Tax Services for the Investment Management Industry

The Deloitte difference

In our work with leading hedge funds, mutual funds, private equity firms, and private wealth firms, our clients consistently describe several key trends that impact their businesses today from a tax perspective. Among the most notable are:

• Frequency of new legislation, regulations, and rulings
• Global growth driving cross-border activity and investments
• Continuing convergence of investment styles
• Increasing use of complex financial products
• Sophistication of transactions and due diligence
• High degree of specialization in all aspects of their business

These trends drive compliance concerns and planning considerations. Addressing them all can be a tough balancing act, but doing so can unlock hidden value for your organization. Deloitte takes an integrated industry approach based on key trends in order to increase the value we deliver to investment managers.

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Frequency of new legislation, regulations, and rulings

Proposed and enacted legislation, new regulations and rulings, and increased levels of scrutiny around tax compliance and financial reporting have complicated life for investment management firms. New requirements, combined with other regulatory requirements and increased examination activity by the IRS and state and local jurisdictions, place significant value on getting it right the first time and on time.

Deloitte can help by supplementing your in-house resources — both to handle the volume of compliance work and to address the technical issues that are almost certain to arise. We have the people, processes, and technology necessary to help you streamline your compliance operations and produce the quality of tax returns and other tax reporting your firm requires.

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Global growth and cross-border activity

As you continue your growth globally, is your tax department equipped to deal with emerging U.S. and international tax developments?

We have the depth of industry-experienced resources to assist you with the seemingly countless issues in this area, including foreign tax credit planning, outbound investment planning, managing offshore funds and their U.S. partnerships, along with effectively connected income (ECI), withholding at source, and many others. Our tax professionals have the specific industry experience and the tax-technical specialization to help you prioritize each of these issues, address them effectively, and find the balance that’s right for your organization.

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Convergence, complexity, and specialization

The tax implications of deal structures differ widely between private equity funds, hedge funds, and mutual funds. In private equity, your focus is on transactions — mergers, acquisitions, and, ultimately, divestiture. Several key considerations include identification of tax risks through the due diligence process, understanding how partners in the deal share in the economics and tax consequences, and implementation of the most tax-efficient structure for the organizations in question.

With mutual funds and hedge funds, the focus is on increasingly complex financial products and derivative transactions, such as swaps, futures, forwards, and, in some cases, new twists on stocks and bonds.

Each financial instrument requires different tax treatment, and the rules seem to change constantly. Then, of course, there’s the issue of generating a timely K-1 and, for mutual funds, operating the fund so that it qualifies as a Regulated Investment Company.

Whether it’s structuring or transactional in nature, our industry tax specialists have the hands-on experience to help you explore the many possible opportunities relating to your financial transactions, as well as the potential pitfalls. If you need support to meet compliance deadlines, we can assemble a team of specialists, the size and composition of which best complements your in-house resources. We can also share insights on U.S. and foreign tax policy, along with the results of recent and pending tax cases, which can guide your decisions.

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Deloitte’s integrated approach brings added value

In a sector defined by complexities, solid tax planning tailored to your investment style and industry is critical for investment management firms. As your firm weighs compliance pressures against the demands of global growth, take advantage of the benefits a tax-aligned, industry-based strategy provides.

Our strengths include:

• Industry specialists distinguished by their specific knowledge of the investment management sector
• A national practice combining deep bench strength in many tax technical areas with broad resources to supplement your in-house compliance and planning capabilities
• A Washington National Tax team that helps keep our clients and our practitioners current with pending domestic legislative and regulatory activity
• Strong experience with the intricacies of international industry tax issues affecting multinational hedge funds, mutual funds, private equity firms, and private wealth firms