The Nassau Conference 2017 Business Unusual October 4th 2017 Agenda 1 Scope of Change 3 2 Key Developments Early Adopters Register of Directors Register of Beneficial Owners UK Cayman BVI ID: 714983
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Session A: The Global Market Place
The Nassau Conference 2017: Business Unusual
October 4th, 2017Slide2
Agenda
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Scope of Change
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Key Developments:Early AdoptersRegister of DirectorsRegister of Beneficial Owners (UK, Cayman, BVI)Amnesties (Mexico, Brazil, Colombia, Peru Argentina and Chile)53State of PlayClients Geopolitics and their financial centers of choiceUSA as a fiduciary centerRole of the Traditional “offshore” centers144On the HorizonBEPSUK proposed legislationEU proposed legislationBrexit and impact on offshore financial centers225Viewpoint from Cayman316Q&A33Slide3
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Scope of ChangeSlide4
Scope of Change
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Political Upheaval
Amnesty and Enforcement
Legislative Changes
FATCACommon Reporting Standard and AEOIBeneficial Ownership RegistersEU ProposalsUK ProposalsSession A: The Global Market PlaceSlide5
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Key DevelopmentsSlide6
Early Adopters: How are they adjusting?
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Session A: The Global Market Place
*As of 6 September 2017. Note that the US has not committed.
**Bolded countries are signatories of the MCAA (list updated as of 30 August 2017).Slide7
Early Adopters: How are they adjusting?
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Session A: The Global Market Place
*As of 6 September 2017. Note that the US has not committed.
**Bolded countries are signatories of the MCAA (list updated as of 30 August 2017).
NIGERIA, FIRST EXCHANGE SEPTEMBER 2019Slide8
CRS Implementation Steps (Early Adopters)Slide9
Register of Directors
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File Register of Directors
Private
The directors’ data in the filed registers will include (generally):
full name and former names;date of appointment / resignation;address for service of documentsresidential addressdate of birthnationalityoccupation Session A: The Global Market PlaceSlide10
Beneficial Ownership Registries
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UK & Crown Dependencies and Overseas Territories (“CDOTs”)
The beneficial owners’ data in the central registers will include (generally):
name;
date of birth;nationality;residency / address; anddetails of ownershipBeneficial Owner?Jersey: Where owner is a trust: the name of the trustee, settlor, protector, controlling individuals and vested beneficiariesCayman/BVI, only require 25% owners or person who can change the directorsFor trusts, the trustee where the trustee has control of the underlying entitySession A: The Global Market PlaceSlide11
Trust Registers
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France
New Zealand
EU Fourth Anti-Money Laundering Directive: requires all EU states to implement a trust register
Session A: The Global Market PlaceSlide12
Trust Registers (continued)
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UK Trust Register
Applies to “Taxable Relevant Trusts”
trustees are UK resident; or
one trustee is UK resident and settlor is UK resident and domiciled; orno trustee is resident but UK source income or assets in the UK which has UK tax liabilityMust register beneficial owner: settlor, trustee, beneficiaries, and any controlling individualInformation to be reported:name of trust, date of establishment, statement of accounts, description of trust assets, place of administration, contact address, full name of legal, financial or tax advisorsbeneficial owners: names, tax id or usual residential address, passport (unless UK address is provided), date of birth and nature of individual’s roleMust be provided on or before 31 January in applicable year in which trustee first becomes liable to pay the applicable UK taxesRegister is privateSession A: The Global Market PlaceSlide13
LatAm Amnesties
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Mexico
Brazil
Colombia
Peru ArgentinaChileHondurasEcuadorSession A: The Global Market PlaceSlide14
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State of PlaySlide15
Clients Geopolitics and their financial centres of choice
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Europeans Traditionally Switzerland
Swiss Banks losing significant AUM’s
Capital returning to European home countries
UK Jersey, Guernsey, Liechtenstein and CaribbeanLatAm Traditionally Caribbean – signficant flows into USAsia CaribbeanMiddel East Switzerland, Dubai Session A: The Global Market PlaceSlide16
USA as fiduciary centre
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Traditional Views:
Litigation
Lack of Bank Secrecy
Now Completely ReversedWhy?Session A: The Global Market PlaceSlide17
USA as fiduciary centre
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US Pre-Immigration Planning
US Families
Holding US Real Estate and US Income producing assets
CRSSession A: The Global Market PlaceSlide18
USA as fiduciary centre
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Use of Hybrid Trusts:
Foreign for Federal Tax Purposes
Ease of Domestication
Use of Domestic Trusts:To hold US situs assetsTo benefit solely US family membersSession A: The Global Market PlaceSlide19
USA as fiduciary centre
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Jurisdictions
Traditional Jurisdictions
Florida
New YorkAsset Protection JurisdictionsDelawareSouth DakotaWyomingNevadaAlaska(and increasingly other states)Session A: The Global Market PlaceSlide20
USA as fiduciary centre
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Traps
US Securities Law
New Reporting Obligations for LLCs
Blocker for Estate TaxSession A: The Global Market PlaceSlide21
Role of the Traditional “offshore” centres
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Tax Neutral
Non Tax objectives
Privacy
SecurityEstate PlanningCharitable PlanningHolding StructuresInvestment ManagementFundsInsuranceCaptivesSession A: The Global Market PlaceSlide22
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On the HorizonSlide23
BEPS
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OECD
Close “Loopholes” and shift of profits from high tax to low or no-tax, reduce “untaxed” income of cross border structures
Realign taxation with true economic activity
Create global uniformity in taxation What does this mean for Wealth Management?Increased TransparencyDemands for Information on Beneficial Owners, i.e. investorsReview and Changes to Investment Structures that rely on treaty benefits and Cross-border RulesIncreased Global AuditsReview of Tax Structures, Risks and Extra Scrutiny from Tax AuthoritiesSession A: The Global Market PlaceSlide24
UK proposed legislation
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UK Corporate Criminal Offences
Session A: The Global Market Place
Criminal evasion of tax by the taxpayer
This picks up the offence of cheating the public revenue and all other statutory offences involving dishonestly taking steps with a view to, or being 'knowingly concerned in' the fraudulent evasion of tax.Anything falling short of a criminal offence at taxpayer level will not count. There need not be an actual criminal conviction against the taxpayer.The UK domestic offence is split into three components, referred to as 'stages'1Slide25
UK proposed legislation
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UK Corporate Criminal Offences (continued)
Session A: The Global Market Place
Criminal facilitation of the tax evasion by an 'associated person' of the relevant body who is acting in that capacity
2Committing a 'UK tax evasion facilitation offence' requires deliberate and dishonest action to facilitate tax-payer level evasion.Referrals and sub-contracting are discussed in the draft guidance.Straightforward referral will not give rise to the requisite association.If services are sub-contracted the position is different. An example is given of a foreign tax adviser instructed by a UK financial services firm to provide tax advice to a client: that foreign tax adviser is an 'associated person' of the UK firm and its advice to the client could attract liability for the UK firm.The draft guidance accepts there may be little direct control over sub-contractor staff. This will be a factor in considering what constitutes 'reasonable' procedures. It may be sufficient to include a term requiring the sub-contractor to provide the necessary controls. This is something seen in the context of the Bribery Act and equivalent foreign regimes.Slide26
UK proposed legislation
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UK Corporate Criminal Offences (continued)
Session A: The Global Market Place
Failure by the relevant body to prevent that facilitation
Reasonable prevention procedures must be in place to benefit from the statutory defence.The foreign offence starts from the premise that a UK-based relevant body should not escape liability simply because the foreign country suffering the tax loss is unable to bring a prosecution against it.In addition to the 3 stages above, the foreign offence requires a 'UK nexus' and 'dual criminality'.3Slide27
EU proposed legislation – June 21
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Session A: The Global Market Place
Now the Commission is also tackling the central role played by intermediaries in international tax avoidance and evasion, as exposed by the Panama Papers. Most services provided by intermediaries, such as tax advisors, accountants, financial institutions, law firms, are legitimate. However, certain intermediaries actively design, promote and sell schemes with the specific aim of helping their clients to escape taxation.Slide28
EU proposed legislation – June 21 (continued)
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Session A: The Global Market Place
How would the proposed measures work in practice?
Intermediaries will have to report any cross-border tax planning arrangement that they design or promote if it bears any of the features or "hallmarks" defined in the Directive.
Make this report to their tax authorities within five days of giving such an arrangement to their client.Slide29
EU proposed legislation – June 21 (continued)
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Session A: The Global Market Place
Make this report to their tax authorities within five days of giving such an arrangement to their client.
Involve a cross-border payment to a recipient resident in a no-tax country;Involve a jurisdiction with inadequate or weakly enforced anti-money laundering legislation;Are set up to avoid reporting income as required under EU transparency rules;Circumvent EU information exchange requirements for tax rulings;Have a direct correlation between the fee charged by the intermediary and what the taxpayer will save in tax avoidance;Ensure that the same asset benefits from depreciation rules in more than one country;Enable the same income to benefit from tax relief in more than one jurisdiction; Do not respect EU or international transfer pricing guidelines.Examples of these hallmarks include arrangements which:Slide30
Brexit and impact on offshore financial centres
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Future of Brexit is far from clear
Distinction between the Crown Dependencies and the CDOTs
Jersey and Guernsey have direct relationship with EU
CDOTs rely on the UKTo what extent will the UK advance the interests of the Caribbean? Is the market sufficiently lucrative to care?To what extent will the 27 EU countries wish to maintain the rights of CDOTs or care about trade with the Caribbean?View from Caricom and the CommonwealthSession A: The Global Market PlaceSlide31
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Viewpoint from CaymanSlide32
Viewpoint from Cayman
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Session A: The Global Market PlaceSlide33
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QuestionsSlide34
Speakers
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Session A: The Global Market Place
Simon P. Beck
Partner
New YorkTel: +1 212 626 4751Fax: +1 212 310 1751simon.beck@bakermckenzie.comCeci HassanPartnerMiamiTel: +1 305 789 8939Fax: +1 305 789 8953ceci.hassan@bakermckenzie.comSlide35