Owen, Christopher: Global Survey – June 2019

  • Bahamas to offer tax residency certificates to permanent residents
    • 14 May 2019, Minister of Financial Services, Trade and Industry and Immigration Brent Symonette announced that the Bahamas government had approved the creation of tax residency certificates for individuals who have been granted permanent residency, typically under an investor migration programme.

      The new scheme is intended to address OECD criticisms of the Bahamas permanent residency status, which is available to financially independent individuals or investors who are legitimate owners of a residence in The Bahamas. Individuals purchasing a residence for BS$1.5 million or more receive speedy consideration.

      Last year, the OECD identified the Bahamas Economic Permanent Residency as one of 25 residence and citizenship by investment (CBI/RBI) schemes worldwide that posed a high-risk to the integrity of the OECD/G20 Common Reporting Standard (CRS) by potentially enabling misrepresentation of an individual’s jurisdiction of tax residence.

      It said the CBI/RBI schemes listed gave access to a low personal income tax rate on offshore financial assets and did not require an individual to spend a significant amount of time in the location offering the scheme. The listing report called for financial institutions to take this into account when performing CRS due diligence obligations programmes to prevent tax avoidance and tax evasion.

      Under the revised Bahamas scheme, holders who spend a minimum of 90 days in the Bahamas in one year and no more than 183 days in one other country will be issued with tax residency certificates. These will carry unique taxpayer identification numbers (TINs) confirming that the Bahamas is the holder’s main domicile and will help certify their compliance with home country tax laws.

      Bahamas Financial Services Board chief executive Tanya McCartney said the certificates would create certainty for permanent residency holders by enabling them to demonstrate that they are tax resident in the Bahamas, while maintaining the distinction between permanent residency and tax residency.

  • Committee reports on proposed register for overseas entities owning UK property
    • 20 May 2019, the Joint Committee on the Draft Registration of Overseas Entities Bill published its pre-legislative scrutiny report. It makes a number of recommendations to improve transparency in UK property ownership in order to restrict the potential for money laundering and other illegal activity through property investments by overseas companies.

      The Bill currently aligns closely with the criteria applied to the information already required to be registered by UK companies in relation to their beneficial ownership on the people with significant control (PSC) register. This is defined as someone holding more than 25% of shares or voting rights in a company with the right to appoint or remove the majority of board of directors or as someone who otherwise exercises significant influence or control.

      The Report recommends lowering the shareholding and voting thresholds in respect of the definition of beneficial owners and further recommends that statutory guidance should be given to the meaning of "significant influence or control" for overseas companies.

      The Bill currently envisages that the overseas entity will have 18 months to take reasonable steps to provide the beneficial ownership information to Companies House, which will process the application and notify the overseas entity of its ID number. The overseas entity can then apply to the Land Registry to add the registration ID number to its title.

      Overseas entities will then have to register prior to purchasing UK property or taking a lease of UK property above a certain number of years  – seven years in England and Wales, 20 years in Scotland or 21 years in Northern Ireland) – and have an ongoing duty to update the register every year, or confirm that the information on the register is accurate.

      The Report recommends including a specific requirement to update the register before disposing of property as well as including verification mechanisms to prevent criminals from submitting false information.

      The Bill sets out limited circumstances in which certain entities will be exempt from publishing their information and in some cases from disclosing the information at all. The Report recommends that the government should make it clear exactly which entities can be exempted and that there be some transparency surrounding the extent to which exemptions are used.

      The Bill does not apply to trusts and the Report recommends that the government’s measures to ensure transparency of trusts under the Fifth EU Anti-Money Laundering Directive should be introduced at the same time as the Bill to prevent trusts being used to circumvent the law.

      The Report warns that criminal penalties alone may not be a sufficient deterrent. It suggests that civil penalties will be easier to enforce abroad, and against land or other assets in the UK. These could be supported by further criminal sanctions for non-payment of penalties.

      The UK government plans to introduce the Bill to parliament later in 2019, and to launch the register in 2021. It will work alongside other anti-money laundering measures, including the people with significant control (PSC) register, unexplained wealth orders and suspicious activity reports.

  • EC publishes non-confidential version of Huhtamäki decision
    • 3 May 2019, the European Commission published the non-confidential version of its decision, adopted on 7 March, to open an in-depth investigation into Luxembourg's tax treatment of Finnish food and drink packaging company Huhtamäki.

      The Commission has concerns that three tax rulings granted by Luxembourg to Huhtamäki may have allowed the company to pay less tax and given it an unfair advantage over its competitors, in breach of EU State aid rules. The opening of an in-depth investigation gives Luxembourg and interested third parties an opportunity to submit comments

      One of the three tax rulings under investigation was disclosed among over 500 files published as part of the ‘Luxleaks’ investigation led by the International Consortium of Investigative Journalists in 2014.

      In January 2017, following discussions with the Commission, Luxembourg introduced changes to its national tax rules to make the tax treatment of financing companies more stringent. The new rules aim to ensure that financing companies are taxed sufficiently and imply that the rulings regarding certain financing companies issued before 2017, including those from the Luxleaks files, no longer bind the tax authorities in Luxembourg.

      The decision is available under the case number SA.50400 on the Commission's competition website at http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_50400

  • EU applies additional AML measures to financial groups
    • 14 May 2019, Delegated Regulation (EU) 2019/758 of 31 January 2019 was published in the Official Journal of the European Union. It supplements Directive (EU) 2015/849 in respect of regulatory technical standards for the minimum action and the type of additional measures credit and financial institutions are required to take to mitigate money laundering and terrorist financing risk in certain third countries.

      The Delegated Regulation lays down a set of additional measures, including minimum action, that credit institutions and financial institutions must take to effectively handle the money laundering and terrorist financing risk where a third country’s law does not permit the implementation of group-wide policies and procedures under Article 45(1) and (3) of the Fourth Anti-Money Laundering Directive (MLD4) at the level of branches or majority-owned subsidiaries that are part of the group and established in the third country.

      The Fourth Directive delegated authority to the European Commission to adopt regulatory technical standards specifying what additional measures are required to be taken. These regulatory technical standards are now set out in the Regulation.

      Where additional measures under the Regulation are required, a group needs to be able to demonstrate to its competent authority that the extent of the measures is appropriate. If the AML/CTF risk cannot be effectively managed by applying the additional measures then some or all of the operations of the branch or subsidiary are required to be closed down.

      The Delegated Regulation will enter into force on 3 June 2019. It will apply from 3 September 2019, to allow credit institutions and financial institutions sufficient time to adjust their policies and procedures in line with this Regulation’s requirements.

  • EU removes three jurisdictions from ‘non-cooperative’ blacklist
    • 17 May 2019, the European Council decided to remove Aruba, Barbados and Bermuda from the EU list of non-cooperative tax jurisdictions.

      The list was established in December 2017 and is contained in Annex I of the conclusions adopted by the Council. It was revised in March 2019, following an in-depth review of the implementation of the commitments taken by third country jurisdictions that are part of the process.

      Barbados has made commitments at a high political level to remedy EU concerns regarding the replacement of its harmful preferential regimes by a measure of similar effect, whilst Aruba and Bermuda have now implemented their commitments. At the same time, Bermuda remains committed to address EU concerns in the area of collective investment funds.

      As a consequence, Barbados and Bermuda will be moved from Annex I of the conclusions to Annex II, the so-called 'grey list' of jurisdictions that have undertaken sufficient commitments to reform their tax policies, while Aruba will be ‘white-listed’ – removed entirely from both Annexes.

      As a result, 12 jurisdictions remain on the list of non-cooperative jurisdictions: American Samoa, Belize, Dominica, Fiji, Guam, Marshall Islands, Oman, Samoa, Trinidad & Tobago, United Arab Emirates, US Virgin Islands and Vanuatu.

      The work on the EU list of non-cooperative jurisdictions is a dynamic process. The Council will continue to regularly review and update the list in 2019, whilst it has requested a more stable process moving forward. As from 2020 there will be with just two updates per year to allow sufficient opportunity for EU member states to amend their domestic legislation if necessary.

  • French court claims jurisdiction in Hallyday inheritance dispute
    • 28 May 2019, a French court in Nanterre agreed to hear a lawsuit over the €100 million estate of the late French singer Johnny Hallyday, who died in 2017, in a legal dispute between the singer's widow and children.

      The argument involves Hallyday’s biological children, Laura Smet and David Hallyday, and their stepmother, Hallyday’s second wife Laeticia, with whom he lived with in Los Angeles prior to his death.

      In his will, written in Los Angeles, Hallyday disinherited his biological children, leaving the entirety of his estate to his wife, Laeticia. Whilst it is legal to disinherit or omit children from a will under Californian law, it is illegal to do so under French forced heirship laws.

      Although Hallyday had become a permanent resident in the US before his death, his children claimed that the singer was a secret resident of France and used their father’s Instagram posts as evidence of the singer’s whereabouts in the final years of his life.

      The Instagram posts found that Hallyday spent 46% or 168 days in France during 2014 and 41% or 151 days in 2015. Furthermore, he spent the final eight months of his life in France receiving treatment for cancer.

      Finding in favour of Hallyday’s children, the French court allowed the Instagram evidence to stand as it was considered crucial in determining the frequency of his French stays. It determined that "up to the end he lived a bohemian and nomadic life, but above all a very French life that led him to live... usually in France."

      The court ruled that the inheritance dispute must now be settled in France. As a result Hallyday’s two biological children will be entitled to a share of the estate, becoming equal beneficiaries with Hallyday’s widow and their two adopted daughters. The estate will also be liable to French inheritance tax. Laeticia Hallyday is planning to appeal the decision, her lawyer said.

  • Gucci owner Kering agrees record Italian tax settlement
    • 9 May 2019, French luxury goods group Kering announced it had agreed to pay €1.25 billion to settle a dispute with the Italian Revenue Agency in relation to its Gucci fashion brand.

      Gucci was accused of evading taxes on more than €1 billion in revenues between 2011 and 2017 that were booked through a Swiss subsidiary, Luxury Goods International S.A. (LGI). Italian prosecutors argued that tax should have been paid in Italy, not Switzerland. Italian police raided Gucci’s offices in Milan and Florence in late 2017.

      The settlement acknowledged the claims of the Italian Revenue Agency in respect of both the existence of a permanent establishment in Italy and the transfer prices applied by LGI in the same period with its related party Guccio Gucci.

      The settlement involves the payment of €897 million in additional taxes, along with further payment for penalties and interest. Gucci’s current and former chief executives, Marco Bizzarri and Patrizio Di Marco, remain under investigation in the case, “in their capacity as legal representatives of the company”.

  • Italy extends special tax regime for those relocating for work
    • 1 May 2019, the Italian government published and brought into force the Decree for Growth (Decreto Crescita), which included several favourable amendments to broaden the size and scope of the special tax regime for new resident workers (lavoratori impatriati).

      The tax exemption for Italy-sourced income is no longer restricted to qualified professionals, managers, executives or high-prestige entrepreneurs. It is now open to any workers who were non-resident during the two previous years, who commit to residing in Italy for at least two years and who perform their work mainly in Italy, irrespective of their qualifications or role.

      The value of the exemption has also been increased, from 50% to 70% for the first five years after relocation, such that a qualifying individual will pay standard rates of Italian income tax, which vary from 23% to 43%, on only 30% of his or her income.

      This exemption is further increased to 90% for new resident workers relocating to one of southern Italy's ‘deprived’ regions  – Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia or Sicily.

      Qualifying individuals can also claim a 50% exemption for a further five years if they have bought a house in Italy within a year before or after their relocation or has at least one minor child. This increases to 90% if there are three or more minor children.

      New residents who are Italian citizens also now qualify for the special regime if they have been tax resident of a foreign country with a double taxation treaty for the prior two years, and if they have not removed their name from the official Italian resident population list.

      The new regime will only apply to individuals who become tax residents of Italy from 2020. If an individual becomes a resident of Italy in 2019, they will still be subject to the rules and rates that apply under the previous regime.

  • Luxembourg imposes disclosure requirements for ‘non-cooperative countries’
    • 28 May 2019, Luxembourg introduced new disclosure requirements for companies that enter into transactions with related parties that are resident in a territory listed on the EU list of non-cooperative jurisdictions for tax purposes.

      The Luxembourg tax authority is the first to officially announce sanctions against jurisdictions blacklisted by the EU as non-cooperative. The tax affairs of companies engaged in such transactions will be subject to apply 'reinforced control'.

      Under Circular LG-A no.64, which was issued on 7 May 2018, Luxembourg resident companies must state in their tax return if they have entered into transactions with 'related enterprises' in jurisdictions included on the EU blacklist, starting from the 2018 tax year.

      The term 'related enterprise' refers to an enterprise that participates directly or indirectly in the management, control or capital of another enterprise; or where the same individuals participate directly or indirectly in the management, control or capital of two enterprises.

      They are also required to prepare a file containing details of the transactions in question, such as income and expenses, as well as a statement of receivables and liabilities outstanding with the related party. This must be kept at the company’s registered office and made available on request to the tax authorities as part of a review of the tax return or an on-site inspection.

      The new disclosure requirement will be based on the EU blacklist as it stood at the end of the relevant financial year. For 2018, this comprised American Samoa, Guam, Samoa, Trinidad & Tobago and the US Virgin Islands. Ten more jurisdictions were subsequently added, three of which were later removed.

  • Netherlands and Curaçao commit to treaty changes to tackle tax avoidance
    • 22 May 2019, Dutch State Secretary of Finance Menno Snel and Curaçao Minister of Finance, Kenneth Gijsbertha signed a statement committing both countries to including limitations of benefits provisions in their tax treaty agreement "as soon as possible”.

      The new measures are intended to prevent the benefits of the treaty from being used solely to avoid taxation and will bring the agreement into line with international anti-avoidance standards, the ministry said. Aruba and St Maarten have agreed to introduce similar provisions.

      Curacao, Aruba and St Maarten also indicated that they would seek to come into compliance with international standards regarding the exchange of information.

      The agreements were signed in Havana, where the 25 members of the Caribbean Customs Law Enforcement Council (CCLEC) signed a new treaty to establish the Caribbean Customs Organisation (CCO).

      Having operated under an MOU since 1989, the CCLEC members decided a more robust legally binding mechanism was necessary to meet more complex challenges in respect of automatic sharing of information and the advent of several new trade arrangements. The CCO treaty will provide the legal gateway for members to share information not only amongst themselves but also with other regional and international law enforcement agencies.

  • OECD publishes Programme of Work for taxing MNEs
    • 31 May 2019, the 129 members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) adopted a Programme of Work laying out a process for reaching a new global agreement for taxing multinational enterprises (MNEs).

      The programme will explore the technical issues to be resolved through the two main pillars. The first pillar will explore potential solutions for determining where tax should be paid and on what basis (nexus), as well as what portion of profits could or should be taxed in the jurisdictions where clients or users are located (profit allocation).

      The second pillar will explore the design of a system to ensure that MNEs – in the digital economy and beyond – pay a minimum level of tax. This pillar would provide countries with a new tool to protect their tax base from profit shifting to low or no-tax jurisdictions, and is intended to address remaining issues identified by the OECD/G20 BEPS initiative.

      "Important progress has been made through the adoption of this new Programme of Work, but there is still a tremendous amount of work to do as we seek to reach, by the end of 2020, a unified long-term solution to the tax challenges posed by digitalisation of the economy," said OECD Secretary-General Angel Gurría.

      "Today’s broad agreement on the technical roadmap must be followed by a strong political support toward a solution that maintains, reinforces and improves the international tax system. The health of all our economies depends on it."

      The Inclusive Framework agreed that the technical work must be complemented by an impact assessment of how the proposals will affect government revenue, growth and investment. While countries have organised a series of working groups to address the technical issues, they also recognise that political agreement on a comprehensive and unified solution should be reached as soon as possible, ideally before year-end, to ensure adequate time for completion of the work during 2020.

  • Singapore and South Korea sign updated tax treaty
    • 13 May 2019, the governments of Singapore and the Republic of Korea signed an updated double tax treaty, which is to replace the existing treaty that entered into force in 1979 treaty and a protocol that entered into force in 2013.

      The updated treaty enhances the cross-border trade and investment between both countries. Amongst other changes, it lowers the withholding tax rate for royalties to 5% and expands the scope of capital gains tax exemption. It will come into force when ratified by both signatories.

  • Sweden amends tax treaty with Portugal
    • 16 May 2019, Portugal and Sweden signed a Protocol to their existing 2002 double tax treaty. Amongst other changes, an amendment to Article 18 (Pensions) provides that pensions earned in Sweden will be taxable in Sweden if not taxed in Portugal. As a result, Swedish pensioners who are living in Portugal under the non-habitual residents (NHR) regime may lose the double exemption of income tax from which they currently benefit.

      Introduced in 2009 to attract ‘high value-added’ scientific, artistic or technical professions to Portugal, the NHR taxes qualifying professionals at a flat rate of 20% on their Portuguese-sourced business income. In addition, most foreign-source income – including pensions – is exempt from Portuguese taxation for a period of ten consecutive years. This can apply even if the income is not actually taxed in the home country.

      This provision offers significant benefits to retirees. Of the 27,367 individual accepted under the NHR programme to date, only 2,140 (8%) are qualifying ‘high value-added’ professionals.

      The treaty renegotiation was initiated at the request of Sweden and follows a similar move by Finland. Finland signed a Protocol with Portugal in November 2016 to amend its 1970 double tax treaty, which it said restricted its “right to tax private pensions received in Portugal from Finland”. In this case, the Portuguese government failed to complete ratification procedures and, as a result, Finland terminated its DTA with Portugal as of 1 January 2019.

      The Finnish government said the treaty was not consistent with Finland’s current tax treaty policy. “The termination decision ensures that Finland will be able to tax the private pensions of Finns resident in Portugal," said a government statement.

  • Swiss corporate tax reform approved by popular referendum
    • 19 May 2019, Swiss voters approved the latest Swiss corporate tax reform in a popular referendum, with a 64.4% majority voting in favour of the package proposed by the Swiss government and none of the 26 cantons opposed.

      Swiss voters had rejected the previous Corporate Tax Reform III (CTR III) in 2017. The Federal Act on Tax Reform and AVS Financing (TRAF) – formerly known as ‘Tax Proposal 17’ – was therefore linked to measures to boost the funding of the old age and social insurance (AVS) with an additional CHF2 billion per year.

      TRAF, which was approved by parliament on 28 September 2018, introduces major changes in the Swiss tax system by abolishing certain preferential tax regimes and replacing them with new measures that are in line with international standards. The European Union had given Switzerland until the end of 2018 to abolish its preferential tax regimes.

      With the entry into force of TRAF at the beginning of 2020, tax privileges for holding companies, domicile companies and mixed companies at the cantonal level are to be terminated. The profit allocation rules for principal companies and Swiss finance branches at the federal level will also be abolished.

      Other measures include:

      -Mandatory introduction of a patent box regime at cantonal level in accordance with the OECD standard – relief is maximised to 90% of qualifying income at the discretion of the cantons.

      -R&D super reduction – a maximum deduction of 50% at cantonal discretion is limited to personnel expenses for R&D plus a flat-rate surcharge of 35% for other costs and 80% of expenses for domestic R&D carried out by third parties or group companies.

      -Disclosure of hidden reserves – a step-up of hidden reserves, including goodwill, will be allowed for companies migrating to Switzerland. Ongoing depreciation will be allowed annually at the permitted rates. For companies transitioning from the previous preferential regimes, profits from realising hidden reserves will be taxed at a separate rate at the discretion of the cantons for a five-year period. Hidden reserves will be declared by decision of the tax authorities.

      -Notional interest deduction (NID) – an option for high-tax cantons to introduce a NID on excess capital.

      -Overall tax relief – the mandatory maximum tax relief for the above measures is 70%.

      -Reduction in cantonal corporate income tax rates to remain internationally competitive – based on official announcements by cantonal governments, it is expected that the majority of the Swiss cantons will provide tax rates on pre-tax income between 12% and 18% (including federal tax).

      -Capital tax relief – related to qualifying participations, patents and similar rights, and intra-group loans at the discretion of the cantons.

      -Swiss permanent establishments of foreign companies will be able to claim a lump-sum tax credit to prevent double taxation.

      TRAF will enter into force on 1 January 2020. Cantons are generally required to adapt their tax legislation to the new rules introduced by TRAF by the same date.

  • Swiss Federal Council adopts dispatch on AEOI with 19 further states
    • 29 May 2019, the Swiss Federal Council adopted a dispatch on the introduction of the automatic exchange of financial account information (AEOI) with 19 further partner states. Entry into force is planned for 2020 with the first exchange of data in 2021.

      Switzerland's current AEOI network does not include 19 of the 108 states and territories that have committed to the AEOI standard. The Federal Council therefore intends to exchange financial account information for the first time with these states and territories in 2021.

      The new partner states are: Albania, Azerbaijan, Brunei Darussalam, Dominica, Ghana, Kazakhstan, Lebanon, Macao, the Maldives, Nigeria, Niue, Pakistan, Peru, Samoa, St Maarten, Trinidad and Tobago, Turkey and Vanuatu.

      In the period between the initiation of the consultation process and publication of the dispatch, Oman also declared that it would implement the AEIO by 2020 and was therefore added to the list.

      The corresponding federal decrees are to be submitted to Parliament for approval in the autumn and winter sessions this year, such that AEIO can be activated from 2020. Prior to initial exchange of data, the Federal Council will again review whether these partner states meet the requirements of the AEIO standard.

      The Federal Council also approved a report on the review mechanism for standard-compliant implementation of the AEIO by the partner states with which Switzerland intends to exchange data for the first time in autumn 2019. It has instructed the Federal Department of Finance (FDF) to submit the report to the parliamentary committees for consultation and will then decide whether any data at all should be exchanged with a partner state.

      At the end of September 2018, Switzerland automatically exchanged financial account information with 36 states and territories for the first time and plans to exchange data with 37 further partner states at the end of September 2019.

  • UAE ratifies the Multilateral BEPS Convention
    • 29 May 2019, the United Arab Emirates deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) with the OECD.

      The MLI is a multilateral treaty that enables jurisdictions to swiftly modify their bilateral tax treaties to implement measures designed to address multinational tax avoidance. These measures were developed as part of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project.

      For a bilateral tax treaty to be modified by the MLI, both treaty partners need to have signed and ratified the MLI and to have identified that particular bilateral tax treaty as a treaty to be covered.

      Albania became the 88th jurisdiction to sign the MLI on 28 May. It now covers almost 1,530 bilateral tax treaties.

  • UBS faces €83 million fine in German tax investigation
    • 7 May 2019, prosecutors in Mannheim, Germany, announced they were seeking to fine UBS Deutschland AG, the German unit of Swiss bank UBS, about €83 million for assisting clients to evade taxes.

      According to a prosecutor’s statement, executives at the UBS subsidiary, aided by executives at the Swiss parent, helped “numerous" clients evade taxes, partly by making cross-border bank transfers appear as though they were within Germany. The allegation covers actions between 2001 and 2012.

      The investigation was opened in 2012 and a year later prosecutors raided offices and homes of bank employees. The statement said it was enough to fine the bank in order to sanction wrongdoing by the bank executives.

      UBS, which paid about €300 million in 2014 to resolve a similar German case in Bochum, said it would fight the Mannheim demand.

  • UK consults on major reform of Companies House regime
    • 5 May 2019, the UK government issued an 80-page consultation document on corporate transparency and registry reforms. These are designed to limit the risk of fraud and misuse of information by increasing the information companies are required to disclose, increasing checks on this information and introducing measures to improve the exchange of intelligence between Companies House, HMRC and UK law enforcement bodies.

      The basic companies register records over four million limited companies, and was accessed 6.5 billion times in 2018. There are currently 6.7 million directors and 4.6 million “people with significant control” on the Register, but Companies House has no powers to verify, audit or monitor the information submitted to its register. It has been identified as a significant weak link in the UK's economic crime prevention strategy.

      It is now proposed that Companies House should assume a more active role, receiving new powers to query and check information placed on its register, while also developing a functionality to identify suspicious activities and fraudulent information in conjunction with law enforcement partners.

      The consultation seeks views on a series of reforms to limit the risk of misuse under four broad headings:

      -Increased information about who is setting up, managing and controlling companies;

      -Improving the accuracy and usability of data on the companies register;

      -Protecting personal information on the register; and

      -Ensuring compliance, sharing intelligence and other measures to deter abuse of corporate entities.

      The Department for Business, Energy & Industrial Strategy (BEIS) expects the new provisions to apply to any corporate body subject to disclosure obligations under the Companies Act 2006 – private and public companies, unlimited companies, unregistered companies, overseas companies, limited liability partnerships and limited partnerships.

      The main changes proposed to the current regime are:

      -Verifying the identity of individuals who have a key role in setting up companies, including presenters (people connected with the company who file information on the register), directors and ‘people with significant control’ (PSCs);

      -Extending the powers of Companies House to query and seek corroboration on information before it is entered on the register;

      -Imposing obligations on regulated entities – law firms, accountants and company secretarial providers – to report anomalies in the information they have about corporate bodies that they have registered to Companies House;

      -Limiting the number of directorships that any one individual can have.

      The government is also seeking feedback on whether such checks should be extended to shareholders above a minimum threshold. The intention is that an individual's activities, over multiple companies if applicable, would ultimately be connected through a single verified identity record.

      To ensure compliance with the new regime, the government proposes that Companies House refuses to incorporate a company if any prospective directors fail to verify their identity. The government also suggests that failure of a PSC to verify their identity could amount to a criminal offence, or alternatively that the register would flag whenever a company had such unverified beneficial owners.

      In addition, following feedback from law enforcement agencies, the government proposes that UK companies would be required to notify Companies House within 14 days of opening a non-UK bank account. The accuracy of this information would then be verified by information from banks.

      These reforms would be accompanied by a major programme "to upgrade digital services at Companies House alongside a complete review of its staffing and skills requirements”, including the protection of the enhanced data that will be collected and processed as a result of the changes. The consultation closes on 5 August.

      Companies House chief executive Louise Smyth said: "This package of reforms represent a significant milestone for Companies House as they will enable us to play a greater part in tackling economic crime, protect Directors from identity theft and fraud and improve the accuracy of the register.

      "The UK has one of the highest ratings for cracking down on anonymous companies, and the government's proposed measures build on the Britain's world-leading anti-corruption activity. In 2016, the UK became the first country in the G20 to introduce a public register of company ownership, while new protections against identity fraud for company directors were introduced in 2018."

  • UK crime agency secures further Unexplained Wealth Orders
    • 29 May 2019, the UK National Crime Agency (NCA) announced that it had been granted three more Unexplained Wealth Orders (UWOs) at the High Court as part of its investigation into London property linked to a politically exposed person believed to be involved in serious crime.

      Investigators are looking into the funds used to purchase three residential properties in prime locations – originally bought for more than £80 million and held by offshore companies. Interim Freezing Orders have also been granted which means that the properties cannot be sold, transferred or dissipated while the investigation continues.

      Andy Lewis, Head of Asset Denial at the NCA, said: “This is the second time the NCA has successfully secured UWOs since the new legislation was enacted. They are a powerful tool in being able to investigate illicit finance flowing into the UK and discourage it happening in the first place. The individuals behind these offshore companies now have to explain how the three properties were obtained.”

      As part of a separate case in February 2018, the NCA obtained UWOs against two UK properties believed to belong to jailed Azerbaijani banker Jahangir Hajiyev and his wife Zamira Hajiyeva.

  • US companies urge Senate to approve tax treaties
    • 29 April 2019, the US National Foreign Trade Council (NFTC) petitioned the US Senate on behalf of 85 leading US companies for “expeditious action” in respect of approving pending international tax treaties.

      The Senate is currently considering tax conventions with Chile, Hungary and Poland and four amended tax treaties with Luxembourg, Spain, Switzerland and Japan.

      The letter, which follows legislation first proposed in January, was addressed to Senate majority leader Mitch McConnell and Senate foreign relations committee chairman James Risch. The NFTC said: "We ask for your support for these treaties and protocols and also ask for expeditious action on them by both the Senate Foreign Relations Committee and the Senate."

  • US Court authorises ‘John Doe’ summonses for Finnish residents
    • 1 May 2019, a federal court in North Carolina authorised the Internal Revenue Service (IRS) to serve John Doe summonses on Bank of America, Charles Schwab and TD Bank seeking information about Finnish residents with payment cards linked to bank accounts located outside of Finland.

      The US government petitioned the District Court for the Western District of North Carolina to authorise the summons at the request of the government of Finland under the tax treaty between Finland and the US. The treaty allows the two countries to co-operate in exchanging information that is necessary for carrying out each country’s tax laws.

      The summonses are referred to as ‘John Doe’ summonses because the IRS does not know the identity of the persons being investigated. They seek the identities of Finnish residents who have payment cards linked to bank accounts located outside of Finland so that the Finnish government can determine if those persons have complied with Finnish tax laws.

      Finland had advised the IRS that, in circumstances where the payment cards were used only at ATMs or in other transactions where authorisation was by PIN code, cardholders could not be identified from sources in Finland. The filing did not allege that Bank of America, Charles Schwab, or TD Bank had violated any US or Finnish laws with respect to these accounts.

      The request is part of a foreign payment project being conducted by the Finnish Tax Administration (FTA), in which information on the use of payment cards issued by foreign financial institutions is used to identify non‑compliant Finnish taxpayers. Previous FTA investigations of approximately 120 to 150 Finnish taxpayers who used foreign payment cards in a similar manner yielded extremely high rates of tax non-compliance.

      IRS Commissioner Charles Rettig said: “Our continued success in combatting offshore tax non-compliance has been helped by the assistance we receive through the network of tax treaties around the globe … the US will return this help by working under the law with tax administrators in other nations to help them in their fight against tax evasion and avoidance. A global economy should not be allowed to serve as a possible vehicle for tax evasion in any country.”

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