FSC joins calls for tax treaty flexibility
The Financial Services Council (FSC) has co-signed a letter asking the Organisation for Economic Co-operation and Development (OECD) to provide flexibility to benefits under tax treaties that prevent double taxation.
The letter, signed by 10 collective investment vehicle (CIV) industry associations, is seeking temporary relief from “administrative and procedural requirements”.
The letter said CIV managers are struggling to secure treaty relief due to factors including:
- experiencing difficulties in receiving certificates of residence (CoRs) from their tax authorities (many of whom are working from home);
- getting forms hand-signed by authorised signatories;
- getting access to paper copies of supporting documents (which, in many cases, are sitting in offices that the CIV managers cannot access); and
- sending these documents to the funds’ custodian.
“Similar ‘work from home’ challenges, we understand, are being faced by custodians, their sub-custodians and tax authorities worldwide,” the letter said.
“Even if all documents make it through the custodial chain to the tax authorities, often no one at the source country tax administration will be available to receive and process the tax claim.”
According to the letter, the CIVs are requesting tax administrations to help facilitate filings by accepting electronic copies of forms and supporting documents, and by permitting forms to be signed electronically.
The CIVs have also requested that tax administrations to accept the most recently expired CoRs when residence country tax authorities are unable to provide current ones.
Additionally, the CIVs have requested tax administrations to preserve claims that CIVs “cannot presently make” due to the pandemic.
This request includes:
- temporarily eliminating certain verification requirements (such as apostillisation) for taxpayers that have previously filed claims that have been honoured based on verified documentation;
- providing reasonable extensions for filing deadlines;
- extending the statute of limitations for filing claims; and
- providing a temporary reclaim system in at-source-only tax relief jurisdictions.
“The temporary relief measures that we suggest would preserve the ability of CIVs to receive the treaty relief to which they are entitled without, given current conditions, creating unreasonably long delays,” the letter said.
“Without this relief, a substantial backlog of treaty claims will develop once business as usual conditions return; this backlog will add significant pressure to tax administrations processing these claims.
“Claims that cannot be submitted, due to COVID-19, before filing deadlines are reached will expire worthless — to the detriment of individual investors in CIVs.
“By adopting temporary relief measures such as these for CIVs and other investors, tax administrations will be enhancing confidence in the capital markets.”
