Dear FS professional,
In the FS Tax Newsletter, we provide you with an update on developments in the Financial Services sector.
In this edition you will find, among others, a summary of our annual FS VAT seminar and a summary of the recently published decree on insurance premium tax. We have also included an update of relevant jurisprudence relating to VAT. If you would like to read more about the comments of the Dutch Central Bank about the exception for international holding companies to the 20% bonus cap of the Dutch Financial Undertakings Financial Policy Act (Wet beloningsbeleid financiële ondernemingen or Wbfo) please click here.
Partner, Financial Services Tax Group
1. Decree on the conversion of a fiscal investment institution with the legal form of a mutal fund into a public limited company
This Decree covers the situation where the activities of a mutual fund (fonds voor gemene rekening), as referred to in Section 2(1)(f) Corporate Income Tax Act 1969, with the status of an investment institution as referred to in Section 28 Corporate Income Tax Act 1969 (hereinafter: the fund), are continued by a public limited company (NV) with variable capital.
This Decree grants approval for the conversion of the participations and the liquidation of the fund that occurs as a result of the change in the legal form to take place on a tax-neutral basis. Without this tax guidance, the liquidation dividend would (probably) be subject to dividend withholding tax. The desired transfer of the fund’s corporate income tax position to the public limited company is also not possible without approval.
This Decree replaces the Decree dated December 5, 2005, CPP2005/1783M. The most important change concerns the cancellation of the condition in relation to Section 6 of the Decree on Investment Institutions as a consequence of the introduction of a remittance reduction in Section 11a Dividend Withholding Tax Act 1965. In addition, the number of conditions has been greatly reduced by the introduction of more generally worded conditions. For example, corporate income tax guidance now includes the condition of complete ‘substitution’. The fund’s tax position as a whole is consequently now transferred. The previous separate transfer of each tax component has been canceled.
This Decree took effect on March 1, 2017.
2. FS VAT Seminar 2017
On Tuesday April 4, 2017 we have held our annual FS VAT Seminar in our Amstelveen office. The theme of our 9th FS VAT Seminar 2017 was ‘Global village, local city’. We hosted approximately 50 participants across the entire FS sector, including banking, insurance and investment management.
As kick-off we held a panel discussion with KPMG FS VAT experts from the UK, Germany, Ireland and the Netherlands on several international trends in FS Indirect Tax, such as Brexit, the influence of digital economy changes and cross border intra-group activities. The panel discussion provided valuable insights from multiple jurisdictions, including the national practices on obtaining legal certainty by means of requesting rulings from local tax authorities. Although EU VAT should provide for the levy of a harmonized VAT across all EU Member States, the panel demonstrated that this currently is not the case, which calls for specific focus on VAT in all jurisdictions where financial institutions operate.
After this plenary session, the participants joined one of the three workshops: (i) Banking & Investment management, (ii) FS VAT developments in a nutshell and (iii) Insurance (VAT & IPT) & Asset management. In these interactive workshops, we shared our latest insights with the participants, and discussed the current commercial and VAT developments in their markets.
Last but not least, we have hosted a final plenary session on a ‘new’ organizational model for businesses: Holacracy. This is a complete, packaged system for self-management in organizations. It replaces the traditional management system, and increases transparency, accountability and organizational agility. This model is applied and tested by several financial institutions.
We concluded our seminar with an informal drink, to catch up with the participants and to personally discuss some topics in further detail.
Next year, we will be hosting our 10th FS VAT Seminar. If you would you like to be kept in the loop regarding this event, please send an e-mail to Marloes Singeling and do not miss our jubilee edition!
3. Supreme Court refers preliminary questions to the Court of Justice of the European Union about dividend withholding tax refunds for foreign investment funds
In its judgment of July 10, 2015, the Dutch Supreme Court denied a request for the refund of Dutch dividend withholding tax filed by a Luxembourg investment fund. However, on March 3, 2017 the Supreme Court referred questions to the Court of Justice of the European Union (CJEU) for a preliminary ruling, following a request from the Dutch District Court in August 2016 for the Supreme Court to reconsider its negative judgement. Meijburg & Co acted as legal counsel for the taxpayer in both cases.
4. Advocate General at CJEU issues Opinions on application of the VAT exemption for cost-sharing groups
On March 1, 2017 the Advocate General (‘AG’) to the Court of Justice of the European Union (‘CJEU’) issued her Opinions in the DNB Banka (no. C-326/15) and Aviva (no. C‑605/15) cases. The AG concluded that the VAT exemption for cost-sharing groups cannot be applied in the financial and insurance markets and neither in cross‑border situations. The AG however advised the CJEU to narrowly interpret the criterion that application of the VAT exemption for cost-sharing groups is not likely to cause distortion of competition.
5. Decree on Insurance Premium Tax
Recently, a new Dutch decree on Insurance Premium Tax was published. Our Dutch and English alert about this development was immediately sent to most of the Dutch insurance market (insurers, brokers, etc). KPMG’s European Insurance Premium Tax Network was also informed. Several clients have already confirmed that the alert proved valuable in high level determining the impact of the changes in the decree on their business. Please feel free to forward our alert to any of your clients or targets. As is also outlined in our alert, the new decree replaces the old decree of February 21, 2014 and mainly concerns the following changes.
The exemption for the insurance of seagoing vessels is, for example, extended with an exemption for the cover of the mortgage-related interest in a seagoing vessel. The exemption for export credit insurances has been elaborated in more detail. The approval for co-insurance has been tightened. An important approval for intermediary activities by retailers/franchise holders has been added.
Last, but not least, please feel free to contact Otto van Gent, Nienke van den Blink, or Eric Falk with any Insurance Premium Tax queries. Otto and Eric both specialize in Insurance Premium Tax and Corporate Income Tax. Nienke specializes in Insurance Premium Tax and Value Added Tax.