Liquidity Coverage Ratio and OECD model tax convention: Difference between pages

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imported>Doug Williamson
(Create the page. Source ACT CertFin CT 3.1.1 pages 10 to 11.)
 
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''Bank regulation''
''Tax''.


(LCR).
Companies often operate in a number of different countries and, as a result, may be resident in more than one country under the different domestic tax laws of each country.


The LCR is a requirement under Basel III for a bank to hold high-quality liquid assets (HQLAs) sufficient to cover 100% of its stressed net cash requirements over 30 days.  
Many developed countries have entered into bilateral international tax agreements, known as double tax treaties, with other countries. Many, but not all, of the tax treaties follow the OECD model tax convention.  




The LCR is calculated as:
The OECD model convention provides a basis that can be used to draw up a bilateral tax agreement between two states, that seeks to eliminate double taxation. Double tax treaties also help to encourage cross border trade.


LCR = HQLAs / Net cash outflows


The OECD model tax convention contains a 'tie breaker' clause that determines a company’s tax residence for the purposes of the treaty.


The purpose of this requirement is to ensure that banks can manage stressed market conditions, under which the bank is assumed to suffer substantial outflows of the cash previously deposited with it.
This is taken to be the place where ‘effective management’ and control (POEM) is carried on. In a tie context this test requires a review of where the day to day management of the company takes place.  
 
The LCR applies throughout the European Union.
 
 
It reduces the value to a bank of cash deposits of less than 30 days tenor, because they are only worth the income on the HQLAs if a bank forecasts no short term cash receipts to cover repayment.  




== See also ==
== See also ==
* [[Basel III]]
* [[Double tax treaties]]
* [[Cash investing in a new world]]
* [[Double taxation]]
* [[European Union]]
* [[Organisation for Economic Co-operation and Development]]
* [[High Quality Liquid Assets]] (HQLAs)
* [[Permanent establishment]]
* [[Level 1 liquid assets]]
* [[POEM]]
* [[Level 2 liquid assets]]
* [[Profit shifting]]
* [[Leverage Ratio]]
* [[Residence]]
* [[Liquidity]]
* [[Liquidity buffer]]
* [[Liquidity risk]]
* [[Net Stable Funding Ratio]]  (NSFR)
* [[Overall Liquidity Adequacy Rule]]  (OLAR)
* [[Pillar 1]]
* [[Required Stable Funding]]
* [[Stress]]
* [[Survival period]]
 
[[Category:Compliance_and_audit]]
[[Category:Liquidity_management]]

Revision as of 09:54, 24 May 2015

Tax.

Companies often operate in a number of different countries and, as a result, may be resident in more than one country under the different domestic tax laws of each country.

Many developed countries have entered into bilateral international tax agreements, known as double tax treaties, with other countries. Many, but not all, of the tax treaties follow the OECD model tax convention.


The OECD model convention provides a basis that can be used to draw up a bilateral tax agreement between two states, that seeks to eliminate double taxation. Double tax treaties also help to encourage cross border trade.


The OECD model tax convention contains a 'tie breaker' clause that determines a company’s tax residence for the purposes of the treaty.

This is taken to be the place where ‘effective management’ and control (POEM) is carried on. In a tie context this test requires a review of where the day to day management of the company takes place.


See also