Owen, Christopher: Global Survey – February 2020

  • Bermuda amends Economic Substance legislation
    • 24 December 2019, the Bermuda government introduced key changes to the economic substance regime by bringing the Economic Substance Amendment (No. 2) Act 2019 into force and issuing a further iteration of the Economic Substance Regulations.

      The changes followed six months of active dialogue with the EU Code of Conduct Group and the OECD to ensure equivalency with other jurisdictions under the European Council’s criterion 2.2 – existence of tax regimes that facilitate offshore structures that attract profits without real economic activity – for the listing of ‘Non-cooperative jurisdictions for tax purposes’.

      One of the most significant changes under the Economic Substance Amendment (No. 2) Act is to the definition of ‘holding entity’. The revised definition now only includes "pure equity holding entities". In order to fall within this new definition, an entity must acquire and hold equitable interests as its primary function, hold a controlling stake in another entity and must not carry on any other commercial activity.

      The definition of ‘shipping’ has been changed to exclude entities that own a vessel but do not otherwise take part in its operation. The defining characteristics for this relevant activity are now the operation and management of a ship.

      The definition of ‘insurance’ has similarly been narrowed in scope such that it only captures insurers and re-insurers, while insurance intermediaries – managers, agents and brokers – are no longer within scope.

      Amendments have also been made to the definitions of ‘financing’ and ‘leasing’, such that they are no longer separate relevant activities but have been merged into a single relevant activity of ‘financing and leasing’.

  • Cayman moves to address deficiencies in AML regulatory standards
    • 30 January 2020, the Cayman Islands’ Legislative Assembly approved a package of Bills introduced by the government in order to align the funds regulatory regime with best international market practice and to meet the Caribbean Financial Action Task Force's (CFATF) recommendations in respect of anti-money laundering (AML) regulatory standards.

      In March 2019, the CFATF released a mutual evaluation report that found the Cayman Islands has major shortcomings in its ability to analyse and understand the risks from money laundering and terrorism financing. The CFATF made a total 63 recommendations and gave Cayman one year to implement the measures to enhance the effectiveness of its laws and practices to combat money laundering.

      Cayman has until 21 February to demonstrate that it has made positive and tangible progress in implementing the recommendations of the report. The FATF will then decide whether to impose a remediation plan on the Cayman Islands and place and place it on the CFATF greylist. The FATF will deliver its decision at its June 2020 plenary.

      Last August, the Cayman government contracted Jan Tibbling, former chief public prosecutor at the Swedish Economic Crime Authority (SECA), to help steer its National Co-ordination Team through the CFATF response. Tibbling, who has represented Sweden at several FATF plenaries and was also the law enforcement FATF assessor for Austria, is contracted through to May 2020.

      The Mutual Funds Bill will require those funds not previously covered under the existing Mutual Funds Law, specifically those funds with 15 or fewer investors capable of appointing or removing the operators, to register with CIMA and be subject to regulation.

      The Private Funds Bill will require private funds to register with the Cayman Islands Monetary Authority (CIMA) and be subject to regulation. Specifically, the bill requires private funds to have appropriate and consistent internal procedures for the proper valuation of their assets. It also requires that a private fund be audited annually by a CIMA-approved auditor in accordance with international audit standards and have proper custodial and cash monitoring processes.

      The Companies (Amendment) Bill 2020, the Limited Liability Partnership (Amendment) Bill 2020 and the Limited Liability Companies (Amendment) Bill 2020 are intended to provide clarity on what constitutes a beneficial owner and the responsibilities of corporate service providers to gather, record and file the information with the Registrar of Companies.

      The International Tax Co-operation (Economic Substance) (Amendment) Bill 2019 is designed to maintain alignment with international standards and to meet the ‘substantial activities’ requirement for no tax or only nominal tax jurisdictions under the OECD BEPS Action 5 on Harmful Tax Practices.

  • Curaçao introduces territorial tax system
    • 1 January 2020, legislation to introduce a territorial tax system, economic substance rules, anti-abuse provisions and a reduced corporate income tax rate for certain business activities was brought into force. It was passed by the Curaçao parliament on 30 December 2019.

      The EU Code of Conduct Group announced in February last year that it required further changes to certain aspects of the Curaçao Profit Tax Ordinance. The resulting draft legislation was approved by the Code of Conduct Group and can therefore be considered in compliance with current EU minimum requirements.

      The principle amendment to the profit tax legislation is the change from a worldwide tax system with exemptions for foreign permanent establishments, sales to foreign buyers and foreign real estate, to a stricter territorial system where only income from a domestic enterprise is included in the taxable basis.

      The territorial system will not apply to passive income or any kind of royalty income as defined by the OECD. In addition, certain domestic activities – including ship building and the repair of ships and airplanes, warehousing and logistics, support services and fund management and administration – will be subject to a reduced rate of tax at 3% (from the standard 22% rate).

      Economic substance rules were introduced in 2019 for Curaçao Investment Companies (CICs) – special investment companies qualifying for a 0% corporate income tax rate. Under the amended legislation, economic substance will also be required for companies deriving income from foreign sources and companies with activities qualifying for the new reduced corporate income tax rate of 3%.

      CICs are required to have an adequate number of employees performing core activities and to incur expenses commensurate with the type and volume of these core activities. Under the new legislation, in addition to having adequate employees and expenses, a company that generates foreign income must have economic substance comparable to what would be required for a non-resident entity to be deemed to have a Curaçao permanent establishment. Failure to comply can result in penalties.

      Similarly, companies that generate income subject to the reduced corporate income tax rate of 3% must have sufficient employees and expenses, but only activities of the entity itself will be taken into account and not those of the group of companies.

      An outsourcing entity must demonstrate that it has adequate and consistent supervision of the outsourced activities, which must take place within Curaçao. In respect of services provided to investment funds or managers, the economic substance requirements may not be outsourced, even to group companies. The core income-generating activities must be performed by the entity itself.

      To comply with EU guidelines, the e-zone (free trade zone regime) reduced corporate income tax rate is abolished as from 1 January 2020. For taxpayers that were qualified as an e-zone company on 31 December 2019, these provisions are grandfathered through 31 December 2022.

  • Cyprus and Saudi Arabia ratify BEPS MLI
    • 27 January 2020, the governments of Cyprus and Saudi Arabia deposited legal instruments with the OECD ratifying the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS MLI). It will enter into force for both countries on 1 May.

      The BEPS MLI is designed to allow countries to swiftly incorporate new tax treaty provisions, designed to curtail multinational group tax avoidance and speed cross border tax dispute resolution, into existing bilateral tax treaties. It enters into force three months after a jurisdiction deposits its instrument of ratification with the OECD,

      The BEPS MLI entered into force in respect of Denmark and Iceland on 1 January and was also ratified by Chile on 10 January. North Macedonia became the 94th jurisdiction to sign the BEPS MLI on 29 January.

  • DMCC introduces new companies regulations
    • 2 January 2020, the Dubai Multi Commodities Centre (DMCC) introduced a new set of rules and regulations aimed at improving the ease of setting up and doing business in the free zone. Changes include increased flexibility around a company's articles of association, the introduction of different classes of share and a new 'dormant' company status.

      The DMCCA Company Regulations 2020 update DMCC’s existing company law framework in line with international best practice and to offer more simplicity and flexibility to businesses registered within DMCC and increasing the remit of their activities.

      Companies may adopt model 'standard articles' of association as prescribed by the DMCC Authority (DMCCA) or can choose to modify the standard articles or adopt their own. Companies that do not use the standard articles must provide the DMCC Registrar with a legal opinion that its articles do not contradict and are consistent with the regulations.

      The DMCC's previous AED50,000 (c. USD13,500) minimum share capital requirement has been repealed, although the regulations state that the DMCC Registrar may specify a minimum amount of share capital for a particular company.

      Companies may now issue different classes of shares provided that the rights associated with each share class are stipulated in the articles of association, and may hold shares in treasury. The regulations also contain new rules around payment of dividends and unlawful distributions.

      The regulations contain new provisions to make it easier to transfer company incorporation to the DMCC, as well as provisions around winding up. They also introduce the concept of dormancy, allowing companies to suspend a licence for up to 12 months or an extended period if approved by the Registrar.

      The regulations further introduce detailed requirements around accounts, record-keeping and auditing. Auditors are required to be registered with the DMCCA as an approved auditor and follow International Accounting Standards (IAS) rules when preparing financial statements.

      DMCC is a Dubai free zone focused on commodities trade and enterprise. Almost 2,000 new companies registered in the DMCC in 2019, according to official figures, taking the total number of companies registered in the free zone up to over 16,000.

      DMCC executive director Ahmad Hamza said: "The new rules and regulations are indicative of our commitment to providing companies with a seamless ability to set up and grow their operations. We are confident that these enhancements will attract even more companies to do business in DMCC".

  • European Union and UK hold preliminary discussions on future relationship
    • 8 January 2020, the new European Commission President Ursula von der Leyen held a meeting in London with UK Prime Minister Boris Johnson to discuss the future relationship after the UK formally exits the EU on 31 January.

      The EU and the UK will enter intensive discussions on a new partnership and free trade agreement during the transition period. At their first face-to-face meeting since von der Leyen took office, Johnson stressed that the UK will not extend the transition period beyond 31 December 2020, and that he is seeking a Canada-style free trade accord.

      Johnson said that “any future partnership must not involve any kind of alignment” with EU rules and standards or be subject to the jurisdiction of the European Court of Justice. Earlier, von der Leyen said it would be “impossible” to get a full deal before Johnson’s year-end deadline, adding that every decision taken would come with a “trade-off.”

      “Without the free movement of people, you cannot have the free movement of capital, goods and services,” von der Leyen told an audience at the London School of Economics. “Without a level playing field on environment, labour, taxation and state aid, you cannot have the highest quality access to the world’s largest single market.”

  • France expands list of non-cooperative jurisdictions
    • 7 January 2020, the French government added the Bahamas, the British Virgin Islands, Anguilla and the Seychelles to the list of jurisdictions that France considers to be non-cooperative for tax purposes. Botswana was removed.

      La liste des Etats et territoires non coopératifs en matière fiscale (ETNC) was introduced in October 2018 under the French Anti-Fraud Act, which was designed to strengthen the measures to fight against taxpayers' failure to comply with their tax obligations.

      Announcing the updated list, Finance Minister Bruno Le Maire and Public Accounts Minister Gérald Darmanin said the jurisdictions had been listed due to deficiencies in their exchange of tax information, stating that French tax authorities had been unable to obtain requested information.

      Panama remained on the list for the same reason, given that the dialogue with the country over pending information request and better bilateral co-operation had not progressed sufficiently. Similar discussions with the other countries and territories are still ongoing.

      The ETNC now includes 13 jurisdictions: Anguilla, the Bahamas, Fiji, Guam, the British Virgin Islands, the US Virgin Islands, Oman, Panama, Samoa, American Samoa, the Seychelles, Trinidad & Tobago and Vanuatu.

      Companies with a link to listed countries may be subject to a 75% withholding tax on interest and dividends, stricter information filing on transfer pricing and no access to tax treaty benefits.

  • HMRC publishes final DAC6 regulations
    • 31 January 2020, HMRC published final regulations for applying the EU’s Sixth Directive Amending the Directive on Administrative Cooperation in Tax Matters (DAC 6), which is designed to enable EU tax authorities to share information about cross-border tax arrangements.

      DAC 6, which was brought into force on 25 June 2018, imposes mandatory reporting of cross-border arrangements involving at least one EU member state where these fall within one of a number of hallmarks. The information obtained from these reports will be shared with EU tax authorities, enabling them to identify potential tax risks.

      DAC 6 defines five types of hallmark that may signify a breach of conduct:

      -Generic hallmarks linked to the main benefit test, such as confidentiality clauses or success fees paid to an intermediary;

      -Specific hallmarks linked to the main benefit test, such as acquisition of loss-making companies or conversion of income types;

      -Specific hallmarks related to cross-border transactions, such as depreciation or double relief from taxation in respect to the same asset in multiple jurisdictions;

      -Specific hallmarks related to the automatic exchange of information and beneficial ownership, such as the transfer of an account to a non-Automatic Exchange of Information (AEOI) jurisdiction;

      -Specific hallmarks related to transfer pricing, such as the transfer of hard-to-value intangibles.

      Some of the hallmarks should only be considered when the ‘main benefit test’ threshold is met. This occurs if it can be established that the main benefit, or one of the main benefits, which a person may reasonably expect to derive from an arrangement is the obtaining of a tax advantage.

      The UK’s International Tax Enforcement (Disclosable Arrangements) Regulations 2020 No 25 will come into force on 1 July 2020. Reports for cross-border arrangements entered into between 25 June 2018 and 30 June 2020 will have to be made by 31 August 2020.

      Changes were made to the draft legislation making the rules more proportionate, amending the penalty regime to avoid penalising genuine mistakes and limiting the scope of ‘tax advantage’ to just EU tax advantages.

      Further amendments ensure that the same intermediary does not have an obligation to report in multiple jurisdictions; that the scope of the rules is limited to UK intermediaries only and does not apply to those without a UK connection.

      While the UK officially left the EU on 31 January 2020, under the terms of the Withdrawal Agreement the UK is legally obliged to transpose DAC 6 before its departure, and that obligation will continue during the implementation period.

      HMRC said: “It is also important to note that leaving the EU will not diminish the UK’s resolve to tackle tax avoidance and evasion, and we will continue to work internationally to improve tax transparency,” continued the statement.

  • Inclusive Framework to move forward on global digital tax
    • 28 January 2020, the group of 137 countries and jurisdictions making up the OECD/G20 Inclusive Framework (IF) on Base Erosion & Profit Shifting (BEPS) agreed at a meeting in Paris to move ahead with negotiations to address the tax challenges of the digital economy. IF members "affirmed their commitment to reach an agreement on a consensus-based solution by the end of 2020”.

      The multilateral negotiations followed moves by a number of European countries to impose unilateral digital taxes that would primarily affect major US tech companies. Last July, the French government introduced a Digital Services Tax (DST) for companies with digital revenues of more than €25 million in France and €750 million worldwide.

      The tax, which is deductible for French corporate income tax purposes, applies at a single rate of 3% to total gross revenues, net of VAT, derived from the supply of taxable digital services in France during the tax year. Both Italy and the UK have legislated for a similar tax. The Italian DST has just come into force while the UK's is scheduled to take effect in April.

      In response to the French DST, the US government proposed tariffs on US$2.4 billion of French goods. However, after talks on the sidelines of the World Economic Forum in Davos between French finance minister Bruno Le Maire and US Treasury Secretary Steven Mnuchin on 23 January, the US agreed to suspend the tariffs and France agreed to suspend collecting DST, although corporate liabilities will still be accrued.

      Le Maire said: “I want to be very clear. [There has been] no suspension of the French taxation, no withdrawal of the French taxation. Either there is an international agreement in 2020 and in that case the international agreement will replace the national taxation, or there is no agreement at the OECD, and in that case, since the French taxation remains in place, the companies will have to pay.”

      The Inclusive Framework on BEPS agreed to move ahead with the OECD’s proposed two-pillar negotiation to address the tax challenges of digitalisation. The digital tax rules under ‘Pillar One’ are designed to ensure that multinationals conducting sustained and significant business in places where they may not have a physical presence can be taxed in such jurisdictions. It requires the negotiation of new rules on nexus, covering where tax should be paid, and new profit allocation rules.

      The OECD stated: “Endorsement of the unified approach is a significant step, as until now inclusive framework members have been considering three competing proposals to address the tax challenges of digitalisation.”

      A revised programme of work under Pillar One, which outlines the remaining technical work and political challenges to deliver a consensus-based solution by the end of 2020, was agreed. IF members will meet in July in Berlin, at which time political agreement will be sought on the detailed architecture of this proposal.

      The IF statement took note of a proposal to implement Pillar One on a ‘safe harbour’ basis, as proposed by Mnuchin to OECD Secretary-General Angel Gurría last December. It said many IF members had expressed concerns that “implementing Pillar One on a ‘safe harbour’ basis could raise major difficulties, increase uncertainty and fail to meet all of the policy objectives of the overall process." The issue was included in the list of remaining work, but a final decision was deferred until the architecture of Pillar One has been agreed.

      The IF also welcomed the significant progress made on the technical design of Pillar Two, which aims to address remaining BEPS issues and ensure that international businesses pay a minimum level of tax. However it noted that further work that needs to be done on Pillar Two.

      "We welcome the Inclusive Framework’s decision to move forward in this arduous undertaking, but we also recognise that there are technical challenges to developing a workable solution as well as critical policy differences that need to be resolved in the coming months," said OECD Secretary-General Angel Gurría.

      "The OECD will do everything it can to facilitate consensus, because we are convinced that failure to reach agreement would greatly increase the risk that countries will act unilaterally, with negative consequences on an already fragile global economy.”

      The ongoing work will be presented in a new OECD Secretary-General Tax Report during the next meeting of G20 finance ministers and central bank governors in Riyadh, Saudi Arabia, on 22 February.

  • Isle of Man updates guidance on tax residence
    • 2 January 2020, the Isle of Man Treaty Income Tax Division published a practice note addressing the determination of the tax residence of companies and other corporate taxpayers.

      The practice note covers how the tax residence of a company is established. The Isle of Man applies a combination of both the place of incorporation and the place of central management and control of the company in order to determine the tax residency of a company.

      The practice note also covers dual residence, transfer of domicile, application for non-residence for companies incorporated in the Isle of Man and for tax residence for those not incorporated in the Isle of Man, as well as certificates of residence and reporting obligations.

      Since 2006, the standard rate of corporate income tax in the Isle of Man is 0%, although a 10% rate of tax applies to income received by a company from banking business and to retail business in the Isle of Man that has taxable income of more than £500,000. A 20% rate of tax applies a 10% rate of tax applies to income received by a company from land and property in the Isle of Man.

  • J5 countries hold global ‘day of action’ against tax evasion
    • 22 January 2020, the Joint Chiefs of Global Tax Enforcement, known as the J5, undertook a globally co-ordinated ‘day of action’ to put a stop to the suspected facilitation of offshore tax evasion across the UK, US, Canada, Australia and the Netherlands.

      The action occurred as part of a series of investigations in multiple countries into an international financial institution located in Central America, whose products and services are suspected to be facilitating money laundering and tax evasion for customers across the globe.

      The J5, which was formed in mid-2018, said in a statement: “It is believed that through this institution, a number of clients are using a sophisticated system to conceal and transfer wealth anonymously, to evade their tax obligations and launder the proceeds of crime.”

      The J5 brings together tax, crypto and cyber experts to target those who enable global tax evasion by gathering information, sharing intelligence and collaborating on operations.

      The ‘day of action’ involved evidence, intelligence and information gathering activities such as search warrants, interviews and subpoenas. The J5 said significant information had been obtained and investigations were ongoing. It was expected that further criminal, civil and regulatory action would arise from these actions in each country.

      "This is the first coordinated set of enforcement actions undertaken on a global scale by the J5 – the first of many," said Don Fort, head of the US Internal Revenue Service, Criminal Investigation.

      "Working with the J5 countries who all have the same goal, we are able to broaden our reach, speed up our investigations and have an exponentially larger impact on global tax administration. Tax cheats in the US and abroad should be on notice that their days of non-compliance are over," Fort said.

      The J5 said it was working on more than 50 investigations including those involving “sophisticated international enablers of tax evasion, a global financial institution and its intermediaries who facilitate taxpayers to hide their income and assets”.

  • Malta issues new guidelines on automatic exchange of information
    • 2 January 2020, Malta's Commissioner for Revenue issued a unified set of guidelines on the automatic exchange of financial account information, which incorporate further clarifications and salient changes, including:

      -A clarification on entity classification pertaining to cell companies, in line with the previous determinations issued by the Commissioner;

      -The elimination of Holding and Treasury Companies of financial institutions (FIs) that do not fall within the definition of a FI are no longer deemed as FIs under the US Foreign Account Tax Compliance Act (FATCA);

      -Clarification on Distributed Ledger Technology assets, to align the guidance with the guidelines issued by the Commissioner;

      -More complete notes on registration and modifications of domestic registrations and the introduction of guidance on the cancellation of domestic registration and Global Intermediary Identification Number (GIIN);

      -Clarifications on reporting obligations pertaining to structures with underlying structures that do not have a separate legal personality;

      -The definition of passive income has been aligned in its entirety with the Income Tax Act to ensure more certainty;

      -Current citizenship-by-investment and residence-by-investment guidelines will be extended to FATCA.

  • Netherlands announces 2020 tax treaty targets
    • 20 January 2020, the Dutch Ministry of Finance announced the list of countries with which the Netherlands intends to negotiate new or amended double tax treaties in 2020.

      The Netherlands will continue treaty talks with Belgium, Brazil, Chile, Curacao, Morocco, Uganda and Portugal. It will also attempt to start or restart negotiations with Australia, Aruba, India, Israel, Mozambique, Senegal and Thailand in 2020.

  • Netherlands postpones ultimate beneficial ownership register
    • 10 January 2020, implementation of the Netherlands' register of corporate and other related entities’ ultimate beneficial ownership (UBO) was delayed after the Upper House of the Dutch Parliament (Eerste Kamer) announced it was to conduct a preparatory investigation of the bill on 28 January.

      Legislation to establish a partially public register of ultimate beneficial owners of companies was submitted to the Dutch parliament in April 2019. It was proposed to introduce the register as part of the Trade Register of the Chamber of Commerce in January 2020, as required by the EU Fourth Anti-Money Laundering Directive (AMLD 4).

      All companies registering after 10 January 2020 would have had to comply with the beneficial ownership disclosure regulations immediately, although existing businesses were to be granted a further 18 months, until mid-2021, to register their UBOs.

      The requirement extended to private companies as well as to co-operatives, foundations and partnerships, but not to trusts. However, the EU’s Fifth AMLD V, which member states were supposed to enact in January, does extend the registration requirement to trusts.

      The Lower House of the Dutch Parliament (Tweede Kamer) adopted a bill for the implementation of the UBO Register on 10 December 2019 with the intention that implementation would begin on 10 January 2020.

      The legislation requires beneficial owners' names, month and year of birth, state of residence, and nationality to be accessible to the public, along with the details of their interests in the entity concerned. The register will also record their full date and place of birth, the home address, citizen service number and tax identification number, although these details will only accessible to the appropriate authorities.

      It is not yet clear when the Upper House will be ready to vote on the Bill, but implementation of the register is now not expected until the end of the first quarter of 2020.

  • Panama assembly approves beneficial owner register Bill
    • 19 December 2019, Panama’s National Assembly approved Bill No. 169, which would create a register of beneficial owners of legal entities. It will become law once signed by the Panamanian President and published in the Panamanian Official Gazette.

      In June 2019, the global Financial Action Task Force (FATF) placed Panama back on its grey list of monitored countries, citing strategic anti-money laundering deficiencies. These included “ensuring adequate verification and update of beneficial ownership information by obliged entities; establishing an effective mechanisms to monitor the activities of offshore entities; assessing the existing risks of misuse of legal persons and arrangements to define and implement specific measures to prevent the misuse of nominee shareholders and directors; and ensuring timely access to adequate and accurate beneficial ownership information.”

      Resident agents have been required to perform due diligence on the ultimate beneficial owner (UBO) of a client entity since 2015. The new Bill now requires resident agents to file this information at the Superintendence of Non-Financial Institutions.

      Resident agents must register with the Superintendence and submit the required information within 30 business days of a company being incorporated or of being appointed as its agent. A grandfathering clause grants resident agents of existing companies six months to register and obtain the required information. An agent that fails to do this will be required to resign as the entity's resident agent.

      Changes to the information must also be notified within 30 days. Resident agents will be fined from US$1,000-5,000 for each legal entity whose beneficial information is not registered or updated, with progressively increasing daily fines. Extra penalties will be applied for filing false information.

      A UBO is defined as: “A natural person, who directly or indirectly owns controls, and/or has a significant influence over the account relationship, contractual relationship and/or the business or the natural person benefitting from a transaction, or who ultimately controls the legal entity’s decisions”.

      The criteria for ownership, control or influence in respect of a legal entity are as follows:

      -Shareholding participation – a natural person who ultimate owns or controls, whether directly or indirectly, 25% or more of the shares or voting rights in a legal entity, except if the shares are listed on a recognised stock exchange.

      -Control – the partner or partners who control a partnership; the trustee, settlor, beneficiary, protector or other person who controls a trust; the natural person who is appointed as liquidator or administrative receiver to a legal entity which is in liquidation, bankrupted or under administrative receivership; and the natural person acting as executor or personal representative of the estate of a deceased UBO shareholder in a corporate entity.

      -Management – the natural person who ultimately exercises control over the management of a legal entity.

      The register will contain a UBO’s name, ID number, date of birth, nationality, address and the date on which the individual became the beneficial owner. This information will not be publicly available except to resident agents, registered legal entities and two designated officers at the Superintendence. Failure to keep the information confidential is subject to a fine of US$200,000. Anyone who gains unauthorised access to the register is liable to a fine of US$500,000.

      Under the Bill, a legal entity whose resident agent has not registered with the Superintendence will be suspended from the Panamanian Public Registry, and will be removed after failing to file for two years.

      The Bill will be effective from the day after its publication in the Panamanian Official Gazette. Once the law is effective the resident agent should register the UBO information within 30 days of incorporation. For existing legal entities the resident agent will have six months from the effective date.

  • Portugal set to end 10-year tax exemption for non-habitual residents
    • 10 January 2020, the Portuguese government proposed changes to the 2020 state budget that would raise the tax rate on the overseas pensions of non-habitual residents (NHRs) from zero to 10%, and limit the granting of so-called ‘golden visas’ to property purchases outside Lisbon and Porto.

      The proposed tax increase on the overseas pensions of NHRs follows complaints from Finland and Sweden that, when combined with bilateral tax treaties, the scheme results in an effective zero tax rate on private pensions.

      The NHR tax rule, introduced in 2009, allows for a flat 20% personal income tax-rate for any earnings in Portugal; plus, a tax exemption on all foreign income, including pensions, for 10 years. A qualifying applicant must spend 183 days or more a year in the country (owning or renting a property), and cannot already be a resident.

      The governing socialist party of Portugal has also proposed an amendment to the granting of ‘golden visas’ to foreigners who invest at least €500,000 in property.

      Between 2012, when the scheme started, and 2019, Portugal issued more than 8,200 ‘golden visas’, of which more than half went to Chinese citizens. Although the visas can be granted for job creation and some other projects, property purchases account for more than €4.5 billion of €5 billion invested through the programme.

      At present, the scheme is open to those who wish to invest in the cities of Lisbon and Porto, and on the coast, which together are estimated to represent about two-thirds of total property investment to date. The amendment would restrict the scheme only to property based in inland municipalities, as well as the Azores and Madeira.

      The minority Socialist government was expected to approve the proposed changes and include them in the final version of the budget. They would be introduced from March and would not apply to those already using the NHR concessions.

  • Singapore attracts 21 applications for Digital Bank Licences
    • 7 January 2020, the Monetary Authority of Singapore (MAS) announced that it had received 21 applications for new digital bank licences at the close of the application window on 31 December 2019. This comprised seven applications for two digital full bank (DFB) licences and 14 applications for three digital wholesale bank (DWB) licences.

      The issuance of the new digital bank licences is designed to enable non-bank businesses with strong value propositions and innovative digital models to offer banking services. DFBs will be allowed to take retail deposits, while DWBs will focus on serving small and medium-sized enterprises (SMEs) and other non-retail segments.

      MAS said the new digital bank licences attracted strong interest from a diverse group of applicants, including e-commerce firms, technology and telecommunications companies, fintech firms and financial institutions. The majority of applicants were consortiums, with entities seeking to combine their individual strengths to enhance the digital bank’s value proposition.

      MAS will evaluate all eligible applications and will announce the successful applicants in June 2020. Successful applicants are expected to commence business by mid-2021.

  • Singapore launches Variable Capital Companies framework
    • 15 January 2020, the Monetary Authority of Singapore (MAS) and the Accounting & Corporate Regulatory Authority (ACRA) launched the Variable Capital Companies (VCC) framework, a new corporate structure that can be used for a wide range of investment funds.

      The VCC is designed to offer more flexibility to investment funds than Singapore’s standard vehicles – Singapore companies, limited partnerships and unit trusts – by providing an umbrella-sub-fund structure and less rigid capital maintenance requirements. The VCC is therefore similar to the ‘protected cell’ and ‘segregated portfolio’ structures in offshore jurisdictions such as the Cayman Islands, the British Virgin Islands and Guernsey.

      Fund managers will be able to constitute investment funds as VCCs across both traditional and alternative strategies, and as open-ended or closed-end funds. Fund managers may also incorporate new VCCs or re-domicile their existing investment funds with comparable structures by transferring their registration to Singapore as VCCs.

      A VCC will be treated as a company and a single entity for tax purposes, enabling VCCs to access double tax agreements (DTAs). Tax incentives available to Singapore-based funds – notably the Singapore Resident Fund Scheme and Enhanced Tier Fund Scheme – are extended to VCCs, together with the Financial Sector Incentive Scheme for fund managers and the remission for funds from goods and services tax (GST).

      A group of 18 fund managers participated in a VCC Pilot Programme that was initiated by MAS and ACRA in September last year. All of these fund managers have incorporated or re-domiciled a total of 20 investment funds as VCCs, comprising venture capital, private equity, hedge fund and Environmental, Social, and Governance (ESG) strategies.

      To further encourage industry adoption of the VCC framework in Singapore, MAS has launched a VCC Grant Scheme. The grant scheme will help defray costs involved in incorporating or registering a VCC by co-funding up to 70% of eligible expenses paid to Singapore-based service providers. The grant is capped at S$150,000 for each application, with a maximum of three VCCs per fund manager.

  • Union Bancaire Privée agrees addendum to US Non-Prosecution Agreement
    • 2 January 2020, the US Department of Justice announced the signing of an addendum to the non-prosecution agreement (NPA) signed with Swiss private bank Union Bancaire Privée (UBP) under the Swiss Bank Programme in respect of previously undisclosed additional US-related accounts.

      When the original NPA was signed on 6 January 2016, UBP reported that it held and managed 2,919 US-related accounts, with assets under management of approximately US$4.9 billion, and paid a penalty of US$187.8 million.

      In signing the addendum, UBP acknowledged there were an additional 97 US-related accounts that it knew about, or should have known about, that were not disclosed to the Justice Department at the time of the signing of the non-prosecution agreement. It will pay an additional sum of US$14 million and will provide supplemental information regarding its US-related account population.

      The Swiss Bank Programme provided a path for Swiss banks to resolve potential criminal liabilities in the US relating to offshore banking services provided to US taxpayers. The Justice Department executed NPAs with 80 banks under the Swiss Bank Programme between March 2015 and January 2016, imposing a total of more than US$1.36 billion penalties.

      All participating banks were required to disclose all known US-related accounts that were open between 1 August 2008 and 31December 2014. They also committed to continue disclosing all material information relating to their US-related accounts bank throughout the term of the NPA.

      Principal Deputy Assistant Attorney General for the Tax Division Richard Zuckerman said: “Today’s agreement reflects our continued commitment to ensuring that when entities cooperate and make disclosures to the Department, that they do so fully.”

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