be considered as separate services, being subject to Dutch VAT. For more information about this case and this judgment, we refer to the news item on our website. Of course, you can also contact Gert-Jan van Norden or Irene Reiniers if you have any questions about this case.

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5. Status: Financial Transaction Tax

Consensus has still not been reached on a Financial Transaction Tax (FTT) by those EU Member States that are considering its introduction.

This appears from a document prepared by the technical committee charged with resolving the FTT’s various design issues following a meeting held on November 25, 2015. The document sets out the current state of play regarding these issues and is intended to serve as a basis for discussion at the next meeting of EU finance ministers (ECOFIN) on December 8. 

It seems that agreement still has to be reached on the following key technical areas: possible exemptions for pension fund operations, sovereign debt transactions (including derivatives) and market making, and the jurisdictional scope of the tax. Further issues include possible measures to protect the ‘real economy’ from the unintended impact of the tax, the tax base for certain derivative contracts, exemptions for clearing members, and taxing on a gross or net basis.

Comments reported in the media from the Austrian Finance Minister, who is coordinating the political process, suggest that the upcoming meeting of finance ministers may be the last chance to reach agreement for the foreseeable future.

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