JUNE 2015 AMSTERDAM
Tax planning for investment in and out of Brazil
[ LEONARDO BRAUNE ]
SINCE THE 1990s THERE HAS been an outflow of capital
Coming onshore [ PAOLO PANICO ]
SOME CLIENTS ARE NOWADAYS ASKING TO have trusts that are taxed at a reasonable
rate, perhaps to seek treaty benefit, or for reputation reasons – avoiding accusations of tax avoidance. In Canada, Italy and Hungary trusts are themselves tax subjects. ‘Mid-shore’ jurisdictions do not tax trust income referable to non-resident beneficiaries. The exemption in New Zealand depends on the residence of the settlor. Switzerland and Luxembourg are not suitable: trusts are not taxed in their own right. In Canada, trust income is deemed income of an individual, but the rate of tax is at least 26%. In Italy, trusts are taxed on accumulated income, but since 2014 the effective tax rate on dividends is 21.36%. The new Hungarian Civil Code makes provision for a kind of trust taxable at 10% on the first HUF500 (approximately €1.6m) and 19% thereafter. There is the possibility of withholding tax for non-Hungarian residents. Singapore taxes trust income, but foreign source income only to the extent of remittance. There is an exemption for a ‘prescribed trust fund’. Hong Kong
Some clients want a trust that is taxed at a reasonable rate for reputational reasons.
is not dissimilar. In Australia, trusts are treated as taxpayers. Local income is taxed at rates of up to 45%, but non-Australian income appointed to non- residents is only taxable when paid. The foreign non-grantor trust in the US requires special attraction. It can be a ‘foreign trust’: there is a control test and a court test, which may be satisfied by the inclusion of a non-US co-trustee or a non-US protector with appropriate powers.
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The ITPA Green Book 2016
www.itpa.org
following rising inflation and the arbitrary use of state power. Offshore assets and structures are required to be reported annually, but only a small proportion of taxpayers do so – perhaps 50%. Austria is the preferred jurisdiction for offshore investment, with the Cayman Islands as the preferred jurisdiction for investment funds and the Netherlands in third place –
also used (along with the US) for inward investment. The BVI, Bahamas and Cayman have most of the offshore investment of Brazilians; there are no personal holding company rules, but these are now on the horizon. The law does not recognise trusts, but beneficiaries are required to report their interests and trustees may make reports on behalf of the beneficiaries. There is a council (the COAF) responsible for collecting information. Many wealthy families are considering trusts, foundations and other vehicles instead of the simple BVI IBC etc, on which they have formerly relied. The level of wealth is high and the need for advice great.
The level of wealth is high, and the need for advice great.
Reporting obligations regarding beneficial ownership
[ NIKLAS SCHMIDT ]
THE EU’s FOURTH ANTI-MONEY LAUNDERING DIRECTIVE IS A further step in the recent invasion of privacy. The UK Act of 2015
requires small companies to make public the beneficial ownership of their shares. The directive has to be implemented within two years. A ‘beneficial owner’ of a company is an individual who owns or
controls 25% of the shares or is a senior management official. With a trust, the class extends to the settlor, trustee, protector beneficiary or ‘controller’. There are similar rules for foundations, extending to the founder (and perhaps another person who adds funds), a protector (or similar) and the beneficiaries. There is a separate registry for corporate and legal entities (Art 30)
and for trusts (Art 31). Access to the corporate register is available to a wide range of persons, for the time being depending on the national rules of member states. Access to the trust register is more limited: it applies to express trusts which generate tax consequences; there is access for competent authorities; there will be no access others, even if they show a legitimate interest. It seems that the trust rules will apply to foundations. The directive arguably conflicts with the EU’s charter of fundamental rights.
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