Fund tax reporting is key for a cross-border fund distribution and is becoming the "hallmark" of fund administrations.
Despite various harmonization initiatives in Europe, e.g. UCITS IV, fund tax reporting for investors is still a very long way behind. Germany, for example, requires the publication of specific accumulated income figures on a daily and yearly basis which have to be computed according to the German highly complex fund tax reporting framework, so that resident investors are taxed according to local tax regulation. Otherwise the investors are tax-penalized and have to pay an unfavourable lump sum.
The fund tax reporting requirements in Europe are one of the biggest challenges for fund administrations, promoters and management companies. Each distribution country requires different reporting figures (daily and annually), which leads to; highly complex tax computations for each jurisdiction, non-standardised reclassification of accounting figures/financial instruments and the interpretation of highly complex regulatory requirements.
The fund tax regimes of the main fund distribution markets requires significant efforts to fulfil intricate tax reporting requirements and reduce the risk of publishing incorrect daily and annual tax figures.
Currently up to ten times as many fund tax figures as NAVs have to be published per share class. Therefore it is time to take a different perspective on fund tax reporting.