Agefi Luxembourg - novembre 2024

AGEFI Luxembourg 6 Novembre 2024 Economie BySidonieBRAUD,Partner–AWMTaxLeaderand AlexandreHICK,TaxDirector,PwCLuxembourg I n today’s dynamic financial land- scape, tax compliance has emer- ged as a key concern for financial professionals.With the scrutiny of the tax and regulatory authorities intensi- fying and the complexity of tax laws increasing, assetmanagers, but also bankers, and insurersmust prio- ritise tax compliance as a fun- damental component of their operations. This change underscores the ne- cessity for financial institu- tions to establish robust tax governance frameworks that ensure adherence to local and in- ternational tax regulations. In a world where investors and stakeholders are in- creasinglydemandingtransparency,effectivetaxgov- ernance can enhance a firm’s credibility and trustworthiness. Financial institutions that prioritise tax compliance as part of their strategic framework positionthemselvesfavourablyinacompetitivemar- ket, ensuring long-termsustainability and success. Moreover, strong taxgovernancenot onlyaddresses compliance concerns but also fosters transparency and accountability within organisations. Financial professionalsmustensurethattaxconsiderationsare embedded in their overall financial strategies, thereby reinforcing the organisation’s commitment to ethical practices. In this respect, the intersectionof taxcomplianceand Environmental, Social, andGovernance (ESG) crite- riahasbecome increasingly important. Stakeholders are now looking for companies that demonstrate a commitment not only to regulatory compliance but also to ethical behaviour in all aspects of their oper- ations, including taxation. Tax governance as part of ESG: Amust for assetmanagers A strong tax governance framework has emerged as a critical component of Environmental, Social, and Governance (ESG) criteria. Tax practices now fall under the scrutiny of investors and regulators alike, who seek assurance that asset managers aremanag- ing their tax obligations ethically and transparently. ThegovernancepillarofESGemphasisesresponsible corporatebehaviour,whichincludeshowcompanies approach taxation. Today,stakeholdersexpectassetmanagerstouphold highethicalstandards,andtaxgovernanceisasignifi- cant aspect of this accountability. Poor tax practices, particularlyaggressivetaxavoidance,areincreasingly viewedasdetrimentaltoacompany’sreputationand ethicalstanding.Companiesthatengageinsuchprac- ticesmayfacebacklashfrominvestorsandregulatory bodies, potentially leading to reputational damage andfinancial penalties. Global initiatives like the OECD’s Base Erosion and ProfitShifting(BEPS)projectandtheForeignAccount Tax ComplianceAct (FATCA) already reinforced the push for tax transparency. These frameworks aim to ensure that companies pay taxes where their eco- nomic activities occur and that they report their tax positions in a clear and understandable manner. By aligning tax governance with ESG principles, asset managers candemonstrate their commitment to eth- ical practices, thereby enhancing their organisations’ credibilityandappealtosociallyresponsibleinvestors. Tax riskmanagement and reputational risks In today’s complex regulatory environment, tax is not just a compliance matter; it is a significant risk that asset managersmust manage proactively. The landscape of tax riskhas expanded, and institutions need to recognize and address the various dimen- sions of tax-related risks to safeguard their reputa- tions and operational integrity. Asset managers must adopt a comprehensive ap- proach to tax riskmanagement, incorporating both compliance and strategic oversight. This includes understanding the implications of evolving tax reg- ulations, anticipating changes, and implementing systems run by aware and responsible people that ensure adherence toboth local and international tax laws. Failure tomanage tax risks can lead to severe consequences, including financial penalties, legal repercussions, and loss of investor confidence. Demonstrating a commitment to responsible tax practices is indeed essential for building trust and maintaining strong relationshipswith investors and clients alike. A crucial aspect of effective tax risk management is the involvement of theboardof directors, atmanage- ment company and/or funds levels. Board membersmust ensure that tax considera- tions are firmly placed on their agenda. This requires a commitment to under- standing the implications of tax regula- tions and their potential impact on the organisation’sfinancialhealthandrepu- tation. By prioritising tax governance, boards can foster a culture of accountabil- ity and transparency that permeates throughout the organisation. Moreover, having board members with a solid understanding of tax is- sues is essential for in- formed decision-making. Expertise in taxmatters en- ables directors to engage meaningfully with tax profes- sionals and assess the organisa- tion’s tax strategies critically. This knowledge is vital in evaluating risks, identifying opportunities, and ensuring that the company’s tax practices align with its overall business strategy. Strengthening tax governance to keeppacewith tax complexity Staying up-to-date with global tax developments presents a challenge for asset managers. The sheer volume and complexity of tax changes mean that taxgovernance is no longer optional—it is essential. As said, strong tax governance frameworks enable asset managers to effectively manage these com- plexities, uphold compliance and get some tax effi- ciencywhen possible. The PwC Manco Tax Barometer underscores that asset managers in Luxembourg face ongoing chal- lenges in meeting evolving tax and compliance re- quirements, driven by both local and international regulatory pressures and is designed to ensure that each and any tax hot topic is considered at least, dis- cussedduring the Boards, and analysed. At PwC, we believe that the followings tax updates (amongst many others) should be understood and embedded inBoards’ agendas and tax policy: -NewTaxLegislationDraftinLuxembourg :Adraft bill (n° 8414), currently under review, proposes changes such as lowering the corporate income tax ratefrom17%to16%.Thebillalsoexpandscertainex- emptions, includinga subscription tax exemption for UCITSETFs.Thesedevelopmentsdirectlyimpactthe asset management sector, requiring immediate ad- justments to tax compliance strategies. It also brings importantmodificationswhen it comes to impatriate tax regime andprofit-sharingpremiums scheme. -PillarIIImplementation :PartoftheOECD’sglobal taxreform,PillarIIintroducesa15%globalminimum tax rate for multinational enterprises. This measure adds layers of complexity for Luxembourg-based in- stitutions, necessitating compliance assessments and updatestocross-bordertaxstrategiesformultinational portfolios. This very complex tax framework is fully applicable to assetmanagers and couldbe applicable atFundslevelaswell.Indeepimpactanalysisshould urgently be carriedout if not alreadydone. -SubscriptionTaxComplianceandAudits :TheLux- embourg subscription tax has grown more intricate, with stricter compliance standards and increased tax authorities’ audit activities. Recent tax laws have in- troducedconditionalreductionorexemptions,which we fully welcome but posing a higher risk of non- compliance.Assetmanagersmustreviewtheirprod- ucts and their corresponding subscription tax rates and maintain detailed documentation to meet these evolving requirements andavoidpotential penalties. - New Investment Tax Credit: The Investment Tax Credit provides a financial incentive for companies investing in digital or ecological transformations, of- feringan18%tax credit computedoneligible invest- ments and expenses. However, firms must stay informedofspecificeligibilitycriteriatoleveragethis opportunity effectively within their broader tax strategies. - Retailisation of investment funds: As more retail investors gain access to alternative investment funds, assetmanagersmustadapttoincreasedtransparency and tax reportingexpectations. Thedemand for clear reporting aligns with global tax and investor protec- tion standards, emphasizing the need for adaptable andresilient governance frameworks. Conversely, as moretraditionalassetmanagerswidentheirstrategies toAlternativesones,relatedtaxlegislationsandstruc- turingmust be fully understood and embedded into the tax policies. In sum, these examples underscore that staying abreastofglobaltaxregulationsisnosmallfeat.Strong tax governance structures enable asset managers to navigate these challenges confidently, aligning with bothcomplianceobligationsandtheethicalstandards investors increasingly expect. Conclusion As thefinancial landscape evolves, the importanceof tax governance in financial strategy cannot be over- stated. Tax considerations have become central to the operationalframeworksofassetmanagersintertwin- ingwiththeprinciplesofESG.Strongtaxgovernance frameworksareessentialforensuringcompliance,ef- ficiency,managingrisks,andaligningwithinvestors’ ethical expectations. Inaworldwheretransparencyandaccountabilityare paramount, assetmanagersmust prioritize responsi- ble tax practices to build trust and integrity. By em- bedding tax governance within the broader ESG agenda, firms can demonstrate their commitment to ethicalbehaviour,enhancingtheirreputationsandat- tracting socially responsible investors. As the regulatory environment continues to change, the call for robust tax governance will only grow stronger. asset managers that proactively manage their tax strategieswill not only safeguard their repu- tationsbutalsopositionthemselvesforlong-termsuc- cess in an increasingly competitivemarket. The growing importance of tax compliance for asset managers and financial professionals Luc Frieden à Budapest au CPE et à la réunion informelle des chefs d’État et de gouvernement : «L'UE a besoin de force et non d'instabilité pour relever les défis » L e Premier ministre luxembourgeois Luc Frieden a participé à la cinquième réunion de la Communauté politique eu- ropéenne (CPE), qui s'est tenue à Budapest, en date du 7 novembre 2024. Le sommet a réuni des dirigeants detoutel’Europepourpoursuivre ledialogueetlacoopérationsurla base des résultats des précédents sommets,dontlederniers’esttenu en juillet de cette année à Blenheim Palace, au Royaume- Uni. Les discussions ont porté principalement sur les défis aux- quelsl’Europefaitface,enmatière de sécurité, de migration et de sécurité économique. Par la suite, Luc Frieden a participé à la réu- nion informelle du Conseil euro- péen le 8 novembre, qui était consacréeprincipalementausujet de la compétitivité de l’Europe. “Les mesures visant à stimuler la compétitivité de l'Union euro- péenne (UE) pour rattraper les États-Unis et la Chine sont encore plus urgentes après la victoire du républicain Donald Trump à l'élection présidentielle américaine”, a déclaré Mario Draghi, ancien directeur de la Banque centrale européenne (BCE), à Budapest. L'ancien président américain, élu le 5 novembre pour un second mandat, avait prévenu peu avant sa victoire que l'UE devrait "payer un lourd tribut" si elle n'achetait pas suffisam- ment d'exportations américaines et avait évoqué la possibilité d'imposer des droits de douane forfaitaires de 10% à 20% sur la quasi-totalité des produits importés aux États-Unis. “Le sentiment d'urgence plus fort aujourd'hui” MarioDraghiadéclaréquelesen- timent d'urgence s'était aggravé depuisl'électionaméricaine."Oui, c'est vrai. Le sentiment d'urgence est plus fort aujourd'hui qu'il y a une semaine", a-t-il déclaré aux journalistes avant la présentation de son rapport sur la compétiti- vité devant les dirigeants des Vingt-Sept. Le rapport Draghi, commandé parlaCommissioneuropéenneet rendu public en septembre, affirme que l'Union européenne a besoin d'une politique indus- triellebeaucouppluscoordonnée, d'une prise de décision plus rapide et d'investissements consi- dérables si elle veut tenir la cadence économique face à ses rivaux, les États-Unis et la Chine. Lescommentairesdel'ancienpré- sident du Conseil italien inter- viennentparailleursaprèsl'effon- drement, mercredi 6 novembre, de la coalition gouvernementale enAllemagne et àunmoment où le président français Emmanuel Macron connaît des difficultés politiquesintérieures,affaiblissant et remettantmême enquestion la forcedumoteurfranco-allemand. Adoption de la déclaration de Budapest Luc Frieden a pour sa part déclaré que dans tous les pays voisins - Belgique, France et Allemagne - il n'y avait pas de gouvernement disposant d'une majorité parlementaire. Selon lui, l'UE a besoin de force et non d'instabilité pour relever les grands défis. Les dirigeants européens ont adopté le 8 novembre la décla- ration de Budapest, une longue liste de tâches assorties de nom- breuses échéances, visant à ren- forcer le marché unique, à aug- menter les capitaux destinés aux investissements et à unifier le marché de l'énergie. Mario Draghi a chiffré les investissements supplémen- taires dont l'UE a besoin de 750 à 800 milliards d'euros par an, mais les pays européens les plus économes du bloc ont déjà contesté l'idée qu'une partie de cette somme provienne d'actifs communs de l'UE. À cet égard, l'ancien banquier central a déclaré que la question la plus urgente n'était pas le finance- ment conjoint, mais la lutte contre la fragmentation du marché unique et des marchés de capitaux. Cependant, les discussions sur l'Union des marchés de capi- taux (UMC) traînent depuis une décennie en raison des dif- férences d'intérêts nationaux, de cultures d'entreprise et de réglementations entre les États membres. “L'UE doit se ressaisir” Le Premier ministre belge Alexander De Croo a déclaré que l'UEdevait se ressaisir avant le retour de Donald Trump à la Maison blanche, expliquer l'im- pact d'une éventuelle guerre tarifaire entre les deux parte- naires et indiquer clairement qu'ils devaient discuter du com- portement économique de leur concurrent commun, la Chine. Source : Reuters et gouvernement ©ME