Funds Update - Ireland
Quarterly Update | July - September 2015

1 Legal & Regulatory

1.1 UCITS Update

1.2 AIFMD Update

1.3 Irish Collective Asset-Management Vehicles Act 2015

1.4 Money Market Funds: Update

1.5 EMIR Update

1.6 Investment in Chinese Shares Via Stock Connect Permitted

1.7 MiFID II/MiFIR Update

1.8 PRIIPs KID Regulation

1.9 European Venture Capital Funds and Social Entrepreneurship Funds

1.10 CSDR: Regulating Central Securities Depositories

1.11 Market Abuse Regulation

1.12 Benchmark Regulation on Indices

1.13 ELTIF Regulation

1.14 EU Capital Markets Union

1.15 Client Assets and Investor Money Regulations

1.16 Thematic Review - Cyber Security and Operational Risk

1.17 Securities Financing Transactions Regulation

1.18 Fitness & Probity - Individual Questionnaire Application Guidance and FAQs

1.19 Investment Funds Statistics: Q2 2015

1.20 Industry Funding Levy Consultation

1.21 Anti-Money Laundering Update

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2 Tax

2.1 OECD BEPS Update

2.2 Recent Irish Revenue Briefings relevant to the Funds Industry

Go to Tax section

3 Listings

3.1 New Process for Submitting NAVs to the ISE

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1 Legal & Regulatory

1.1 UCITS Update

There have been a number of developments over the quarter:

Central Bank UCITS Regulations 2015

On 5 October 2015, the Central Bank of Ireland ("Central Bank") published the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015. The Regulations will come into effect on 1 November 2015 and consolidate into one location all of the requirements which the Central Bank imposes on UCITS, UCITS management companies and depositaries of UCITS.  They also supplement existing legislative requirements, in particular, the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011. 

For more information see our client update, Introducing a New Regulatory Framework for Irish UCITS. Most notably the regime revamp includes a removal to the requirement for sponsors of Irish UCITS to obtain promoter approval from the Central Bank.

UCITS Q&A and forms

On 15 July 2015, the Central Bank issued the sixth edition of its Q&A. It clarifies the position with regard to consistency between the sole object provisions of the Irish Collective Asset-management Vehicles Act 2015 and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011. A UCITS ICAV’s instrument of incorporation should include the text set out in section 6(3)(a) of that Act which will also satisfy the requirements of the Regulations (ID 1014, UCITS Q&A).

On 16 July 2015, the Central Bank updated a comprehensive set of forms relating to UCITS applications.

On 5 October 2015, the Central Bank published the seventh edition of its UCITS Q&A. New questions ID 1016 onwards are new and as a result of the introduction of the Central Bank UCITS Regulations 2015. Questions ID 1007 and ID1009 are no longer relevant and have been deleted. Question ID 1008 has been re-written to reference the Central Bank UCITS Regulations 2015.

Feedback statements

The Central Bank on 5 October 2015, published feedback statements on CP77 – Consultation on publication of UCITS Rulebook and CP84 – Consultation on adoption of ESMA revised guidelines on ETFs and other UCITS issues. 

UCITS V remuneration

On 23 July 2015, the European Securities and Market Authority ("ESMA") published a consultation paper (2015/ESMA/1172) on guidelines on sound remuneration policies under the UCITS V Directive (2014/91/EU) and the Alternative Investment Fund Managers Directive (2011/61/EU) ("AIFMD"). Article 14a(4) of UCITS V requires ESMA to issue guidelines on the application of the remuneration principles in Article 14b of UCITS V. The proposed guidelines are set out in section 8.4 (Annex IV) of the consultation paper. They will apply to national competent authorities ("NCAs") and UCITS management companies, and aim to ensure a convergent application of the UCITS V. They are based on those already issued on remuneration under AIFMD. Comments can be made on them until 23 October 2015. Finalised guidelines are then expected to issue in Q1 2016, ahead of the transposition deadline for UCITS V (18 March 2016). It is expected the guidelines will then apply to UCITS management companies in respect of the next full financial year/remuneration period that starts after that date.

For more information see our client update, ESMA Proposes AIFMD Alignment in Consultation on UCITS V Remuneration Rules.

Delegation of powers

On 3 August 2015, the European Commission published a report on the exercise of delegation of powers to the Commission to adopt implementing measures under Article 112a of the UCITS IV Directive. In the report, the Commission lists the Articles in UCITS IV giving powers to the Commission and the specific legislative acts and the provisions within those acts that were adopted using those powers.

UCITS V - penalties and measures

On 18 September 2015, ESMA delivered its implementing technical standards ("ITS") on penalties and measures under UCITS V to the European Commission for endorsement. UCITS V requires NCAs to provide ESMA annually with aggregated information on all the penalties and measures they impose on companies and persons for UCITS infringements. When NCAs make public any administrative penalties or measures, they must report this information to ESMA at the same time. The technical standards set out the procedures and forms NCAs must use when submitting this information to ESMA.

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1.2 AIFMD Update

On 16 July 2013, the European Union (Alternative Investment Fund Managers) Regulations 2013 (No. 257 of 2013) gave effect to AIFMD in Ireland. There have been a number of developments over the quarter:

(a) Central Bank Q&As

On 15 July 2015, the Central Bank published the fourteenth edition of its AIFMD Q&A. It clarifies that a qualifying investor alternative investment funds ("QIAIF") availing of the flexibility to invest more than 50% of net assets in an unregulated investment fund must also comply with the requirement to attach the periodic reports of the underlying investment fund to its own periodic reports (ID 1095, AIFMD Q&A). On 12 August 2015, the Central Bank published a fifteenth edition. A new question ID 1096 on Feeder AIFs is included which confirms that, where a QIAIF raises capital from investors on a formally agreed commitment basis, the reference to "assets" (net assets) in the definition of "feeder AIF" (in the European Union (Alternative Investment Fund Managers) Regulations 2013) can be understood to refer to committed capital, provided the QIAIF remains closed for redemptions during the capital commitment period.

On 5 October 2015, the Central Bank published a sixteenth edition. New questions ID 1097 (Directed Brokerage), ID1098 (Board Composition) and ID1099 (Non-material change) are included.

(b) ESMA Q&A

On 21 July 2015, ESMA published an updated version of its Q&A on the application of AIFMD)(ESMA/2015/1137). The Q&As have been amended to reflect updated answers about reporting information to NCAs and calculating the total value of assets under management. On 1 October 2015, ESMA published another updated Q&A in relation to depositaries. The Q&A clarifies that when an alternative investment fund’s ("AIF") depositary sub-delegates custody of the AIF’s assets to either an EU or third-country central securities depositary ("CSD"), that CSD must comply with the provisions on delegation under Article 21(11) of AIFMD.

(c) Application of the EU passport

On 30 July 2015, ESMA published its advice (ESMA/2015/1236) on the application of the EU passport under AIFMD to non-EU alternative investment fund managers ("AIFMs") and AIFs, together with an opinion (ESMA/2015/1235) on the functioning of the passport for EU AIFMs and the national private placement regimes for consideration by the European Parliament, Council and Commission.

ESMA's advice covers six jurisdictions: Guernsey, Hong Kong, Jersey, Singapore, Switzerland and the US. It has no issue with extending the passport to Guernsey and Jersey and no issue with Switzerland (once certain amendments are made to the Federal Act on Stock Exchanges and Securities Trading). No definitive view on the other jurisdictions was taken because of concerns relating to competition, regulatory issues and lack of sufficient evidence to assess the relevant criteria.

ESMA advised that although the AIFMD was still in its early stages, as yet no major issues had been identified with the ongoing operation of the existing national private placement regimes in conjunction with AIFMD. It also identified issues relating to the use of the EU passport such as different approaches to marketing rules and the definition of a "professional investor"; and varying interpretations of what activities constitute "marketing" and "material changes" under the AIFMD passport in different Member States.

ESMA is to finalise the assessments of other third countries in the coming months. For countries with no supervisory co-operation arrangements in place under AIFMD, it will continue its efforts to agree a memorandum of understanding ("MoU") with the relevant authorities.

(d) AIFMD MoUs

On 4 September 2015, ESMA updated the list of AIFMD MoUs signed by EU authorities.

(e) AIFM reporting requirements

On 15 June 2015, the Central Bank updated a number of the AIFMD forms: application form for authorisation as an AIFM; application form for authorisation as an AIF Management Company; application form for registration as an AIFM; Qualifying Investor AIF application forms; Retail Investor AIF application forms; and Post-Authorisation forms. On 18 September 2015, The Central Bank issued tabular guidance on reporting requirements for AIFMs (excluding internally managed AIFs) made via the Central Bank’s online reporting system.

Please see our client update, ESMA Recommends Deferral of AIFMD Passport Extension Decision

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1.3 Irish Collective Asset-Management Vehicles Act 2015

The Central Bank is the registrar for Irish Collective Asset-management Vehicles ("ICAVs") under the Irish Collective Asset-management Vehicles Act 2015. In August 2015, the Central Bank updated its AIF Rulebook to reflect this and on the process for submitting IQs and registration of charges.

The Irish Collective Asset-management Vehicles Act 2015 (Section 145(2)) (Relevant Jurisdictions) Regulations 2015 and the Irish Collective Asset management Vehicles Act 2015 (Section 149(2)) (Relevant Jurisdictions) Regulations 2015 were signed on 3 September 2015 and designate the British Virgin Islands and the Cayman Islands as relevant jurisdictions under those sections.

Designation as a relevant jurisdiction under section 145(2) of the Act permits a corporate entity which is a collective investment scheme in that jurisdiction to migrate to Ireland becoming in the process an ICAV.

Designation as a relevant jurisdiction under section 149(2) of the Act permits an ICAV to migrate to that jurisdiction without the need to wind-up in accordance with the relevant legal provisions for the winding-up of an ICAV in other circumstances.

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1.4 Money Market Funds: Update

On 2 September 2015, the International Organization of Securities Commissions ("IOSCO") published its final report (FR19/2015) following its peer review of the regulation of money market funds ("MMFs"). It looked at the progress of adopting legislation, regulation and other policies relating to MMFs and found that the 31 participating jurisdictions (including Ireland) had made progress in introducing implementing measures across all reform areas.

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1.5 EMIR Update

The European Market Infrastructure Regulation (Regulation on OTC derivative transactions, central counterparties ("CCPs") and trade repositories (Regulation 648/2012)) ("EMIR") is relevant to all Irish funds trading in financial derivative instruments ("FDI") whether on an exchange or otherwise.

On 2 July 2015, ESMA published its final report on the interoperability arrangements between EU-based CCPs required under EMIR, recommending that the interoperability provisions should be extended to exchange traded derivatives.

On 13 July 2015, ISDA published a classification letter that will enable counterparties to notify each other of their status for clearing and other regulatory requirements under EMIR.

On 16 July 2015, the Central Bank published a feedback statement and the submissions to CP90 ‘Supervision of Non-Financial Counterparties under EMIR’.

On 6 August 2015, the European Commission adopted a delegated regulation that makes it mandatory for certain over-the-counter ("OTC") interest rate derivative contracts to be cleared through central counterparties under EMIR. It covers interest rate swaps denominated in euro, pounds sterling, Japanese yen or US dollars that have specific features, including the index used as a reference for the derivative, its maturity, and the notional type. The clearing obligations will enter into force subject to scrutiny by the European Parliament and Council of the EU and will be phased in over three years to allow additional time for smaller market participants to begin complying.

On 13 August 2015, ESMA published four reports on how the EMIR framework has been functioning for the European Commission’s EMIR Review. Three of the reports cover non-financial counterparties, pro-cyclicality and the segregation and portability for CCPs. The fourth responds to the Commission's review including recommendations on amending EMIR in relation to the clearing obligation, the recognition of third country CCPs and the supervision and enforcement procedures for trade repositories.

On 27 August 2015, ESMA published a discussion paper on the review of Article 26 of its regulatory technical standards ("RTS") under EMIR, which deals with CCPs' client accounts (ESMA/2015/1295).

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1.6 Investment in Chinese Shares Via Stock Connect Permitted

The Central Bank announced in July 2015 that it will permit Irish funds to access Shanghai-Hong Kong Stock Connect ("Stock Connect").  This opens up a substantive facility for Irish funds to invest directly in China domestic-listed equities and thus represents a significant milestone for the Irish funds industry and a welcome step in enhancing economic links between Ireland and China from a funds perspective. 

For more information see our client update, Stock Connect Update: Central Bank Gives Green Light to Irish Funds

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1.7 MiFID/MiFIR Update

The Markets in Financial Instruments Directive (2014/65/EU) ("MiFID II") and the Markets in Financial Instruments Regulation (Regulation 600/2014) ("MiFIR") will repeal and recast the Markets in Financial Instruments Directive (2004/39/EC) ("MiFID") They must be transposed into national law by 3 July 2016 and will apply from 3 January 2017 (subject to a small number of excepted sections).

On 31 August 2015, ESMA published a consultation paper (ESMA/2015/1301) on the three draft ITS under MiFID II and MiFIR on which it has not yet consulted: the suspension and removal of financial instruments from trading on a trading venue; notification and provision of information for data reporting services providers; and the weekly aggregated position reports for commodity derivatives, emission allowances and derivatives thereof. The consultation closes on 31 October 2015. The final report is due to be sent to the European Commission for endorsement by 3 January 2016 and the final ITS will apply from 3 January 2017.

On 28 September 2015, ESMA published its final report (ESMA/2015/1464) on the draft ITS and draft RTS under MiFID II and MiFIR which it consulted on in December 2014 and February 2015. The report sets out final proposals for a total of 28 draft technical standards in the following areas: transparency; market microstructure issues; data publication and access; requirements applying on and to trading venues; commodity derivatives; market data reporting; post trading; and best execution. The RTS do not cover the issue of dealing commissions. The European Commission has three months to decide whether to endorse these technical standards.

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1.8 PRIIPs KID Regulation

The Regulation on key information documents ("KIDs") for packaged retail and insurance-based investment products ("PRIIPs") ("PRIIPs KID Regulation") introduces a new pan-European pre-contractual product disclosure document for PRIIPS in EU Member States from 31 December 2016.

On 3 July 2015, the European Insurance and Occupational Pensions Authority published its final report (EIOPA-15/569) and technical advice (EIOPA-15/564) to the European Commission on product intervention powers under the PRIIPs Regulation. These set out criteria and factors to be taken into account in determining when there is a significant investor protection concern or a threat to the orderly functioning and integrity of financial markets or to the stability of the whole or part of the EU financial system or to the stability in at least one Member State.

On 14 September 2015, a statement on the work of the Joint Committee of the European Supervisory Authorities relating to the work being done on the RTS under the Regulation was published which confirms that the Joint Committee will publish a consultation paper on draft RTS in November 2015.

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1.9 European Venture Capital Funds and Social Entrepreneurship Funds

The European Venture Capital Funds Regulation (Regulation 345/2013) ("EuVECA regulation") sets out a marketing passport to allow fund managers to market qualifying venture capital funds to EU investors using the EuVECA designation. The European Social Entrepreneurship Funds Regulation (Regulation 346/2013) ("EuSEF regulation") sets out a marketing passport to allow fund managers to market qualifying social entrepreneurship funds to EU investors using the EuSEF designation.

On 30 September 2015, the European Commission launched a consultation on the review of the EuVECA regulation and the EuSEF regulation with a view to improve the take-up of these funds as part of the capital markets union action plan. This consultation supports the objective of capital markets union which is to facilitate a greater flow of capital from willing investors into the real economy. It requests more details as to where and how the regulations could be changed without reducing the existing levels of investor protection. Issues the consultation will cover include the restrictions on who is able to manage the funds, the level of minimum investment of €100,000 for investors, and whether non-EU managers should be able to offer EuVECA or EuSEF. The consultation closes on 6 January 2016.

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1.10 CSDR: Regulating Central Securities Depositories

The Regulation on improving securities settlement and regulating CSDs (Regulation 909/2014) ("CSDR") is in effect since September 2014. However, Article 3(1) will apply from 1 January 2023 to transferable securities issued after that date, and from 1 January 2025 to all transferable securities. Article 5(2) will apply from 1 January 2015, except in the case of a trading venue that has access to a CSD referred to in Article 30(5), where it will apply at least six months before such a CSD outsources its activities to the relevant public entity and in any event from 1 January 2016. Certain other implementing measures will apply from the date that they enter into force.

In August 2015, ESMA published its final report on technical advice on Commission delegated acts relating to penalties for settlement fails and the substantial importance of a CSD.

On 28 September 2015, ESMA published its final report (ESMA/2015/1457) on the draft RTS and ITS required by CSDR. It covers harmonised CSD requirements and internalised settlement reporting. ESMA has sent the final report to the European Commission which has three months to decide whether to endorse the draft RTS and ITS.

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1.11 Market Abuse Regulation

The Market Abuse Regulation (Regulation 596/2014) ("MAR") will apply from 3 July 2016 and the Directive on criminal sanctions for insider dealing and market manipulation (2014/57/EU) ("CSMAD") has to be transposed into Irish law on the same date (together, MAD II). MAR updates and strengthens the existing framework by extending its scope to new markets and trading strategies and by introducing new requirements.

On 28 September 2015, ESMA published a final report containing draft RTS and ITS on MAR (ESMA/2015/1455) on the following: (i) notifications of financial instruments; (ii) conditions for buyback programmes and stabilisation measures; (iii) market soundings disclosure; (iv) accepted market practices; (v) reporting abusive practices or suspicious orders and transactions; (vi) public disclosure of inside information; (vii) insider lists; (viii) notification  and disclosure of managers' transactions and arrangements; and (ix) investment  recommendations.

ESMA has sent the final report to the European Commission which has three months to decide whether to endorse the draft RTS and ITS after which the European Council and Parliament will review them.

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1.12 Benchmark Regulation on Indices

Agreement is expected to be reached on the final version of the proposed Regulation on indices used as benchmarks in financial instruments and financial contracts by the end of 2015. Following which it will be adopted and published in the OJ. It will come into force on the following day and apply 12 months later.

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1.13 ELTIF Regulation

The Regulation on European Long-Term Investment Funds ("ELTIF Regulation") is designed to provide a framework for retail investment in illiquid asset classes such as infrastructure projects and unlisted companies. ELTIFs will have to apply for authorisation, have a regulated structure and comply with specified rules so that they offer long term and stable returns. The ELTIF Regulation applies from 9 December 2015.

On 31 July 2015, ESMA published a consultation paper (ESMA/2015/1239) under the ELTIF Regulation. It is consulting on draft RTS to determine the criteria for establishing the following:

  • Circumstances in which the use of financial derivative instruments solely serves hedging purposes.
  • Circumstances in which the life of an ELTIF is considered sufficient in length.
  • Criteria to be used for certain elements of the itemised schedule for the orderly disposal of the ELTIF assets.
  • Costs disclosure.
  • Facilities available to retail investors.

The deadline for responses is 14 October 2015.

On 30 September 2015, the European Commission adopted a Delegated Regulation amending the Solvency II Delegated Regulation (EU 2015(35)) concerning the calculation of regulatory capital requirements for several categories of assets held by insurance and reinsurance undertakings, in particular infrastructure investments and investments in ELTIFs. It extends to ELTIFs the provisions in the Solvency II Delegated Regulation concerning the treatment of EuVECAs and EuSEFs.

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1.14 EU Capital Markets Union

Following its February 2015 consultation process, on 30 September 2015, the European Commission launched its capital markets union ("CMU") action plan to build a true single market for capital across the 28 EU Member States. The Commission's overall goal for CMU is to create opportunities for investors, connect finance to the wider economy, and foster a more resilient financial system, with deeper integration and more competition.

As part of this the Commission launched a public consultation on the review of the European Venture Capital Funds and European Social Entrepreneurship Funds regulations (see 1.10 above for more detail).

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1.15 Client Assets and Investor Money Regulations

The Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) Client Asset Regulations 2015 come into force on 1 October 2015. Investment firms are required to issue a Client Assets Key Information Document to new retail clients from 1 October 2015 onwards and to existing retail clients by 1 January 2016.

The Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) Investor Money Regulations 2015 will take effect from 1 April 2016.

On 17 July 2015, the Central Bank updated its guidance note for Authorisation under MiFID to reflect the client asset framework.

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1.16 Thematic Review - Cyber Security and Operational Risk

The Central Bank recently undertook a thematic review to assess the management of cyber security and related operational risks across investment firms, fund service providers and stockbrokers. The objective of the review was to examine firms' control environment (including policies and procedures) designed to detect and prevent cyber security breaches as well as board oversight of cyber security.

On 22 September 2015, the Central Bank issued an industry wide letter to investment firms and fund service providers setting out measures it expects such firms to take in managing cyber security risk. Although not part of the thematic inspection, boards of investment funds (which covers management companies) also received the letter. However, the letter does not consider investment funds/management companies specifically or reflect how they differ from investment firms and fund service providers in terms of operational set-up and business infrastructure.

While it is prudent for investment funds to consider the content of the Central Bank's letter and take actions accordingly, many elements will not be relevant for investment funds. The key message in the letter, for investment funds, is the recommendation that boards should have robust cyber security policies and procedures capturing a range of elements including processes for reporting incidents internally and to the Central Bank.

For more information on this topic generally see our client update, Legal Considerations to Address Cyber Security Risk for Irish Investment Funds.

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1.17 Securities Financing Transactions Regulation

The proposed Regulation on securities financing transactions ("SFTs") seeks to cover all forms of lending, borrowing and re-use of securities in the EU and in all the branches of counterparties to SFTs no matter where they are located. The European Parliament is due to consider the regulation in its plenary session on 27 October 2015.

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1.18 Fitness & Probity - Individual Questionnaire Application Guidance and FAQs

On 13 July 2015, the Central Bank issued guidance for regulated financial service providers and applicant firms in relation to submitting IQs through the Central Bank of Ireland’s Online Reporting System for individuals who are proposed to hold Pre-Approval Controlled Functions.

The Fitness and Probity - Frequently Asked Questions issued by the Central Bank on 14 July 2015 further addresses certain questions that may arise in the context of the amendments made to the Central Bank Reform Act 2010 by the European Union (Single Supervisory Mechanism) Regulations 2014.

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1.19 Investment Funds Statistics: Q2 2015

The main points to note in the Central Bank's September 2015 update are:

  • The net asset value of investment Funds resident in Ireland ("IFs") remained broadly stable increasing by just 0.3% over the quarter to Q2 2015,  to €1,456 billion from €1,451 billion in Q1 2015; 
  • Net transactions inflows were offset by negative asset revaluations, primarily in debt security holdings. Conversely, hedge funds benefitted from relatively strong revaluations over the quarter;
  • IFs holdings of equity remained broadly stable while debt security holdings declined by 2.5%, due to negative revaluations.

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1.20 Industry Funding Levy Consultation

On 3 July 2015, the Central Bank and the Department of Finance published a joint consultation paper (CP95) entitled ‘Funding the Cost of Financial Regulation’ which closed on 25 September 2015. It outlined a number of proposed changes to the current funding structure and addressed topics including:

  • the case for full industry funding;
  • the current regulatory cost model;
  • the future cost of financial regulation;
  • international comparisons;
  • domestic comparisons; and
  • regulatory landscape for each of the regulated sectors.

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1.21 Anti-Money Laundering Update

On 25 June 2015, the Fourth Money Laundering Directive ((EU) 2015/849) ("MLD4") and the revised Wire Transfer Regulation ((EU) 2015/847) ("WTR") came into force. EU Member States must adopt and bring into force the measures transposing MLD4 into national law by 26 June 2017. The WTR applies from 26 June 2017. The Joint Committee of the European Supervisory Authorities is due to publish its first consultations relating MLD4 and the WTR in October 2015.

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2 Tax

2.1 OECD BEPS Update

On 5 October 2015, the OECD presented its final package of proposals for a co-ordinated reform of international tax rules. The OECD/G20 Base Erosion and Profit Shifting ("BEPS") Project aims to provide governments with solutions for closing gaps in the existing rules that allow corporate profits to be artificially shifted to low/no tax environments, where little or no economic activity takes place.

Perhaps the most important point to note about the package is that nothing legally binding has yet been introduced. Changes in domestic tax law and international tax treaties will be required to implement the proposals. The OECD will now begin working in earnest on the implementation phase.

The BEPS package covers a broad range of 15 key areas, from transfer pricing to tax disclosure, and in general it may be said that the measures proposed are focused on the taxation of multinational enterprises.  However, some measures do have the potential to impact the funds industry, in particular, structures that use hybrids or special purpose companies to make and hold investments.  For example, new minimum standards are proposed on treaty shopping and there are measures aimed at arrangements that reduce or eliminate taxable profits through the use of excessive interest deductions or hybrid instruments. 

The OECD has proposed the adoption, at a minimum, of rules in bilateral tax treaties to address treaty shopping.  This is the practice by which an entity in a country without tax treaties might set up an entity in a country with tax treaties in order to access treaty benefits they would not otherwise obtain.  This means that countries will be expected to include in their treaties one or a combination of the following rules: (i) a "limitation-on-benefits" rule (or "LOB") which denies treaty access unless a treaty resident is a "qualified person"; and/or (ii) a "principal purpose test" rule ("PPT") which denies treaty access where one of the main purposes of any arrangement is to access treaty benefits. 

About 90 countries have started the negotiation of an innovative "multilateral instrument" to implement the treaty-related BEPS measures in a synchronised manner. The multilateral instrument will be opened for signature in 2016. 

Helpfully, it has been proposed that certain "collective investment funds" should be automatically regarded as "qualified persons" for the purpose of the LOB rule. This mirrors the treatment of Irish funds under the US/Ireland double tax treaty. This is something which Maples assisted the Managed Funds Association in lobbying for earlier in the year.

A new treaty provision on transparent entities (included in the proposals on hybrids) and the possible inclusion of a derivative benefits provision in the LOB rule (to be finalised in the first part of 2016) may address some concerns regarding the treaty entitlement of funds in which there are non-resident investors. 

However, the position with regard to funds that are not considered to be "collective investment vehicles" (e.g. some alternative investment funds that are not widely held) has not yet been resolved.  That will be the subject of further consultation through 2016.  It should also be noted that the OECD wishes to review its proposals on LOB in light of any changes made by the US in its LOB provisions which were published for consultation in May 2015.

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2.2 Recent Irish Revenue Briefings relevant to the Funds Industry

UCITS and AIFS with Irish Managers

In August 2015, Irish Revenue released an e-briefing regarding the taxation of certain non-Irish UCITS and AIFS which have an Irish manager.

The briefing inserts new guidance in relation to section 747G of the Irish Taxes Consolidation Act 1997 (as amended) ("TCA") into the Unit Trusts and Offshore Funds Tax and Duty Manual as follows, confirming that a UCITS formed under the law of another EU Member State and an AIF formed under the laws of a jurisdiction other than Ireland will not be liable to tax in Ireland by reason only of having a management company or a manager (respectively) that is authorised under Irish law.

The guidance merely confirms Revenue's interpretation of existing legislation, which clarifies that non-Irish funds are not exposed to Irish direct taxation by reason of having an Irish manager. In a post-AIFMD environment this increases the attractiveness of using Irish based managers. The manager should be subject to the attractive Irish corporate tax rate of 12.5% on any profits derived from its trading activity.

In relation to indirect tax, Ireland has not yet updated its legislation to address the question of whether an Irish manager leads to any Irish VAT exposure for non-Irish funds. This relates to the question of whether the manager results in the fund being established in Ireland for VAT purposes. Irish Revenue has had constructive engagement with the funds industry in relation to this area although certain questions remain to be resolved.

VAT Treatment of Portfolio Management Services – Revenue's Position

Revenue has published guidance in relation to the Deutsche Bank AG case (C-44/11).  By way of background, the case focused on discretionary portfolio management services provided by Deutsche Bank to client investors.  The service consisted of analysing and monitoring assets of client investors, on the one hand, and selling securities on the other.  The Court of Justice of the European Union ("CJEU") held that Deutsche Bank’s execution and advisory elements ought to be placed on an equal footing and, taken together; they formed a single, inseparable supply which it would be artificial to split. This being the case, the CJEU considered whether the package of services did not fall within the exemption for the management of special investment funds.  Ultimately, the CJEU ruled that the entire fee was chargeable to VAT. The Revenue briefing notes that prior to the Deutsche Bank decision, Revenue understood that portfolio management services could be comprised of several separate elements and treated them accordingly for VAT purposes.  As such, different VAT treatments could be applied to different elements of the portfolio management services provided the separate elements were clearly identifiable and the basis for apportionment of the fees was realistic.  Revenue now notes that this treatment can no longer apply as a result of the Deutsche Bank decision where a fee is charged on a periodic basis for a single supply of a service consisting of (i) analysing and monitoring the assets of client investors; and (ii) of purchasing and selling securities.  That entire fee will be subject to VAT.

Management services provided by investment managers and management companies will still be exempt from VAT where they consist of financial services that consist of managing a regulated investment fund established in Ireland and regulated by the Central Bank. The Deutsche Bank case related to services generally provided to single investors as opposed to services provided to the investment fund itself.

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3 Listings

3.1 New Process for Submitting NAVs to the ISE

The new process for submitting Net Asset Values ("NAVs") to the Irish Stock Exchange ("ISE") moved online on Monday 28 September 2015.  Key changes from this date:

  • Customers submitting NAVs need to register on ISEdirect.
  • Files for automated submission need to be set up in advance via ISEdirect, approved as suitable by the ISE and emailed to a new email address.
  • For customers who do not use files, each NAV will be processed individually via ISEdirect.
  • The email addresses and will no longer be in use so files sent these email addresses will not be processed.
  • Fax and other hard copy forms containing NAV details will no longer be processed.

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© Maples and Calder 2015

This update is intended to provide only general information for the clients and professional contacts of Maples and Calder. It does not purport to be comprehensive or to render legal advice.



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Peter Stapleton
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Adam Donoghue
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