The expanding global presence of US mutual funds remains one of the most challenging reporting and tax concerns. Developments in 2015 included an update on European Union withholding tax reclaims for US funds and the release of final recommendations from the Organization for Economic Co-operation and Development (OECD) on its Base Erosion and Profit Shifting (BEPS) project, which will alter the tax landscape for multinational companies, including mutual funds and their advisors. Congress permanently extended provisions that increase the appeal of mutual funds taxed as regulated investment companies (RICs) to foreign investors. Revisiting regulations that haven’t changed since 1957, the Internal Revenue Service (IRS) finalized rules governing the qualification tests for RICs.
Looking back on 2015, increased tax complexity continued to impact the international regulatory environment, presenting its share of challenges for mutual funds and their advisors. Developments throughout the year that stand out as having higher impact on mutual funds originated from a variety of sources, including rulings in Europe that resulted in withholding tax repayments to US investment funds; a report by the Organization of Economic Cooperation and Development (OECD) that issued final recommendations on its Base Erosion and Profit Shifting (BEPS) project; and, on the domestic front, the Internal Revenue Service (IRS) release of its final asset diversification test regulations, which are expected to alter investment strategy options of certain mutual funds.