BEPS regulation forcing asset manager adaptations

A new report finds almost half of asset managers reviewing investment structures to make sure they are compliant with the OECD initiative.

Almost half (41 percent) of alternative asset managers canvassed for a new survey said they were reviewing their investment structures to make sure they were compliant with Base Erosion and Profit Shifting (BEPS) regulation.

The survey was undertaken by Intertrust in the wake of this month’s annual OECD Week, in which 76 countries and jurisdictions signed – or formally expressed their intention to sign – a multilateral BEPS convention that will implement a series of tax treaty measures to update existing bilateral tax treaties.

Other areas now being reviewed to ensure compliance include: REIT-type structures (34 percent of managers); accounting systems (30 percent); management structures (30 percent); financing structures (29 percent); and underwriting and valuation models (14 percent).

“In the current climate of increasing regulatory reform, as well as increased pressure from the political sphere for tax transparency, investors are having to undertake widespread review and in many cases reform of their own structures in place,” said Paul Lawrence, global head of funds at Intertrust, a provider of trust, corporate and fund services.


BEPS is an OECD regulatory initiative driven by a desire to tackle issues relating to tax erosion and profit sharing. It aims to tackle the most aggressive examples of tax structuring that shift profits to favourable jurisdictions in order to minimise taxation.

Most media reports have focused on the potential impact of BEPS on those large corporates whose approach to tax has created unflattering headlines, such as Google and Starbucks. However, alternative asset managers – which have arguably been less aggressive in their approach – find themselves caught in the net.

In places frequently used by alternative asset managers such as Luxembourg and Dublin for certain tax advantages, more evidence may have to be provided of economic activity (or ‘substance’) by managers in those locations. If the sole reason for being located somewhere is to take advantage of a tax treaty, the regulators may seek to disallow the benefits that accrue.

Consequently, many fund managers are now assessing whether meeting BEPS requirements may mean moving people and/or functions across borders, thus impacting overheads.