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  • Financial Services Tax

Identify the opportunities and manage your risks


In a period of fiscal consolidation, Financial Services will continue to be a priority for SARS and many other countries’ tax administrations. This is further emphasised by the G20 / OECD BEPS (Base Erosion and Profit Shifting) initiatives: to crack down on tax avoidance, harmful practices and aggressive tax planning. The G20s efforts to build more resilient financial institutions, increase transparency and market integrity, and fill regulatory gaps will continue to add pressure to the responsibilities of tax teams.

A key focus area is the exchange of information between tax administrations. The introduction of the Common Reporting Standard (CRS), which draws extensively on the intergovernmental approach to implementing FATCA (the Foreign Account Tax Compliance Act), is a huge challenge for all reporting financial institutions, i.e. banks, life insurance companies, investment funds and investment vehicles. For banks that keep US securities in custody for their clients, compliance with the Qualified Intermediary (QI) agreement will certainly remain one of the biggest challenges because a senior manager will have to certify to the IRS that the bank is fully compliant. We expect this burden to increase as governments and regulators formalise their approach to crypto-assets.

For alternative investment funds (AIFs), BEPS and unilateral measures taken by some countries might have an impact on treaty entitlement and might oblige a fund to adapt its structure. In this new tax environment, the goal will be to find a tax-neutral result. Tax optimisation will often only be possible when the substance is in line with the activity.

As for all other industries, transfer pricing (TP) is a key consideration. Our TP specialists help you answer questions such as “How much equity should be allocated to a foreign branch?” or “When is an advisory fee paid by a Management Company to a related entity at arm’s length?”