Alfi warns Fatca will upend fund distribution

BarometerThe Association of the Luxembourg Funds Industry (Alfi) says the Foreign Account Tax Compliance Act (Fatca), recently passed by the United States “could fundamentally change the way funds are distributed”. Due to be implemented in 2013, the legislation is designed to crack down on tax evasion and will require all foreign financial institutions to report investors who are taxable in the US to the US tax authorities. If foreign institutions do not comply they could suffer a 30% withholding tax on interest, dividends or gross proceeds. Alfi warns that compliance with Fatca could require wholesale reorganising of fund distribution systems, which could cost up to US$40 per investor. A large proportion of this cost would have to be met by European investors, rather than the US citizens who stand to benefit from reclaimed tax. Alfi deputy director general Charles Muller said the challenge is to find ways to lighten the administrative burden so as to prepare for the legislation. “Evading Fatca is not an option for the European fund industry,” he said. “Firstly because the law has been passed, and secondly because the net has been cast so wide that it is hard to escape. Unless you never want to invest in the US again.” ©2011 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.