MARCH 2015 BERLIN


Private Trust Companies [ NICK JACOB ]


SETTING UP A PTC HAS A NUMBER OF problems: finding a suitable board and


Tax planning using partnerships [ ROBIN VOS ]


THE PARTNERSHIP IS an institution of great


antiquity. Partnerships are often (but not always) tax transparent. They facilitate splitting rights. A limited liability partnership is not transparent: it is a body corporate, though treated as transparent for UK tax. The LLC can be tax transparent in the US. Transparency can offer respectability and opportunities for arbitrage, e.g. in rebasing on changing residence from the UK to the US. Profit splitting enables income to be allocated to persons


paying little tax. Partnerships can separate


control and ownership. There can be regulatory issues. Partnerships that are not transparent can be resident in a country in which they are taxed, but partners in a transparent partnership are the beneficial owners of the partnership income. Partnerships have other uses in tax planning: synthetic bond stripping, private equity base-cost shift, and remuneration planning. Partnerships are under attack in the UK, but still have planning possibilities.


suitable people without conflicts. An institutional trustee may administer the PTC. There may be family directors, present and future. There are risks for the institutional trustee. A reserved power trust may be preferred, but they have their concerns. The composition of the board is important – including someone with experience and someone representing the purpose trust owning in the PT. See HR v JPT (1997). There may be statutory


Every level of the structure needs to be registered for FATCA.


requirements – for issued capital, for a licence etc. Every level of the structure needs to be registered for FATCA; they will be mostly FFIs. One level could be a sponsor – perhaps the purpose trust if an FFI; each lower level would then not need to register. The PTC could be a company limited by guarantee,


but a company limited by shares held by a purpose trust might be regarded as the best. There needs to be a service agreement between the PTC and the purpose trust. A PTC can be created in many jurisdictions. Provisions for succession and amendment need to be considered. Careful planning is the clue to success.


Risk management and tax planning [ KAY HOFMANN ]


RISK IS THE EFFECT OF UNCERTAINTY ON OBJECTIVES. Tax planning involves risk, e.g. of offshore leaks,


Luxembourg and Swiss leaks. A tax ruling or opinion does not necessarily eliminate risk. A favourable ruling can be hard to obtain, but an opinion and a meeting can help. If the client is evading tax, the advisers need to walk away. Some tax risk can be covered by insurance, including captive insurance (though the captive capital requirements can be onerous). A captive can cover other risks too, confining itself


to high-risk items, while low-risk items are self-insured. Where the owner of a company wishes to sell, he may insure the continuance of turnover. A royalty payment can be converted into an insurance premium.


022


The ITPA Green Book 2016 www.itpa.org


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