Although the overall number of countries with tax issues as a result of implementation of the UCITS IV Directive has decreased since 2010, there still remains a significant portion of EU Member States yet to address the challenges reported inaudit.com this week. According to KPMG International’s updated version of its 2010 Fill the glass to the brim report on the tax implications of UCITS IV – Fill the glass to the brim: have we broken through? – 13 of the 27 Member States are still yet to fulfill their tax obligations, even though they should have transposed UCITS IV into national law by 1 July 2011. Some of these countries include Belgium, Cyprus, Greece and Portugal. Tax was indentified as a key hurdle to the implementation of UCITS IV in KPMG International’s 2010 report, and whilst some progress has been made, progress seems to have stalled on the main issue of tax neutrality for investors on fund reorganizations.

Georges Bock, KPMG’s Chairman of the European Investment Management & Funds Tax Practice, said that the firm’s research found “varying degrees of discriminatory tax treatment” of cross-border fund operations. “For cross border fund reorganizations the situation is extremely complex. In some countries investors are neutrally treated, in others the treatment varies from insecurity to discrimination and then in others there is no way around taxation of investors upon reorganization—not even a ruling process. We believe the EU needs to take up the fight to protect investors’ interests in the near future,” commented Bock. The new report notes that most tax issues arising from the UCITS IV framework should be solved on an EU level. Claude Kremer, President of the European Fund and Asset Management Association (EFAMA), said that the success of the measures introduced by the UCITS IV Directive depended on a harmonized and efficient tax framework. Although as Bock observed, given the current economic difficulties, “solving the tax implications of UCITS IV does not appear to be high on the political agenda”.