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European Commission: Simplified Procedures For Claiming Cross-Border Withholding Tax Relief – Frequently Asked Questions
(see also IP/09/1543 )
October 19, 2009--What is the recommendation designed to do?
The Recommendation aims to show EU Member States how they could simplify the procedures that they currently apply to verify investors' entitlement to relief from withholding tax on cross-border securities income. The objective is both to facilitate investors who wish to invest across borders and to ensure that EU-based financial intermediaries can provide services freely across borders, as they are entitled to do under Article 49 of the EC Treaty. The Recommendation also suggests ways in which Member States could ensure that the proposed simplifications would not open their tax bases to errors or fraud.
What is the scope of the Recommendation?
The Recommendation applies to withholding taxes levied on securities income (mainly dividends and interest) that is sourced in an EU Member State, and that is paid to EU resident investors, via one or more financial intermediaries established in the EU or in an EFTA country that provides for a level of administrative assistance to other countries equivalent to that applicable by EU Member States under EU legislation.
Why is the Recommendation necessary?
Under the bilateral double taxation treaties that EU Member States have with each other, Member States generally agree to reduce source country withholding taxes on securities income, in order to share taxing rights between the two treaty partner countries. Some Member States even apply a reduced withholding tax or exemption on securities income paid to foreign investors under their domestic law where certain conditions are met. However, the procedures to reduce the withholding tax rates at the payment stage or to claim refunds of tax withheld are often so complicated and varied that investors do not bother claiming relief or refunds and may even be discouraged from investing abroad.
How would the Recommendation benefit investors?
The recommendation would benefit investors in the first place because it suggests that Member States should apply at source (i.e. at the time of payment of the securities income), rather than by refund, any withholding tax relief to which an investor is entitled.
Second, in cases where investors are not able to obtain withholding tax relief at source , the recommendation encourages Member States to apply quicker and simpler tax refund procedures, including the following elements:
permission for any authorised financial intermediary in a custody chain to submit refund applications on behalf of the investors;
use of a single contact point for the introduction and handling of all the refund applications and publication of the relevant information on refund procedures on a website;
use of common formats for refund applications, and permission to file them electronically;
refunding in a reasonable period of time, i.e. normally within 6 months;
allowing investors and financial intermediaries to provide alternative proofs to certificates of residence in connection with their claims.
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Source: European Commission
Irish Government Appoints Nomura As Primary Dealer
October 19, 2009--Nomura, the preeminent Asian-based global investment bank, today announced that it has been named as a Primary Dealer for Irish Government bonds.
Nomura is the only Asian bank to be granted this status and will bring the total number of Primary Dealer firms in the Irish Government bond market to 12. Nomura's role as a Primary Dealer will be to continuously make two way markets in Irish Government bonds and to participate in competitive auctions organised by the Irish National Treasury Management Agency.
We are very proud to be appointed as a Primary Dealer for Irish Government bonds," said Kieran Higgins, Co-Head of Fixed Income for Europe, Middle East and Africa at Nomura. "Nomura's Fixed Income business has been keenly focusing on increasing its market making activities in Europe and internationally, and this development is yet another validation of our strategy."
Brian Healy, Director of Traded Markets, Development, Operations at the Irish Stock Exchange, said: "The addition of Nomura as a Primary Dealer in Irish Government bonds is a significant and welcome development. The involvement of Nomura, a major player in European and global fixed income markets, underscores the strong international interest in the market for Irish Government debt. We look forward to building further on this relationship with Nomura as we continue to expand our trading membership base."
Since the beginning of 2009, Nomura has secured its position as a Primary Dealer for UK, US and Indian Government bonds. It is also a Primary Dealer in Germany, Italy, France, Greece and Austria and will continue to develop its position in the sovereign debt markets.
Source: Nomura
Securities income: Commission recommends simplified procedures for claiming cross-border withholding tax relief
October 19, 2009--The European Commission has adopted a recommendation that outlines how EU Member States could make it easier for investors resident in EU Member States to claim withholding tax relief on dividends, interest and other securities income received from other Member States. The recommendation also suggests measures to eliminate the tax barriers that financial institutions face in their securities investment activities while at the same time protecting tax revenues against errors or fraud. The recommendation is designed to provide guidance to Member States in how to ensure that procedures to verify entitlement to tax relief do not hinder the functioning
Internal Market and Services Commissioner McCreevy said: "If we are serious about promoting cross-border investments in securities in the Internal Market, EU Member States will have to simplify their withholding tax relief procedures, so that foreign investors receive any tax refunds to which they are entitled more quickly and so that tax rules do not hinder financial institutions from getting involved in managing such cross-border investments."
Taxation and Customs Commissioner Kovács said: "While it is true that complicated refund procedures may discourage cross-border investment, Member States must be allowed to have sufficient safeguards in place to protect their tax systems against errors and fraud. The recommendation contains solutions that are designed to balance these opposing concerns."
The recommendation:
encourages Member States to apply at source rather than by refund any withholding tax relief applicable to securities income under double taxation treaties or domestic law;
encourages Member States to apply quick and standardised refund procedures where they cannot provide relief at source, for example because the investor has not provided all necessary information, and lists possible elements of such refund procedures;
encourages Member States to accept alternative proofs of investors' entitlement to tax relief besides certificates of residence ;
suggests how Member States can involve financial intermediaries in making claims on behalf of investors and, in particular, how the procedures could operate where there is a chain of financial intermediaries, in different Member States, between the issuer of the securities and a beneficiary;
encourages greater acceptance by Member States of electronic rather than paper information;
suggests that Member States could apply a risk-based approach to setting requirements of proof of entitlement to tax reliefs;
suggests how Member States could set up single or joint audits or even external audits to investigate the compliance of financial intermediaries with obligations created in line with the recommendation;
suggests follow-up discussions with Member States on the implementation of the Recommendation.
encourages greater use of existing channels for exchange of information between Member States and the exploration of new channels.
Background
The tax laws of Member States usually provide for withholding taxes on dividend and interest income paid to non-resident investors. These withholding taxes are often reduced under Member States' bilateral double taxation conventions, when the two treaty partner countries involved agree on sharing taxing rights. In certain circumstances, some Member States even unilaterally reduce withholding taxes or apply exemptions on securities income paid to foreign investors.
However, Member States' procedures to verify claims for withholding tax reliefs are often so complicated and time consuming that investors may forego the reliefs to which they are entitled or even be discouraged from investing across borders. Furthermore, these procedures often do not take into account the present-day multi-tiered financial environment where there may be a chain of financial intermediaries, based in several countries, between the issuer of the securities and the investor. In fact, a study by the Commission services shows that the costs related to these present reclaim procedures are estimated to a value of € 1.09 billion annually whereas the amount of foregone tax relief is estimated at € 5.47 billion annually.
The amount of cross-border holdings within the European Union was 16.7 trillion dollars in 2006, composed of 6.4 trillion dollars in equity securities and 10.3 trillion dollars in debt securities. The European Union accounts for more than 50 % of the worldwide amount of such holdings, both with respect to the origin and the destination of the investments.
The recommendation is based on the (2006-2007) reports of the EU Clearing and Settlement Fiscal Compliance Experts' Group (FISCO) ( IP/07/1569 ), follows upon an extensive stakeholders' consultation and has been discussed on several occasions with the financial services industry and tax administrations in Member States. Background documents are available at:
http://ec.europa.eu/internal_market/financial-markets
http://ec.europa.eu/taxation_customs/index_en.htm
Source: European Commission
STOXX Ltd. Launches Dow Jones Euro STOXX 50 PutWrite Index
October 18, 2009--STOXX Ltd., the leading European index provider, today announced the launch of the Dow Jones EURO STOXX 50 PutWrite Index. The new index replicates a "reverse convertible" investment strategy and measures the performance of a hypothetical portfolio consisting of monthly put options on the Dow Jones EURO STOXX 50 Index. The monthly put options are fully collateralized by money-market investments in the three month Euribor market (euro interbank offered rate).
The Dow Jones EURO STOXX 50 PutWrite Index is the first of its kind in Europe and is designed to underlie financial products such as exchange-traded funds.
"The Dow Jones EURO STOXX 50 PutWrite Index is a unique and objective measurement tool for market participants who want to follow a collateralized put strategy for the euro zone," said Ricardo Manrique, chief executive officer, STOXX Ltd. "By combining money market investments and put options on Europe's most liquid listed options contract - based on the Dow Jones EURO STOXX 50 Index, we are adding another highly tradable and replicable index to the Dow Jones STOXX Strategy Index family."
The Dow Jones EURO STOXX 50 PutWrite Index replicates a "reverse convertible" investment strategy in which a variable number of put options are written on the Dow Jones EURO STOXX 50 Index on a monthly basis. These are fully collateralized by an investment into the three month Euribor market whose amount in euro is equal to the index close on the day before the options are written plus the premium from selling the put options.
Each month the Dow Jones EURO STOXX 50 PutWrite Index rolls from the previously expiring put options contracts into the new one-month put options contracts. The number of put options is determined by the total amount of the collateralization. The money market investment, the option premium and the interest earned must cover the potential worst-case loss on the underlying options contracts.
Since inception on December 31, 1999, the Dow Jones EURO STOXX 50 PutWrite Index has gained 102.06%[1], whereas the Dow Jones EURO STOXX 50 Index is down -41.00% over the same time. Historical data for the Dow Jones EURO STOXX 50 PutWrite Index is available back to December 31, 1999.
The Dow Jones EURO STOXX 50 PutWrite Index is part of the Dow Jones STOXX Strategy Index family, which comprises the Dow Jones EURO STOXX 50 BuyWrite, Dow Jones STOXX EURO STOXX 50 Leveraged, Dow Jones EURO STOXX 50 Short, Dow Jones EURO STOXX 50 Double Short, Dow Jones STOXX 600 Double Short and Dow Jones STOXX 600 Supersector Short indexes, as well as the VSTOXX.
Further information on the Dow Jones STOXX Strategy Indexes is available at www.stoxx.com.
Source: STOXX
Credit Suisse Launches 17 ETFs In Italy
October 19, 2009--Credit Suisse today announced that it is expanding Credit Suisse Xmtch, its successful ETF range into Italy . Over the past eight years, Credit Suisse has grown its ETF business to become the leading provider of ETFs in Switzerland with Euro 6.0 billion AUM in its Xmtch ETF products. Credit Suisse’s launch of ETF products in Italy is the first launch in line with the Bank’s plans to expand across Europe .
ETFs are passively managed index-tracking investment funds offering institutional and private clients an investment solution with a high degree of liquidity, diversification and transparency. Credit Suisse is launching 17 replication (cash based) ETFs on the Italian Borse, providing investors with access to equities, inflation linked and government bond ETFs with exposure over a range of maturities and with a regional focus on Europe, the United States, and Japan. Italy is the first country outside of Switzerland into which Credit Suisse has expanded its ETF range, responding to an increased demand for index-based products among its European investors.
Credit Suisse sponsored survey* among Institutional Investors showed that Italy , the UK and Switzerland have the highest appetite for index related investments with 61% of respondents in Italy indicating a preference for ETFs. The research also revealed that 86% of Italian investors surveyed would prefer replication products, rather than synthetic ETFs showing a shift in attitude towards counterparty risk. Respondents across Europe considered liquidity the most important criteria when investing in ETFs.
Oliver Schupp, Managing Director at Credit Suisse and Head of Beta Strategies said: “The challenging market conditions of the last eighteen months coupled with an investor base that is increasingly looking for transparency and flexibility means that we are seeing a rising demand for ETF products among our clients.”
Gerhard Fusenig, Head of Asset Management for the EMEA region, Credit Suisse added: “Credit Suisse’s expansion into the Italian market is a significant step forward in expanding our successful ETF platform across Europe . It is consistent with our goal of distributing our best products to our institutional and private clients around the world.”
More information on the ETF range from Credit Suisse is available at www.xmtch-etf.com
Source: Credit Suisse
Oslo Børs To Launch A New Regulated Marketplace
October 15, 2009--Oslo Børs is establishing Oslo Connect, a new regulated marketplace for trading in non-standardised derivatives (OTC derivatives). The launch of this marketplace will give investors a new and unique venue for efficient and secure trading in derivatives that are not stock exchange listed.
Oslo Connect will be structured as a Multilateral Trading Facility (MTF) and will be based on a set of marketplace rules that will ensure higher standards of consistency and openness than an unregulated marketplace can offer. Oslo Børs was granted authorisation by the Financial Supervisory Authority of Norway (Kredittilsynet) to establish an MTF earlier this week. The new marketplace will open for business later this autumn, but no date has as yet been set for the launch.
Oslo Clearing already offers flexible settlement services and takes over counterparty risk on behalf of the participants for both the standardised and OTC derivatives markets. By launching Oslo Connect, Oslo Børs VPS Group will offer investors access to the entire value chain, with a trading venue operated by Oslo Børs and Oslo Clearing taking over counterparty risk.
"Oslo Børs recognized OTC derivatives as an attractive market in which to operate quite some time ago. We believe that it should be possible to trade in a market as large as this on a regulated marketplace. In addition, the financial crisis has made market participants much more aware of counterparty risk, and we can meet their needs with the services of Oslo Clearing”, comments Bente A. Landsnes, President of Oslo Børs and Group Chief Executive Officer of Oslo Børs VPS.
The OTC derivatives market offers greater flexibility than the regular stock exchange market for derivatives. The parties to a transaction have greater scope to customise the terms and conditions of the deal (Tailor Made derivatives), including details such as the expiry date, exercise price and adjustments for dividend payments. The regular stock exchange market in Oslo offers trading in derivatives based on 15 underlying shares listed on Oslo Børs, and derivative contracts for the OBX index, but the OTC market makes it possible, in principle, to arrange derivatives trading on any underlying share.
Trading on Oslo Connect will take place either through the EDGE trading system (provided by Baymarkets) or through the Oslo Børs Market Place Service for derivatives (MPS). In addition to trading, the EDGE system will offer the opportunity to register trading interests and to access a pre-trading price information system. This will also make it possible to identify more than one potential counterparty, which will help to improve the price picture. The system will also allow members to negotiate contract parameters on an anonymous basis prior to entering into a trade.
Investment firms and other institutions that are authorised by Kredittilsynet or by an equivalent foreign supervisory body will be eligible to apply for membership of Oslo Connect in order to access the marketplace. In addition, Oslo Børs collaborates with EDX London, which means that members of Oslo Connect will also be able to trade OTC derivatives across national boundaries.
Source: Oslo Børs
German economy improving, think tanks say
October 16, 2009--Germany's economy will shrink less than expected this year and return to growth in 2010 as financial markets stabilize and demand grows for the country's exports, a group of leading economic research groups said Thursday.
The eight organizations, including Munich's Ifo Institute and Kiel's Ifw as well as think tanks from Austria and Switzerland, revised their April prediction of 6 percent contraction this year to 5 percent. For 2010, the group now forecasts 1.2 percent growth in gross domestic product, compared to its April prediction of a 0.5 percent contraction.
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Source: Todays Zaman
Impact of the proposed AIFM Directive across Europe
October 15, 2009--Charles River Associates (CRA) was asked by the Financial Services Authority (FSA) to conduct an assessment of the impact of the proposed Alternative Investment Fund Manager Directive (AIFMD) on investors, financial markets and enterprise across the European Union
and enterprise across the European Union (EU).1 The Directive affects a wide variety of fund types and we have investigated the impact of the Directive on: hedge funds; private equity and venture capital funds; real estate funds and investment trusts.
Our research has involved: gathering information on the alternative investment fund (AIF) industry in Europe; around 30 interviews with market participants including professional investors, trade associations at a European level and in the UK (since much of the management of the AIF industry is located in the UK) as well as companies involved in the provision of different fund types; and a cost survey focused on the parts of the Directive where interviewees indicated that the costs are likely to be most significant. Impact of the Directive on investor choice and returns Based on interviews, it has not been possible to identify the proportion of funds currently domiciled outside the EU that will re-domicile into the EU in order to continue to be marketed to EU investors. If funds do not re-domicile, the AIFMD will greatly reduce the availability of AIF for EU investors. Investors expressed concern that they will no longer have access to “best in class” funds from across the globe, thereby reducing both the variety and quality of funds.
view the report:Impact of the proposed AIFM Directive across Europe
Source: Charles River Associates
FSA warns on cost of new EU hedge fund rules
October 15, 2009--European institutional investors face billions in lost annual returns if new EU rules for hedge funds and private equity firms are approved, according to a study commissioned by the Financial Services Authority, the UK’s market regulator.
The findings are the first formal – and independent – impact assessment of the directive from an EU member state authority, and are expected to add considerable heft to efforts from several European countries, led by the UK, to amend the European Commission’s draft alternative investment fund manager directive in the coming months.
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Source: FT.com
UK's Financial Services Authority: Lehman-Backed Structured Products - Update
October 14, 2009--NDF Administration Limited (NDFA) and Defined Returns Limited (DRL) have today announced that they are going into administration. The two firms offered a variety of retail products, including Lehman-backed structured products.
This announcement follows an extensive Financial Services Authority (FSA) review of structured products and subsequent discussions with the firms. The FSA's review looked at the UK structured products market, including those backed by Lehman, and as part of this review examined the firms' systems and controls and marketing literature. As a result, the FSA asked the firms to assess their financial position in relation to potential claims by investors with Lehman-backed structured products.
As these firms are now in administration, consumers who had invested in Lehman-backed products with either of the firms may be entitled to compensation from the Financial Services Compensation Scheme (FSCS).
The firms' joint administrators, Andrew Hosking and Martin Ellis of Grant Thornton UK LLP, will shortly contact all customers who bought products through these firms, setting out what they need to do next.
The FSA's Moneymadeclear website provides further information on what this means for consumers who bought Lehman-backed structured products and other products from NDFA and DRL.
Further information on the FSA's structured products review can be found on the Wider Implications website. The FSA will publish the full findings of its review later this month.
Source: FSA.gov.uk
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