UPDATE ON INTERNATIONAL PLANNING ISSUES MONTE-CARLO


Reluctant settlors and difficult beneficiaries [ STELLA MITCHELL-VOISIN ]


LACK OF UNDERSTANDING is often displayed by clients


– quite inappropriately giving instruction to trustees, seeking control of offshore companies etc. Communication with the client is crucial, e.g. explaining that making a settlement is not like opening a new bank account. It is sometimes necessary to lose a client who is not prepared to take advice, but at other times, with patience and communication. problems can be ironed out: it is important to maintain the dialogue. Then there is the know-all client who complains about the way trustees are managing


investments – who wants high return with low risk. It is sometimes possible to keep the client happy by setting aside a small amount for high-risk investment. An independent trustee can have a ‘beauty parade’ of investment advisors. It is important to keep investment performance under review. The politics of a family office can be difficult. Its duties are many and various – calling for continuity, for guidelines on who is doing what and for organising trustees’ meetings. There is always a need for good quality legal advice. Care is needed to handle the grumpy client.


Economic substance [ FRANK SCHUT ]


STARBUCKS is a US corporation. One subsidiary buys beans, one roasts them, one receives royalty and


interest – and makes most of the profit; overall, little tax is paid. The BEPS programme will require transparency and enable the profits to be re-allocated, in line with economic substance of the various activities. Detailed information is to be made available to each of the tax authorities concerned, including details about any rulings in force and any harmful preferential regimes. A lot of IP structures will need to be modified. Treaty-shopping is to be targeted: treaty benefits will not be given to a shell company with little economic substance. Anti-abuse legislation is to be introduced before the end of the year. This will, for example, prevent abuse of the Parent-Subsidiary Directive.


Russia’s new anti-avoidance legislation: some reflections


[ KIRA EGOROVA ]


THERE IS A WORLDWIDE TENDENCY towards transparency, which the changes in Russian law are following – involving disclosure


Actions taken before 1 January 2015 may be covered by amnesty.


of foreign companies and structures, and taxation of undistributed profits. Russian tax residents have obligations to disclose and may be liable for tax on undistributed profits. Control is the main factor: CFC income requires to be ascertained for foreign and Russian purposes and is taxable at 13% (individuals) or 20% (corporations). The income of an active foreign company with guaranteed substance abroad is not affected. A company seeking tax treaty benefit needs substance abroad. Actions taken before 1 January 2015 may be covered by amnesty. A Russian taxpayer needs to make a


thorough review of foreign companies and structures, bank accounts, holdings and sales of securities. There is a Russian FATCA. Compliance needs to be checked, as does any claim to be non-resident. Transparency is needed.


The ITPA Green Book 2017 www.itpa.org


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