It is clear that UCITS IV will have a significant impact on the Irish funds industry and these impacts will be most notable from a tax perspective, as well as affecting asset managers and other service providers in other areas. It is important that all asset managers and service providers consider the impact now and ensure that any work required is undertaken in advance of the introduction of UCITS IV.
From a tax perspective, Ireland is ready for UCITS IV. A number of changes were introduced in Finance Act 2010 which facilitate the practical implementation of UCITS IV from an Irish tax perspective. The changes include protecting the tax residency and existing tax position of any foreign UCITS that would be managed by Irish investment management companies, thereby providing certainty to such non Irish funds and making Ireland an attractive location for such management companies. It also clarifies that unitholders in such foreign funds will be treated in the same manner as unitholders in offshore funds and no Irish exit tax needs to be applied by the fund.
Finance Act 2010 includes practical provisions in respect of the following which should assist with the implementation of UCITS IV:
- Achieve fund reorganisations, reconstructions and amalgamations in an efficient and more cost effective manner
- Permit funds that are sold and marketed to only non Irish residents to seek approval from the Revenue to exempt the fund from having to collect non residency declarations from investors. This administration burden being eliminated is a very helpful and pragmatic initiative
- Ensure no CAT exposure exists for non Irish funds administered in Ireland where the share register is maintained here
Further details on the tax impact of UCITS IV are contained here
Asset manager and asset servicer impact
Although the true impact of UCITS IV will not become apparent until after the implementation date of 1 July 2011, there are some other areas that both asset managers and asset servicers should start considering now:
Asset manager impact
- Consolidation of existing structures and resulting economies of scale
- Operational issues may arise from the introduction of additional rules
- The Key Investor Information Document (KIID) represents a logistical challenge for asset managers since it will need to be updated annually, as well as each time the fund characteristics change, translated into the native language of each country of distribution and in many cases pooled for each share class
- Asset managers may need to reassess what they are looking for in an asset servicer
Asset servicer impact
- Fund managers may rely on asset servicers in relation to the production of the KIID, including the controlled transmission of this document to all distributors of the fund. This presents a service revenue opportunity to the asset servicers
- Asset servicers will need to be able to provide a seamless consistent service across all potential master-feeder structures' domiciles especially in fund accounting and transfer agency
- Centralised management companies will demand more joined-up service and reporting across borders
- The Management Company Passport will require UCITS fund managers to comply with risk and compliance management which increases the chance that asset servicers will be asked to provide additional support services in the areas of investment risk and compliance management
Please do not hesitate to contact our UCITS IV team with any queries on the above.
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