Hot topics for PSFs
The latest challenges for Professionals of the Financial Sector
Base Erosion and Profit Shifting (BEPS)
Tax is in the headlines in a manner few could have predicted – even a year or two ago. This has led to a range of issues for businesses to consider, including the OECD's Base Erosion and Profit Shifting project.
The OECD began work on their BEPS project to address concerns that current principles of national and international taxation were failing to keep pace with the global nature of modern trading and business models. In particular, a perception that existing rules give businesses too much opportunity for arbitraging tax rates and regimes.
While views vary, one clear and consistent message is that the matters on the OECD Action Plan agenda are set to significantly shape the means by which governments collect tax and companies align their tax affairs and business models in the decade ahead. Given the OECD’s pace of work, change is inevitable and will be swift.
Endorsed by the G20 Finance Ministers and Central Bank Governors, the Action Plan will likely be delivered in a short 18 to 24 months timeframe.
A legal framework concerning electronic archiving already exists in Luxembourg. However, this framework does not provide sufficient legal guarantee regarding the destruction of an original document that had already been digitalised.
To overcome this limitation, a team of experts was gathered to design a new legal framework based a new law on electronic archiving and an update of other impacted laws (Civil code, Commercial code, Financial sector law) and of the related Règlement Grand Ducal (RGD).
The proposed legal framework puts forward three major considerations:
- Creation of the Dematerialisation and Conservation service provider (defined as ‘PSDC’ in the draft law) status: the objective is to organise the activity of digitalisation and archiving and thus to build trust on activities for service receiving companies, as well as for judges, ministries, administrations and courts. PSDCs will be monitored by the ILNAS with a specified accreditation scheme. An organisation can choose to become accredited for digitalisation and/or for archiving
- Reversal of the charge of proof: In case of faithful copy of the original document produced and archived by a PSDC under conditions set forth in the RGD, it would be up to the charging party to evidence that the copy is not a faithful or sustainable reproduction of the original document
- Technical and organisational requirements: The RGD, and more specifically, the accreditation scheme will set precise technical requirements, organisational constraints and implementation conditions
In parallel with its prosperous private banking activities, The Grand Duchy of Luxembourg has experienced a growing interest for Family Office business in order to meet wealthy families’ needs as they become increasingly complex and varied when it comes to wealth management and advisory.
On 21 December 2012, the Family Office law came into effect creating one of the first legal frameworks for the Family Office activity (Art. 28-6) together with new opportunities for the specific business in Luxembourg in terms of increased service quality and the development of new structured services for responding to new legal requirements.
CSSF Circular 12/544
Optimisation of the supervision exercised on the support PSF by a risk-based approach
This circular implements a risk assessment and management process for the provision of services to the financial sector for support PSF, relying on:
- The application of the principle of proportionality according to the importance of the activity exercised in the financial sector by the support PSF
- Self-assessment and management taken into account regarding risks the support PSF exposes the financial sector to and which are subject to an annual risk assessment report (RAR) by the support PSF; a description of the activities exercised in the financial sector, the organisation and infrastructure – to be provided annually in a descriptive report (DR) – will facilitate the understanding and analysis of the risks reported in the RAR
It is expected that the above would be completed by a procedures report as agreed with the approved statutory auditors. This report should allow a precise assessment of the organisation, the internal control system, the financial situation and the risks incurred.