How BEPS 2.0 will impact the financial services industry and more specifically the asset management sector has become clearer through the principles outlined in the blueprints. However, the blueprints still contain some uncertainties and issues to solve.
Amount A of Pillar One is targeting consumer facing businesses (“CFB”) and automated digital services (“ADS”). The blueprints treat financial services companies as out of scope, which group includes banking, insurance and most likely asset management groups. Uncertainty remains in this respect as certain asset management companies and their managed funds are not currently regulated.
It is expected that most asset management services will not be subject of new taxing rights under Pillar One as they will likely fall under the exemption of regulated financial services and / or because asset management services do not typically meet the definition of CFB or ADS activities.
For fintech companies there are additional questions as to whether they will be considered under financial services and therefore out of scope, as banking and insurance requirements do not necessarily apply to them.
Even though Pillar One will likely not be applicable to financial services, we encourage financial businesses to follow the OECD’s updates.