Dear FS professional,

The FS Tax Newsletter of KPMG Meijburg & Co was introduced in April 2012 and is published every two months. The FS Tax Newsletter addresses recent developments in FS Tax, as well as current FS Tax “hot topics”, based both on our experience and on your valuable feedback. In this respect we would very much appreciate if you would take a couple of minutes to complete the questionnaire, so that we can ensure that the FS Tax Newsletter fulfills your expectations.

Niels Groothuizen, Partner, Financial Services Tax Group

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Table of Contents

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1. INVITATION WEBEX: implications for Country-by-Country Reporting: a practical guide for banking institutions, investment managers, and insurers.

G20 and OECD progress on Action 13 of the Action Plan to tackle base erosion and profit shifting (‘BEPS’) continues apace. Transfer Pricing documentation requirements and Country-by-Country Reporting (CbyCR) may soon impact every multinational banking group, insurance group and investment manager operating within the G20 or OECD countries. We now have the final template for CbyCR and, for the first time, tax authorities will be able to see at a glance how a group’s profits, revenues and taxes are split across the full value chain.

Your approach to the new transfer pricing documentation requirements does not, however, have to be yet another compliance exercise. Global financial institutions should consider whether the requirements could present opportunities for the wider finance team to link the global value chain to tax and other business factors, for example, could a greater awareness of global tax contribution support the brand’s corporate responsibility policies? Might an increased understanding of the value chain shed further light on the drivers of profit and provide new insight into what activities create value?

What you can do now

While the compliance challenge may be significant, there is also an important window of opportunity to evaluate what your group looks like when its entire value chain is mapped on a CbyCR basis.

In order to share some practical ideas as to what you should do first (or next), we would like to invite you to our WebEx session that brings together KPMG specialists from the Corporate Tax, Transfer Pricing, and Tax Management Consulting practices.

Our WebEx will focus on some of the tangible steps that groups can take now, even before the new rules are in place, including: 

  • a closer look at the information that already exists in the public domain on the global allocation of profits, assets, employees and tax contributions;
  • practical advice for implementing a Master file and a CbyCR system, including our methodologies and a comparison with CRD IV;
  • what else you can do with the information that you are gathering.


Please note that pre-registration is required. To register for the WebEx, please click on the following links:

Banking - Monday 6 October 11:00 CET

Insurance - Monday 6 October 16:00 CET

Investment Management - Monday 13 October 11:00 CET

Once you have registered, you will receive the information you need to join the WebEx, including dial-in numbers and passcodes. Be sure to save these details to your calendar or print this information. 

We do hope you are able to join us!

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2. Exposure Draft Recognition of Deferred Tax Assets for Unrealized Losses

In August 2014 the International Accounting Standards Board (IASB) published an Exposure Draft ("ED") on the recognition of deferred tax assets related to unrealized losses on debt instruments. The ED is open for comment until December 18, 2014.

It can be concluded from the ED that the recognition of a deferred tax asset related to unrealized losses on debt instruments must be assessed in the same way as other deferred tax assets.  This issue arises, for example, at the moment a bond − classified according to IFRS as 'available for sale' − with a cost of 1000 is written down to 900 as the result of an increaseof the interest rate, whilethe tax base remains at cost until the bond is sold or until maturity. This creates an deductible temporary difference of 100. Whether a deferred tax asset should be recognized for thedeductible temporary difference of 100 must be assessed together with  other deductible temporary differences. What this effectively means is that the argument that the bond is held until it matures (or that the bond is only sold once its market value has once again increased) lacks sufficient substance to support the recognition of a deferred tax asset on the balance sheet. It is clear from the underlying documentation that the IASB considers that holding  a debt instrument until recovery of its amortised cost basis cannot be regarded as the realization of a tax benefit.  Although, in that case, the loss on the bond is not realized, if the entity does not expect any future taxable profits, the deduction of the bond's tax base (in this case: 1000) will not decrease future tax payments and therefore a deferred tax asset cannot be recognized for the deductible temporary difference of 100.  For this reason (amongst others) , the IASB is of the opinion that the assessment of whether a deferred tax asset can be recognized on the balance sheet must be evaluated together with the other deductible temporary differences.  However, the IASB does state that the assessment of future taxable profits may take higher incoming cash flows into consideration, if it is probable that the entity will retain the bond until maturity, so that an amount higher than the carrying amount will be realized.  The ED will particularly affect financial institutions with debt instruments that have been impaired for financial reporting purposes, and with no viable expectation of available taxable profits in future periods. 

If you have any further questions please contact Eveline Gerrits.

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3. Insurers can recognize additional Tier 1 capital as debt

On Budget Day, September 16, 2014 the Cabinet presented the 2015 Tax Plan to the Lower House. One of the issues addressed in the 2015 Tax Plan is the Tier 1 capital of insurers. As of 2014, the additional Tier 1 capital furnished by banks will explicitly qualify as debt, which means that the return will continue to be deductible. Please refer to our previous FS Tax newsletters on this issue. Because the capital requirements imposed on insurers means they are comparable to banks, the Tier 1 capital furnished by insurers will now also qualify as debt.

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4. Download the latest edition of frontiers in tax.

KPMG's Financial Services (FS) Tax practice is pleased to provide you with the latest edition of frontiers in tax. 

In this issue of frontiers in tax, we look at the following topics:

  • Automatic Exchange of Information: The emerging global Standard
  • BEPS: Time for action
  • Country-by-Country Reporting: What’s your strategy?

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5. Nil valuation of interest rate reduction for staff loans to be amended

The interest rate reduction that employers apply to staff loans granted for the purchase or refurbishment of the principal residence is currently untaxed. However, in response to parliamentary questions, the Minister of Finance, Mr. Dijsselbloem, let it be known that he intends to amend the untaxed interest rate reduction as of January 1, 2015. The administrative burden for employers will be considerable. Please find attached our client memorandum.

Nil valuation of interest rate reduction for staff loans to be amended.pdf

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6. GloW Track – WHT tool

Withholding tax on cross-border investments is becoming increasingly important for both investors and their service providers.  Finding reliable and accurate information can be challenging, particularly if you are constantly bombarded with information from all directions.  At KPMG, we recognize this and have created GloW Track – our global withholding tax web application.  It provides information in an accessible and consistent format on withholding tax rates, capital gains tax and transaction taxes for a variety of securities in over 60 markets.  Please contact Niels van der Wal

Global GloW Track Brochure.pdf

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7. Judgment in Skandia America Corporation

On September 17, 2014 the Court of Justice of the European Union (“CJEU”) rendered its judgment in the Skandia America Corporation case. The CJEU ruled that services provided by a head office to a fixed establishment that is part of a VAT group are subject to VAT. The VAT due must be paid by the VAT group as purchaser of the services. This judgment of the CJEU is not in line with Dutch practice. This may also be the case in other EU Member States.


Skandia America Corporation (“Skandia”) is established in the United States and has a fixed establishment in Sweden. The fixed establishment is part of a Swedish VAT group. In 2007 and 2008, the US head office recharged (with a mark-up) externally acquired IT services to the Swedish fixed establishment. The Swedish fixed establishment modified the IT and, in turn, recharged the IT costs with a mark-up to the other group companies (both within and outside the VAT group). 

The Swedish court requested a preliminary ruling from the CJEU on whether VAT is payable on the external services purchased by the head office that were allocated to the fixed establishment, given that the fixed establishment is part of a VAT group. If this was the case, it also asked whether the VAT reverse charge mechanism applied.

The CJEU ruling

The CJEU ruled that:

  • Services performed by the head office of Skandia in the United States for its fixed establishment in Sweden, which is part of a VAT group in Sweden, constitute taxable transactions for VAT purposes.
  • The services are taxable in Sweden. The VAT group in Sweden is subject to Swedish VAT under the reverse charge mechanism.

This ruling implies that the services are not deemed to be performed between the US head office and the Swedish fixed establishment of Skandia. Rather, the services are deemed to be performed between the US head office of Skandia and the VAT group in Sweden. The Swedish fixed establishment of Skandia is part of this VAT group in Sweden and thus services are provided between two separate taxpayers. 

The services are taxable in Sweden, the country where the purchaser is resident. For VAT purposes, the Swedish fixed establishment of Skandia is deemed to be part of a VAT group in Sweden, a different taxpayer than the US head office of Skandia. The latter, as service provider, is therefore not regarded as a taxpayer with an establishment (fixed establishment) in Sweden. For this reason, the Swedish VAT payable was reverse charged to the purchaser, the VAT group in Sweden.


It is standard practice in the Netherlands that transactions between a foreign head office and its Dutch fixed establishment, which is part of a VAT group in the Netherlands, fall outside the scope of Dutch VAT. This follows from the case law of the Dutch Supreme Court (June 14, 2002, case No. 35 976).

It was an established fact in the Skandia case that only the Swedish fixed establishment was part of the VAT group in Sweden. The US head office was not. However, in the abovementioned Dutch Supreme Court case, the Court ruled that the foreign head office in question was also part of a VAT group in the Netherlands. The question is therefore whether a foreign head office, with a fixed establishment in the Netherlands, must always be regarded as a separate taxpayer. If a foreign head office, with a fixed establishment in the Netherlands, has a sufficient economic link with companies resident in the Netherlands, the foreign head office may form part of a VAT group in the Netherlands.

In addition, in the Skandia case ‘external costs’ were recharged. It is not clear whether the ruling of the CJEU also applies to the recharging of ‘internal costs’.

In the reverse situation, where a domestic head office is part of a VAT group and also has a fixed establishment in a foreign country (which is not part of a VAT group there), there should not be separate taxpayers in our view, since, in accordance with the ruling of the CJEU in the Skandia case, a fixed establishment itself is not recognized as a taxpayer.

The CJEU refers to a head office in a ‘third country’. The question is whether the ruling of the CJEU in the Skandia case has the same effect if a head office is resident in a country within the European Union.

Until the date of the ruling of the CJEU, we take the view that the principle of legal certainty guarantees that transactions entered into between a foreign head office and a Dutch fixed establishment, which is part of VAT group in the Netherlands, remain outside the scope of Dutch VAT. A comparable interpretation of the implications of CJEU case law can be found in Dutch Supreme Court case law.  

What are your options?

In the future, recharged VAT may be payable on services provided between a foreign head office and a Dutch fixed establishment that is part of a VAT group in the Netherlands. It is advisable to assess the risks, including an assessment of individual agreements with the Dutch tax authorities on recharging, the split between internal and external costs and the assessment of the conditions for the creation of a VAT group. If necessary, an objection can be filed against the payment of reverse charged VAT.

The ruling of the CJEU in the Skandia case may also have practical implications in other Member States. In principle, CJEU case law has retroactive effect. Depending on the particular impact in a Member State, VAT may therefore be levied on transactions that have taken place in the past.

If you would like to discuss this judgment, please contact Gert-Jan van Norden or Irene Reiniers.

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8. Letter from the Deputy Minister of Finance on CJEU judgment in ATP PensionService A/S case (C 464/12)

In response to parliamentary questions, the Deputy Minister of Finance has presented his views on the impact the judgment in ATP PensionService A/S will have on the Dutch pension sector.

1. The judgment in ATP PensionService A/S
In the judgment rendered on March 13, 2014 in the ATP PensionService A/S case (“ATP”), the CJEU ruled that pension funds that operate a Defined Contribution (“DC”) Plan qualify as a common investment fund within the meaning of the VAT exemption for the management of common investment funds if:

(i)   the pension funds are ultimately financed by their participants;

(ii)  the contributed funds are invested according to the principle of risk-spreading; and

(iii) the investment risk is borne by the participants.

Furthermore, administrative services related to the operation of pension plans can also be considered ‘management’ if the service provider establishes the rights of the participants by setting up accounts into which the contributions are paid and accounts for them in the pension plans. This also includes accounting services and services related to payments and transfers to and from the relevant accounts.

What this judgment means for the Dutch practice is that asset management services provided to pension funds that operate a DC plan are VAT exempt. The pension administration services provided to pension funds administering a DC pension plan should also be able to fall under the exemption. Given the conditions the CJEU has attached to qualifying as a common investment fund, it would appear that pension funds that operate plans other than a DC plan will also qualify for the exemption, for example, some Collective Defined Contribution (“CDC”) and Defined Benefit (“DB”) plans.

To date, however, the Dutch tax authorities has been very cautious in dealing with the implications of the ATP judgment.

2. The letter from the Deputy Minister of Finance
In his letter, the Deputy Minister of Finance identifies three categories of pension funds on which he takes the following positions:

  1. Collective DB plans: the VAT exemption does not apply;
  2. Individual DC plans: the VAT exemption applies, with reference being made to the Premium Pension Institution (premiepensioeninstelling; “PPI”) as an example of such plans;
  3. Collective DC and other plans: the VAT exemption may apply depending on the facts and circumstances. The basis for the VAT treatment is the comparability of the specific plan with the two categories mentioned above. The letter appears to imply that certainty can be obtained from the tax inspector responsible for the particular pension entity, which − if the implication is correct − is rather puzzling as Dutch service providers usually obtain certainty from their own tax inspector.

The VAT exemption will continue to apply to asset pooling, whereby two or more pension funds (or other institutional investors) place all or part of their equity in a separate fund.

According to the Deputy Minister, transactions relating to pension and contribution payments that are performed by a third party as an independent service to a pension institution are, and were, VAT exempt. The ATP judgment does not change this.

The Deputy Minister does not feel compelled to reconsider the limitation to the VAT exemption for cost-sharing groups in respect of pension administration services (to take effect as of January 1, 2015) as a result of the ATP judgment. VAT must be charged on these services as of that date. However, the VAT exemption will apply if these services are to be regarded as ‘management’ services and if the particular pension fund qualifies as a common investment fund.

3. Impact
In our view, the letter from the Deputy Minister of Finance does not change the way in which pension funds and service providers should deal with the implications of the ATP judgment. We expect that the letter from the Deputy Minister will not change the position taken by the Dutch tax authorities with regard to the ATP judgment i.e. that it does not, in principle, apply to Dutch pension funds.

However, we consider that the judgment provides a sufficient basis for claiming the VAT exemption, also if the pending appeal against the judgment of the District Court of The Hague dated July 8, 2011 (no. AWB 09/8541 08) is taken into account. The latter case deals specifically with the question whether the VAT exemption applies to management services provided to a Dutch pension fund.

4. What are your options?
We recommend that you do not withdraw any pending notices of objection. Should the Dutch tax authorities request you to further substantiate your notice of objection, we suggest that you do so, otherwise you may inadvertently adversely affect your claim to the VAT exemption.

Pension funds that have not yet filed a notice of objection against the VAT due on management services provided by foreign providers should still do so. Also, if you have not already done so, we recommend that you request your Dutch service providers to file a notice of objection. Service providers that provide management services should file a notice of objection as soon as possible, if they have not already done so, in order to preserve their rights.

Moreover, in response to the cancellation of the VAT exemption for cost-sharing groups in respect of pension administration services, it would be advisable if service providers and pension funds identify the opportunities created by the ATP judgment, as well as other opportunities that may be available to keep the provision of services fully or partly exempt from VAT as from January 1, 2015.

The advisors of the Indirect Tax Financial Services Group of KPMG Meijburg & Co would be pleased to help you as they have extensive experience in these matters. Feel free to contact Gert-Jan van Norden or Karim Hommen for more information.

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