Owen, Christopher: Global Survey - January 2015

  • Australia announces new Premium Investor Visa
    • 14 October 2014, the Australian government announced the introduction of a new Premium Investor Visa (PIV) for applicants investing at least AUD15 million (USD13 million), along with reforms to the Significant Investor Visa (SIV).

      The PIV will offer a 12-month pathway to permanent residency for investors meeting a $15 million threshold in an eligible investment from July 2015. The sole nominating entity will be the Australian Trade Commission (Austrade).

      Austrade will also join State and Territory governments as a nominating entity for the SIV, which currently requires an investment of AUD5 million for a minimum of four years. Changes to the programme, which will involve new eligibility criteria, will take effect during 2014-15.

      The aim is for the money to go into higher-risk infrastructure priorities rather than lower-risk sovereign bonds and managed funds. Direct residential real estate investment is not a complying investment under the SIV, nor will it be a complying investment under the Premium Investor Visa.

      “Our aim, as part of our broader competitiveness agenda, is to attract more investment into Australia that makes a material difference to supporting sustainable growth, productivity and job creation,” said Minister for Trade and Investment Andrew Robb. “We are keen to attract additional investment which supports innovation and which provide new sources of growth capital.”

      Australia introduced SIV visas two years ago and the overwhelming majority of applications – more than 80% – have come from China. More than 436 have been granted from 1,238 applications, attracting over $2 billion in investment.

  • Bahamas introduces ICON fund structure
    • 19 September 2014, the Investment Condominium Act 2014 was passed by the Bahamas parliament to establish The Bahamas as the first common law jurisdiction to create an investment fund vehicle that aligns with the traditional structuring of Brazilian funds. The Bahamas has termed this fund the Investment Condominium or ICON.

      The ICON is the legal structure underpinning the investment fund in the same way as investment funds are legally organised as companies, exempted limited partnerships and unit trusts. The ICON’s purpose is tied to its operation as an investment fund and is defined as the contractual relationship subsisting between participants agreeing to the pooling of assets for the purpose of investing those assets collectively. The ICON can be structured and licensed as a SMART Fund, Professional Fund or Standard Fund in The Bahamas.

      Similar to the Brazilian condominium, the ICON possesses no distinct legal personality save that for the purposes of the legislation it is able to hold assets in its name; enter into agreements in its name; and sue and be sued in its name. The lack of legal personality is addressed by the appointment of an administrator that is empowered to transact in its name, and represent and bind the ICON.

      Under the ICON Act and amended Investment Funds Act (IFA), the responsibility for governance of the ICON is centralised in the ICON’s administrator. If the ICON chooses to engage a single administrator, that administrator performs the governance role of the operator as well as the general administration role of the administrator under the IFA. Alternatively, the ICON may split the governing and general administrator functions between two institutions called the general administrator and the governing administrator.

      The governing administrator must be either a “financial institution” as defined in the ICON Act; or an institution licensed as a corporate services provider under the Financial and Corporate Services Providers Act (Ch.369); or an institution licensed under the Securities Industry Act (No. 10 of 2011) to deal in securities; or a bank or trust company licensed by the Central Bank of The Bahamas under the Banks and Trust Companies Regulation Act (Ch. 316); or an entity registered with or licensed by a regulatory authority in a foreign jurisdiction, which regulatory authority exercise functions that correspond to regulatory functions exercised by the Central Bank of The Bahamas or the Securities Commission of The Bahamas.

      The general administrator also must be a financial institution as defined in the ICON Act. It performs the duties of administration of an investment fund with typical responsibilities.

      The Investment Condominium Act further provides for other types of entities – companies, exempted limited partnerships or unit trusts – to convert to an ICON by following a defined procedure. The Act is clear as to the effect of conversion and it is important to note that conversion does not relieve a converted entity from liabilities or obligations incurred preceding the conversion to an ICON.

      The final route to becoming an ICON is to re-domicile a foreign company, ELP or UT to a Bahamian IBC, ELP or UT, respectively and then convert the Bahamian structure into an ICON, provided that the foreign law and constitutional documents of the company or partnership allows for the re-domiciliation of the entity. With respect to foreign trusts, the trust instrument must include powers to change the governing law of the trust to that of The Bahamas and vary the provisions of the trust.

      To facilitate the new structure, the Bahamas’ Exempted Limited Partnership and International Business Company legislation have been amended to provide for the conversion of such entities to an ICON, and the Investment Funds Act and Regulations have been amended to allow for an ICON to be used as a fund.

      Further amendments to the Companies Act and the International Business Companies Act empower the Registrar General to receive and process electronic communications such as applications for incorporation and certificates of good standing. These amendments are designed to improve the ease of doing business in The Bahamas.

  • Barbados and US sign FATCA agreement
    • 17 November 2014, the Barbados government signed a Model 1 Intergovernmental Agreement to facilitate compliance with the US Foreign Account Tax Compliance Act (FATCA).

      FATCA, which was enacted by the US Congress in 2010 and took effect on 1 July 2014, is intended to ensure that the US Internal Revenue Service (IRS) obtains information on the financial accounts of US persons held by foreign financial institutions (FFIs). Failure by an FFI to disclose information on their US clients will result in a requirement to withhold 30% tax on payments of US-sourced income.

      The Model 1 IGA require FFIs to report all FATCA-related information to their own governmental agencies, which would then report the FATCA-related information to the IRS.

      Barbados Minister of Industry, International Business, Commerce, and Small Business Development, Donville Inniss, said: “The signature of this FATCA agreement represents one of the salient pillars in the transformation of how we as an international business and financial services centre interact not only with other jurisdictions on the sharing of vital information, but is an indication of the transformation of how we interact with our clients and apply greater due diligence in an ever-changing environment.”

  • BVI brings Arbitration Act 2013 into force
    • 1 October 2014, the British Virgin Islands Arbitration Act 2013, which is intended to facilitate alternative dispute resolution in the BVI, was brought into force. It ensures that BVI arbitration will be conducted according to international standards and that BVI arbitrations will also be internationally recognised.

      The Act is modelled on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, which provides rules on arbitration proceedings and is recognised internationally by many countries. The BVI signed the UN Convention on Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) on 25 May 2014, which ensures that BVI arbitration awards are enforceable in all countries that have signed up to the Convention.

      The Act also makes provision for the establishment of a corporate body known as the BVI International Arbitration Centre (IAC) to promote and facilitate arbitration in the BVI. The IAC will be tasked with, among other things, providing all the facilities and services necessary for the conduct of arbitral proceedings and mediation in the BVI.

      The definition of a valid arbitration agreement has been significantly widened. The Act provides that an arbitration agreement is an agreement by the parties – whether signed or not – to submit to arbitration all or certain disputes that have arisen between them in respect of a defined legal relationship whether contractual or not. The agreement must be in writing. An agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement has been concluded orally, by conduct, or by other means.

  • BVI government reviews direction of financial services
    • 12 August 2014, the government of the British Virgin Islands has appointed management consultants McKinsey and Company to undertake a strategic review of the financial services industry. The aim is to protect, diversify and strengthen financial services – which currently provides 65% of government revenue – to ensure the long-term sustainability of the BVI.
      The review will be undertaken in three phases to:
      • Examine the BVI’s existing legal and business environment to assess the health, quality and productivity of the financial services industry, as well as the suitability of current government strategies;
      • Advise the government on managing, rebuilding and strengthening the BVI’s systems and practices, as well as measures to protect the international reputation of the BVI;
      • Develop a strategic framework and implementation plan that is designed to diversify the existing financial services model, create greater substance and attract value-added activities to the BVI.
      BVI Premier and Minister of Finance, Dr Orlando Smith said: “Over the past two years I have led a number of initiatives which sought to critically look at our financial services industry and determine how we should position ourselves for the future. Throughout that period the industry has been subject to a number of shocks, which threaten the viability of what is our most important economic pillar.
      “I am therefore pleased to have commissioned this latest engagement. I look forward to receiving the final implementation plan and the Territory being able to move forward strategically as a global financial services leader, with a stronger and more diversified financial services industry.”

  • Cayman Grand Court (Amendment) Law comes into force
    • 20 October 2014, the Cayman Islands government gazetted the Grand Court (Amendment) Law (Law 15 of 2014) to facilitate grant of interim relief in aid of foreign proceedings.

      The amendment law inserts a new Section 11A into the Grand Court Law of the Cayman Islands. Section 11A empowers the Grand Court to make an order appointing a receiver, or orders for any other interim relief that it would have the power to grant in proceedings within its jurisdiction, in respect of proceedings which have been or will be commenced in an overseas court and are capable of giving rise to a judgment which may be enforced in the Cayman Islands under any statute, or at common law.

      Section 11A(4) empowers the Grand Court to make such orders for interim relief even if the cause of action which is being litigated in the foreign proceedings is not a cause of action which could be litigated in the Cayman Islands. Section 11A(4) also expressly provides that the order need not be ancillary or incidental to any proceedings in the Cayman Islands.

      Section 11A(5) entitles the court to refuse an application for interim relief if, in its opinion, it would be unjust or inconvenient to make an order. Further, Section 11A(6) requires the court to have regard to the fact that the power is ancillary to proceedings outside the Cayman Islands, and that the purpose of the power is to facilitate the process of the foreign court that has primary jurisdiction over the dispute.

      The changes necessary to make to the Grand Court Rules to provide for service out of the jurisdiction of this new form of relief have not yet been implemented.

  • Credit Suisse ordered to pay US$1.8 billion to finalise US guilty plea
    • 21 November 2014, a US court accepted Credit Suisse’s guilty plea to end a criminal case accusing it of helping wealthy Americans avoid paying taxes, and ordered the bank to pay around US$1.8 billion in fines and restitution.

      Credit Suisse agreed to the payout as part of a more than US$2.6 billion settlement with several government authorities. The payout includes a $1.14 billion criminal fine and a nearly $667 million payment to the Internal Revenue Service. An additional $100m will be paid to the Federal Reserve and $715m to the New York State Finance Department.

      In May, Credit Suisse admitted to conspiring to aid and assist US taxpayers in filing false income tax returns and other documents with the IRS. For decades prior to 2009, the bank opened and maintained “secret accounts”, concealing the offshore assets and income of US citizens from the Internal Revenue Service (IRS).

      The bank had also destroyed account records sent to the US for client review, used its managers and employees as unregistered investment advisers on undeclared accounts, and provided offshore credit and debit cards to deport funds in the undeclared accounts.

      A federal court in Norfolk, Virginia accepted the guilty plea. Chief Judge Rebecca Beach Smith said she wanted to see a stiff punishment and would accept the $1.14 billion fine, which was payable within one week, because it fell within recommended federal guidelines. “Deterrence is very important here,” she said.

      In addition to the payments in criminal fines and compensation, the bank has agreed to cooperate to fully disclose all of its cross-border activities, which includes providing account information and details about other banks that transferred funds into undeclared accounts.

      A Credit Suisse spokesman said: “We have worked closely with the US Department of Justice to conclude this matter, and having it fully resolved is an important step forward for us.” The verdict follows years of investigation by US law enforcement authorities, which have also charged seven Credit Suisse employees, of which two have pleaded guilty to date.

  • Cyprus brings new Alternative Investment Funds Law into force
    • 25 July 2014, the Alternative Investment Funds Law of 2014 (AIF) was brought into force with publication in the Official Gazette. The Law, which replaces and repeals the International Collective Investment Schemes Law 1999 (ICIS), was enacted by the Cyprus parliament on 10 July.

      The AIF Law updates the funds regime in Cyprus and aligns it with the latest EU directives on asset management, with a focus on transparency and investor protection. It sets out rules for the authorisation, ongoing operations, transparency requirements and supervision of AIFs in Cyprus and regulates the role and responsibilities of their directors, custodians and external managers.

      An AIF is defined as a collective investment undertaking that raises external capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and that has not been authorised as a UCITS.

      The Law provides for two classes of AIF: “unlimited”, which are available to any number of investors, including retail investors; and “restricted”, which are available only to up to 75 well-informed or professional investors subject to a minimum investment of €125,000.

      AIFs may be structured as variable or fixed capital companies, as limited partnerships, or as a mutual fund. The unit trust structure provided for by the ICIS Law is no longer available. The AIF Law also introduces new structuring options, such as umbrella structures with multiple investment compartments, and permits public offerings of shares of AIFs. Securities issued by AIFs may also be listed.

      The role of depositary is no longer restricted to credit or banking institutions and may, subject to specified conditions, be undertaken by other entities. This may provide more flexibility for AIFs such as private equity and real estate funds, which are not investing in financial and money market instruments.

      Under the previous regime, international collective investment schemes were regulated and supervised by the Central Bank of Cyprus. The AIF Law provides that the Cyprus Securities and Exchange Commission (CySEC) will be responsible for the regulation and supervision of AIFs, bringing all investment products, asset managers and investment firms under a single regulatory body.

  • Dubai proposes new succession rules for non-Muslims
    • 16 November 2014, the Dispute Resolution Authority (DRA) of the Dubai International Financial Centre (DIFC) issued a public consultation on its draft rules relating to succession and inheritance for non-Muslims. The intention is to provide certainty to non-Muslims in passing their assets in Dubai to their chosen heirs without the need for proceedings in the Dubai courts.

      Existing UAE law provides that the law of a deceased non-Muslim’s nationality should apply to their estate but in practice the Dubai Courts have often applied Shariah law at first instance, obliging executors and heirs to appeal. This can be a complex, costly and uncertain process and non-Muslim individuals have generally sought to minimise assets in Dubai by keeping cash offshore and holding real estate through offshore companies.

      Under the proposed DIFC Will and Probate Rules (WPR), non-Muslim individuals with assets in Dubai will be able to execute and register a will under the jurisdiction of the DIFC and its courts. Upon death, the deceased’s executors will be able to apply to the newly formed DIFC Wills and Probate Registry for a grant of probate, which will be issued by the DIFC Court and be enforceable in Dubai.

      The testator must be non-Muslim and aged 21 or older. The will must only cover moveable and non-moveable assets in Dubai, and must be signed in front of, and witnessed by, the registrar or an authorised officer. The proposed fee for registering a DIFC will is $2,800 and the fee for a grant of probate is $1,500.

      The proposed rules demonstrate the commitment of Dubai to supporting expatriates and should result in increased capital retention, as well as growth in direct investment. The DIFC has indicated that it intends to accept appointments for the registration of wills in January 2015.

  • FinCEN issues proposed rules for identifying beneficial owners
    • 30 July 2014, the US Financial Crimes Enforcement Network (FinCEN) published a notice of proposed rulemaking in the Federal Register on customer due diligence obligations at US financial institutions, which includes new requirements to identify beneficial owners behind companies and other legal entity customers.

      Under the proposed rules, US financial institutions would be required to collect and record beneficial ownership information on new legal entity customers as well as to identify the “natural persons” behind the legal entity. A beneficial owner is any person with a 25% or more ownership stake in a legal entity or “an individual with significant responsibility to control, manage or direct a legal entity.” In both cases, the beneficial owner identified would have to be an individual.

      The Notice also lays out requirements for how US institutions should identify and verify customers, establish the nature of the customer relationship and conduct ongoing monitoring and suspicious activity reporting.

      “Expressly stating the requirements facilitates the goal that financial institutions, regulators, and law enforcement all operate under the same set of clearly articulated principles,” FinCEN states in the Notice, calling the proposed rules a “clear framework of minimum expectations.”

      FinCEN has stated that initially, beneficial ownership obligations will apply only to institutions with existing requirements to implement customer identification programmes. This includes banks, broker-dealers and mutual funds. The rules are still subject to a further comment and review period before being finalised.

  • Former UBS banker cleared on US tax charges
    • 3 November 2014, a Florida court acquitted the former head of wealth management at UBS, Raoul Weil, of helping wealthy US clients evade taxes by hiding $20 billion in offshore accounts. The verdict is a setback for the US tax authorities, which have been pursuing Weil since his indictment in 2008.

      The jury took just over an hour to reach its verdict after a three-week trial ended abruptly when the defence declined to call any witnesses, asserting that the prosecution had failed to make its case. Weil’s lawyer Matthew Menchel said: “The jury sent a strong message to the government. This case should never have been brought.”

      At one time the third most senior banker at UBS, Weil was declared a fugitive from US justice in 2009. However he worked openly as chief executive of an independent Swiss asset management business before his arrest while on holiday in Italy in 2013. He was subsequently extradited to the US.

      UBS paid $780m in 2009 to settle allegations it had abetted tax evasion. It also handed over 4,450 names of US clients.

  • G-20 leaders back drive for transparency on beneficial ownership
    • 16 November 2014, the Group of 20 leading nations published a set of principles designed to enable governments to access information on the beneficial owners of companies. The G-20 commitment will intensify pressure to address the issue of corporate secrecy, which has moved up the political agenda as part of the crackdown on tax evasion and illicit financial flows following the financial crisis.

      “We endorse the 2015-16 G-20 anti-corruption action plan,” said the G-20 leaders in the final communiqué following their summit in Brisbane. “We commit to improve the transparency principles of the public and private sectors, and of beneficial ownership, by implementing the G-20 high-level principles on beneficial ownership transparency,” it added.

      In 2013, the G-20 made a commitment to tackle the beneficial ownership issue and distributed a set of principles to guide governments when drawing up national rules. At a meeting of G-20 officials in Paris last September, China expressed its concerns about these points, saying it needed to evaluate the issue.

      However officials said the impasse had been resolved in Brisbane, enabling publication of the High-Level Principles on Beneficial Ownership Transparency, which contains 10 principles – including that beneficial ownership information should be internationally exchanged in the same way as information on taxable income and assets.

      In respect of companies, it said: “Countries should ensure that competent authorities (including law enforcement and prosecutorial authorities, supervisory authorities, tax authorities and financial intelligence units) have timely access to adequate, accurate and current information regarding the beneficial ownership of legal persons. Countries could implement this, for example, through central registries of beneficial ownership of legal persons or other appropriate mechanisms.”

      In respect of trusts, it said: “Countries should ensure that trustees of express trusts maintain adequate, accurate and current beneficial ownership information, including information of settlors, the protector (if any) trustees and beneficiaries. These measures should also apply to other legal arrangements with a structure or function similar to express trusts.”

      However, the policy document stops short of insisting on a central registry of beneficial ownership either for companies or for trusts. Central registries are suggested as a possible, though not necessary, solution only where company ownership is concerned.

      The G-20 principles also stop short of recommending public access to registries of beneficial ownership. Although the UK is progressing legislation to introduce a public registry, the US has announced plans only for its tax authority to collect beneficial ownership information.

      The document committed G-20 countries to lead by example in implementing the agreed principles: “As a next step, each G-20 country commits to take concrete action and to share in writing steps to be taken to implement these principles and improve the effectiveness of our legal, regulatory and institutional frameworks with respect to beneficial ownership transparency.”

      The G-20 leaders also endorsed the OECD’s action plan to tax profits where the economic activities deriving the profits are performed and where value is created. “We welcome the significant progress on the G-20/OECD Base Erosion and Profit Shifting (BEPS) Action Plan to modernise international tax rules,” said the G-20. “We are committed to finalising this work in 2015, including transparency of taxpayer-specific rulings found to constitute harmful tax practices. We welcome progress being made on taxation of patent boxes,” said the policy document.

      “To prevent cross-border tax evasion, we endorse the global Common Reporting Standard for the automatic exchange of tax information (AEOI) on a reciprocal basis. We will begin to exchange information automatically with each other and with other countries by 2017 or end-2018, subject to completing necessary legislative procedures. We welcome financial centres’ commitments to do the same and call on all to join us.”

  • Hong Kong and Macau commit to new OECD information exchange standard
    • 15 September 2014, the government of the Hong Kong SAR announced that it had committed to the Global Forum on Transparency and Exchange of Information for Tax Purposes to implement the new global standard on automatic exchange of information.

      In July this year, the OECD released a Common Reporting Standard for Automatic Exchange of Financial Account Information in Tax Matters (CRS), which called on governments to obtain detailed account information from their financial institutions and exchange that information automatically with the jurisdictions of residence of account holders on an annual basis.
      The Secretary for Financial Services and the Treasury, Professor K C Chan, said: “It is crucial for Hong Kong to adopt the latest global standard on tax transparency in order to maintain our international reputation and competitiveness as an international financial and business centre.”

      It was added that Hong Kong is committed to implementing the new global standard on a reciprocal basis with appropriate partners which can meet relevant requirements on protection of privacy and confidentiality of information exchanged and ensuring proper use of the data. Over 60 jurisdictions around the word have already committed to CRS implementation by 2017, or at the latest by the end of 2018.

      The Hong Kong government said it had been enhancing its regime to meet the evolving international standard on exchange of information, including removing the domestic tax interest requirement in conducting exchange of information under comprehensive avoidance of double taxation agreements, and putting in place the legal framework for Hong Kong to enter into tax information exchange agreements with other jurisdictions.

      The Macau SAR government also announced its support for the global new standard on the automatic exchange of information on 29 September 2014 and said it would soon initiate the legislative procedures necessary for the amendment of relevant domestic laws to ensure timely compliance with the new standard.

      Macau successfully passed the Phase I and Phase II Peer Reviews conducted by the Global Forum in 2011 and 2013 respectively, confirming that both its legal framework and actual operations with regards to exchange of tax information meet internationally agreed standards. To date, Macau has concluded tax treaties with 20 jurisdictions, of which five are double tax agreements and 15 are tax information exchange agreements.

  • Jersey passes new law to govern charities
    • 18 July 2014, the new Charities (Jersey) Law, part of the island’s initiative to develop Jersey’s position as a centre of excellence for philanthropic wealth structuring, was approved by the States Assembly. It is intended to complement the Trusts (Jersey) Law 1984 and the Foundations (Jersey) Law 2009 by introducing a new definition of charitable purposes and, for those wishing to register as a Jersey charity, a charity test and a system of registration.

      The Law provides for a new Charity Commissioner, whose functions will include the issuance of guidance on the operation of the Charities Law, administration of the charity test, and maintenance of the register of charities. It will also define charitable purposes and other elements of the charity test, including public benefit.

      The Law will further establish a register of charities, with general, restricted and historic sections, providing for differing levels of public access. The restricted section, in respect of which public access to information will be limited, will be available for those using their own moneys to fund a structure and not wishing to solicit donations from the public.

      Registration as a charity will be voluntary, but will be relevant in determining entitlement to certain charitable tax reliefs and to the use of the term “charity”. For those not wishing to register as a charity, tax neutrality is to be preserved for structures with no beneficiaries in Jersey and no income deriving from land and buildings in the Island.

  • Leaked documents detailing Luxembourg’s corporate tax deals published
    • 5 November 2014, the International Consortium of Investigative Journalists, a global network based in the US, published leaked documents describing the Luxembourg tax arrangements of more than 340 multinationals.

      Having examined nearly 28,000 pages of confidential documents concerning special tax deals granted by the Luxembourg tax authorities, the ICIJ said its findings showed how hundreds of companies had funnelled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes. “In some instances, the leaked records indicate, companies have enjoyed effective tax rates of less than 1% on the profits they’ve shuffled into Luxembourg,” it said.

      The documents mostly concerned clients of professional services group PwC, which ICIJ said had helped multinational companies obtain at least 548 tax rulings – mainly Advance Tax Agreements – in Luxembourg between 2002 and 2010. The ICIJ also said the arrangements were ‘’legal” under Luxembourg law and that some corporations would have sought comfort letters from Luxembourg for reasons other than tax avoidance.

      The European Commission is currently investigating the use of rulings made by the Luxembourg tax authority in respect of Italian carmaker Fiat and US ecommerce firm Amazon for evidence of potentially improper state aid. All the countries and companies subject to the state aid investigation reject any improper arrangements or wrongdoing.

      The issue is particularly sensitive because the new commission president Jean-Claude Juncker was premier of the Grand Duchy when the deals were approved. Juncker said he would leave the tax inquiry to the commissioner in charge of investigating possible state aid violations – competition commissioner Margrethe Vestager. Asked how Juncker responded to the revelations, his spokesman said: “Mr Juncker is serene.”

  • Luxembourg passes law to immobilise bearer shares
    • 18 August 2014, a new law to provide for the “immobilisation” of bearer shares was brought into force. Under the law, bearer shares must be submitted to a depositary and information about their holder must be entered on a new register. The obligation applies to all bearer shares issued before and after the law’s entry into force. However, the legal status of bearer shares remains unchanged.

      Bearer shares must be deposited with a recognised depositary, which will be appointed by the board of directors or management board of the relevant société anonyme (public limited liability company) or société en commandite par actions (partnership limited by shares). Recognised depositaries will include lawyers admitted to the Luxembourg Bar, financial institutions, family offices and financial sector professionals.

      Bearer shares must be entered in a specific share register, which will hold detailed information concerning the holder’s identity, the date of deposit and the date of transfer of shares. The register will not be publicly accessible but will provide access to judicial and fiscal authorities. Any disposal of shares is made effective by the depositary’s detailed entry in the register.

      There will be a six-month transitional period from the law’s entry into force for shareholders to appoint a depositary and an 18-month transitional period to deposit the bearer shares. If bearer shares have not been registered and deposited by the end of the six-month period, the voting rights attached to the shares will automatically be suspended until the immobilisation procedure is completed.

      If bearer shares have not been deposited within 18 months of the law’s entry into force, they will be cancelled. Criminal penalties will be imposed on the depositary and management entity for non-compliance. A €125,000 fine will be imposed if a depositary is not designated within the specified deadline.

  • Microsoft to pay China $137 million for “tax evasion”
    • 23 November 2014, the Chinese authorities were reported to have levied US$137 million in back taxes and interest against an unnamed US multinational – understood to be Microsoft Corporation – in the first major case concerning cross-border tax evasion in the country.

      According to an article published by China’s Xinhua official news agency, a US multinational identified as “M” was fined 840 million yuan (US$137 million) in back taxes and interest, as well as agreeing to pay more than 100 million yuan in additional taxes a year in the future.

      The report said “M” had reported losses for six years in China of more than 2 billion yuan while its competitors posted profits; the tax authorities concluded its behaviour was unreasonable. It said the US company had admitted tax avoidance and its mainland subsidiary had agreed to pay the levy.

      The article said “M” was one of the world’s biggest 500 firms and had established a wholly owned foreign subsidiary in Beijing in 1995. Microsoft is the only company that fits that description. According to its fiscal 2014 annual report, Microsoft’s overall effective tax rate was 21% – well below the 35% US corporate rate – primarily because it channelled earnings through “foreign regional operations centres” in Ireland, Singapore and Puerto Rico.

  • OECD Global Forum releases new compliance ratings
    • 4 August 2014, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes published 13 new peer review reports demonstrating progress toward implementation of the international standard for exchange of information on request. The Global Forum also issued compliance ratings for 10 jurisdictions.

      A Phase 1 report for Georgia assessed the country’s legal and regulatory framework for transparency and exchange of information. Georgia qualifies for the next stage of the review process, which will assess its exchange of information practices, during the second half of 2014.

      The Global Forum reviewed exchange of information practices through Phase 2 peer review reports in ten jurisdictions and allocated ratings for compliance with the individual elements of the international standard, as well as an overall rating. Five jurisdictions – Andorra, Anguilla, Antigua and Barbuda, Indonesia and Saint Lucia – received an overall rating of “Partially Compliant”. Four – Chile, the Former Yugoslav Republic of Macedonia, Montserrat and St. Kitts and Nevis – were rated “Largely Compliant”. Mexico was rated as “Compliant”.

      The Global Forum said jurisdictions continue requesting supplementary reviews that assess steps taken to address gaps in their legal frameworks and exchange of information practices identified in previous reviews.

      Jersey was rated as “Largely Compliant” in November 2013, when the compliance ratings for an initial batch of 50 jurisdictions were assigned. It has since implemented several recommendations made by the Global Forum, leading to an upgrade of ratings for individual elements of the evaluation process, but its overall rating remains “Largely Compliant.”

      Niue has been blocked from moving to Phase 2 of its review process due to significant gaps in its legal framework. A supplementary review concluded that key changes to its legislation allow Niue to move to Phase 2 of the review process.

      The Global Forum has now completed 143 peer reviews and assigned compliance ratings to 63 jurisdictions that have undergone Phase 2 reviews. Four jurisdictions are rated as Non-Compliant, while eight are now rated Partially Compliant. There are still 12 jurisdictions that remain blocked from moving to a Phase 2 review. Of these, the supplementary review of Switzerland was launched in July to assess changes made since its 2011 review in its legal framework.

      Additional peer reviews will be completed by the next plenary meeting of the Global Forum, in Berlin on 28 October 2014. The Global Forum said it would continue working on the area of exchange of tax information on request but will also be monitoring and reviewing implementation of new international standard for the automatic exchange of tax information. The Global Forum is also working on revision of its Terms of Reference, in preparation for a new round of reviews, in particular to include new transparency requirements on beneficial ownership of legal entities.

  • OECD issues first recommendations on Base Erosion and Profit Shifting (BEPS)
    • 16 September 2014, the OECD released its first recommendations for a coordinated international approach to combat tax avoidance by multinational enterprises. Launched at the request of the Group of 20 (G20) leaders, the Base Erosion and Profit Shifting (BEPS) project is intended to create a single set of international tax rules to end the erosion of tax bases and the artificial shifting of profits to jurisdictions to avoid paying tax.

      The OECD’s work is based on a BEPS Action Plan, which sets out 15 key elements to be addressed by 2015 and was fully endorsed by G20 Leaders in Saint Petersburg in September 2013. The plan will develop a new set of standards to prevent BEPS issues such as double non-taxation through hybrid mismatch arrangements, base erosion via interest deductions, or artificial profit shifting through transfer pricing.

      The first seven elements of the Action Plan focus on helping countries to:
      • Ensure the coherence of corporate income taxation at the international level, through new model tax and treaty provisions to neutralise hybrid mismatch arrangements (Action 2);
      • Realign taxation and relevant substance to restore the intended benefits of international standards and to prevent the abuse of tax treaties (Action 6);
      • Assure that transfer-pricing outcomes are in line with value creation, through actions to address transfer-pricing issues in the key area of intangibles (Action 8);
      • Improve transparency for tax administrations and increase certainty and predictability for taxpayers through improved transfer pricing documentation and a template for country-by-country reporting (Action 13);
      • Address the challenges of the digital economy (Action 1);
      • Facilitate swift implementation of the BEPS actions through a report on the feasibility of developing a multilateral instrument to amend bilateral tax treaties (Action 15); and counter harmful tax practices (Action 5).

      OECD Secretary-General Angel Gurría said: “Our recommendations constitute the building blocks for an internationally agreed and co-ordinated response to corporate tax planning strategies that exploit the gaps and loopholes of the current system to artificially shift profits to locations where they are subject to more favourable tax treatment.”

      The recommendations were presented to and approved by G20 finance ministers and central bank governors at a meeting in Cairns, Australia, on 20-21 September 2014. They further committed to finalising all action items under the Action Plan during 2015.

      The next outputs of the BEPS Project are due to be delivered in September and December 2015. In parallel, the 2014 deliverables will be further refined to ensure that any outstanding technical issues are addressed, including interaction with the 2015 deliverables, and that implementation and practical guidance is developed with regard to all issues.

      The 2015 deliverables include work to develop recommendations in the following areas:
      • Design of effective controlled foreign company (CFC) rules, to provide countries with tools to tackle the large amounts of untaxed profits booked offshore (Action 3);
      • Rules that limit base erosion via interest deductions and other financial payments (Action 4);
      • Continue work on preventing harmful tax practices, with a specific focus on preferential intellectual property regimes (Action 5);
      • Preventing the artificial avoidance of permanent establishment (PE) status (Action 7);
      • Ensuring outcomes from transfer pricing rules are in line with value creation, relating to intangibles, risks and capital and other high risk transactions (Actions 8-10);
      • Methodologies to collect data and carry out economic analysis on BEPS, including its spillover effects across countries (Action 11);
      • Domestic rules requiring the disclosure of aggressive tax planning arrangements (Action 12);
      • Enhance the effectiveness of dispute resolution mechanisms among tax administrations (Action 14).

      BEPS’ project committee heads stated that the finalised recommendations would be presented to the governments of member nations for approval, political endorsement and legislative implementation. As the BEPS project nears completion, international businesses should be alert to the possibility of imminent and significant legislative reform in these areas.

  • Russia excludes Malta from black list of offshore jurisdictions
    • 8 October 2014, the Russian Finance Ministry drafted a decree to remove Malta from its “black list” of offshore jurisdictions. The move followed ratification of the treaty, signed between Russia and Malta on 22 May, for the avoidance of double taxation and prevention of tax evasion with regard to income tax.

      There are currently 41 offshore jurisdictions on Russia’s “List of the States and Territories providing preferential tax treatment and (or) not requiring disclosure and furnishing of the information upon conducting of financial transactions (offshore zones)”.

  • Russia introduces “de-offshorisation” Law
    • 24 November 2014, Russian President Vladimir Putin signed a new Law (No. 376-FZ) that makes wholesale changes to the taxation of foreign entities. The Law introduces the concept of “beneficial ownership”, a new definition of corporate residence, a controlled foreign company (CFC) regime, new rules on the indirect disposal of shares of Russian real estate companies and requirements that Russian legal entities and individuals disclose information on their interests in foreign companies. Approved by the Duma, the Lower House of Russia’s Parliament, on 18 November, the Law was due to have effect from 1 January 2015.

      The new law incorporates a statutory definition of the concept of beneficial ownership into the Russian tax code. To apply the provisions of a tax treaty to the payment of income to a foreign company, Russian taxpayers will have to first obtain a tax residence certificate from the non-resident that is the beneficial owner of the income. The Russian taxpayer is entitled to request a confirmation that the recipient is the beneficial owner of the income.

      The new law changes the definition of tax residence for companies from the place of incorporation to the place of effective management. Legal entities incorporated abroad but meeting the place of effective management test will be subject to unlimited tax liability in Russia.

      Under the new CFC regime, foreign companies managed and controlled from Russia will pay the same profits tax as Russian companies where certain conditions are met. This, said the government, would prevent companies from using low tax jurisdictions to obtain unjustified tax benefits and allow for the taxation of the undistributed profits of CFCs.

      A “controlled foreign company” is a foreign company – including corporate entities or structures without legal identity established under the laws of a foreign country – that is managed and controlled by a Russian tax resident.

      A “controlling person” of a foreign entity is any natural or legal person whose participation in the foreign entity exceeds 25%, or individuals, together with a spouse and dependents, whose participation exceeds 10%, and the share of participation of all residents exceeds 50%. The participation threshold will be reduced to 25% from 2016.

      A foreign company is not subject to the CFC legislation if it is situated in a country with which Russia has signed a double tax treaty, providing that the partner country also exchanges tax information on request and has an effective corporate tax rate that is at least 75% of the weighted average Russian tax rate. This will now factor in dividend tax rates, as well as Russia’s 20% corporate income tax rate.

      The new regime sets out specific notification requirements concerning companies deemed to be CFCs, with reporting to begin from as soon as early 2015. A new penalty regime has also been put in place. Foreign companies whose passive income accounts for less than 20% of their profits will be exempt, as will foreign companies undertaking crude oil activities outside Russia on certain conditions.

      The minimum amount of profit that must be declared will decrease from 50 million roubles (US$1.065 million) in 2015, to 30 million roubles in 2016 and 10 million roubles (US$213,190) after 2017. Russians must notify the tax service of the ownership of more than 10% of authorised capital of a CFC before April 2015.

  • Seychelles, Singapore sign double tax treaty
    • 9 July 2014, Singapore and Seychelles signed a double taxation treaty, which cuts withholding taxes and introduces the internationally agreed standard for the exchange of information for tax purposes. The agreement will enter into force after the completion of domestic ratification procedures in both territories.

      Dividends paid by a company which is registered in one of the countries to a company or individual that is a resident of the other will only be liable for taxation in the other country, unless the beneficiary of the dividends, being a resident of one of the countries, has set up a permanent business establishment in the other country. Withholding tax on interest income is to be capped at 12%. Withholding tax on royalties is capped at 8% if the beneficial owner of the royalties is a resident of the other state.

  • Singapore to adopt OECD information exchange standard by 2018
    • 4 November 2014, Finance Minister Tharman Shanmugaratnam said Singapore would implement the OECD’s new global standard on Automatic Exchange of Information (AEOI) by 2018, provided certain conditions were met.

      “There must be a level playing field among all major financial centres, including Hong Kong, Dubai, Switzerland and Luxembourg, to minimise regulatory arbitrage,” he said in a written response to a parliamentary question.

      Tharman also said Singapore would only agree to exchange information with countries that can ensure the confidentiality of the data they provide and offer reciprocity. “These conditions are necessary to make sure that we continue to respect legitimate expectations for taxpayer confidentiality,” he said.

      In October, finance ministers and tax chiefs from 51 countries, including Luxembourg, signed up to be “early adopters” of the new OECD standard. Singapore, Hong Kong, Switzerland and the United Arab Emirates were not among the signatories, although all have signalled their intent to adopt the accord.

      Singapore, which had more than US$1.40 trillion in assets under management at the end of 2013, brought in new rules last year to make tax evasion a criminal offence under its money laundering rules and has signed up to previous OECD standards on tax transparency.

  • Swiss Museum accepts Gurlitt collection bequest
    • 24 November 2014, the Kunstmuseum Bern announced it had agreed to accept artworks bequeathed by the late Cornelius Gurlitt. The collection was amassed during and shortly after World War II by his father Hildebrand, one of Nazi Germany’s principal art dealers, and passed to his son in 1968.

      Gurlitt’s collection only came to light after a routine check found he was carrying large amounts of cash on a train from Switzerland, triggering a tax inquiry. Investigators found more than 1,400 works in his flat in Munich in February 2012 and a further 60 in his house near Salzburg, Austria. Gurlitt died in May last year following heart surgery.

      The collection – including works by Monet, Matisse, Renoir, Renoir, Picasso, Chagall, Nolde and Liebermann – is estimated to be worth up to €1 billion. It was confiscated by the Bavarian authorities in 2012 but was returned because the acquisitions had occurred more than 30 years previously. Gurlitt later agreed to co-operate on restitution if any artworks proved to be stolen.

      At a joint news conference with the governments of Germany and the state of Bavaria, the Kunstmuseum Bern announced that hundreds of artworks would stay in Germany and that the German authorities have assumed responsibility for legal proceedings, as well as for returning stolen artwork to the heirs of Holocaust victims.

      “The decision was anything but easy for the foundation board,” said Christoph Schäublin, president of the Kunstmuseum Bern’s foundation board. “Looted art and that suspected to be looted…won’t get on Swiss ground,” he said.

      The bequest also faces a legal challenge by relatives of Gurlitt, who have applied to the Munich Probate Court for a certificate of inheritance after a psychological report expressed doubts about his mental capacity when he drew up his will in 2014.

  • Swiss treaties with Australia, Hungary and China enter into force
    • 14 November 2014, the Swiss government announced the conclusion of ratification procedures for the new double taxation treaties with Australia, Hungary and China. The Swiss parliament approved the three agreements on 20 June 2014 and no referendum was called.

      The new treaties, which contain administrative assistance provisions in accordance with the internationally applicable standard and replace the currently applicable treaties, entered into force on 14 October, 9 November and 15 November respectively. The provisions of these agreements will be applicable from 1 January 2015.

      Switzerland’s first three tax information exchange agreements (TIEAs) – with Jersey, Guernsey and the Isle of Man – also entered into force on 14 and 15 October. All three agreements will be applicable from 1 January 2015.

      The Federal Council adopted the international administrative assistance standard in respect of both double tax treaties and TIEAs in April 2012. Switzerland has now signed 49 tax treaties and seven tax information exchange agreements (TIEAs) that are in line with the international exchange of information standard. Of these, 41 treaties and three TIEAs are currently in force.

  • Switzerland amends key law on foreign requests
    • 1 August 2014, the Swiss Federal Council brought the revised Tax Administrative Assistance Act into force, which permits Swiss banks to respond to a wider range of administrative assistance requests concerning their foreign clients.
      The amendment includes a new provision that envisages a procedure for, in exceptional cases, deferred notification of persons entitled to appeal. This would apply to administrative assistance requests already submitted by 21 March 2014.

      It also sets out more precise specifications regarding group requests, which would apply to requests submitted after 1 February 2013.

      The Swiss Parliament approved the revision of the Tax Administrative Assistance Act on 21 March 2014 and the referendum deadline expired on 10 July with no referendum being called against the bill.

      As a result, Switzerland will comply with the applicable international standard for administrative assistance in tax matters, as well as an additional recommendation of the OECD Global Forum on Tax Transparency.
      However, the new Act explicitly states that the Swiss authorities will not consider a request if “it constitutes a fishing expedition” or “if it violates the principle of good faith, particularly if it is based on information obtained through a criminal offence under Swiss law”.

  • Switzerland moves towards automatic exchange
    • 19 November 2014, the Swiss Federal Council approved a declaration on Switzerland joining the multilateral agreement on the automatic exchange of information in tax matters. This international agreement, which was developed within the framework of the OECD, forms a basis for the future introduction of the cross-border automatic exchange of information.

      Switzerland was one of 51 states and territories signed the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA) on the fringes of the plenary meeting of the OECD Global Forum in Berlin on 29 October 2014. Switzerland stated that it intends to collect data from 2017 and exchange it from 2018.

      Switzerland declared as a matter of principle in May 2014 that it would implement the global automatic exchange of information (AEOI) standard and the multilateral agreement is in line with the negotiation mandates adopted by the Federal Council in October with the EU, US and other countries.

      The MCAA forms a basis for the future introduction of the cross-border automatic exchange of information in tax matters. The basis also includes the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters, which the Federal Council signed in 2013, as well as domestic implementing legislation to facilitate the exchange of information with foreign countries.

      The Federal Council will submit all of these proposals for consultation at the start of 2015. They will then go through the standard approval process: consultation of interested parties, Federal Council dispatch to Parliament, approval by Parliament and optional referendum.

      The signing of the MCAA is without prejudice to the question regarding the countries with which the automatic exchange of information should be implemented, because the bilateral activation of the AEOI with certain states will be submitted to the Federal Assembly separately for approval.

      The MCAA sets out the conditions for the annual exchange of account information between the competent authorities of two countries in accordance with the OECD standard. The list of states with which information is to be exchanged automatically can be submitted at a later stage.

  • Top 3,000 UK earners pay more tax than bottom nine million
    • 17 November 2014, the highest-paid people in the UK – amounting to just under 3,000 people with a declared income above £2.7 million – contributed 4.2% of the total government revenue from income tax in the current financial year, according to official government statistics.

      By contrast, Britain’s nine million poorest paid workers contribute less than 4% of the total income tax receipt. In all, 29.9 million people pay income tax in the UK. The top 10% of earners pay more than 55% of the total income tax.

      The figures were disclosed in a Freedom of Information (FoI) request to The Spectator magazine as part of an investigation into growing wealth inequality in Britain. The Spectator’s editor Fraser Nelson said: “In the last tax year, the richest were shouldering a greater share of the burden than any time in history. And this was achieved after the top rate of income tax was reduced from 50p to 45p in April 2013 … the British government is financially reliant on a small number of highly mobile super-taxpayers.”

  • UK agrees to limit patent box regime
    • 12 November 2014, the UK agreed to limit the scope of its patent box regime, which provides for a concessionary 10% tax rate of tax on income from intellectual property. The regime, which came into operation in April 2013, was opposed by Germany on grounds that it encouraged companies to shift their profits to the UK to the detriment of other EU states.

      Under the agreement, preferential tax treatment will only be granted in cases where the patent is linked to research and development that is actually carried out in the UK. To allow time for the legislative process, all existing regimes (products and patents) will be closed to new entrants in June 2016 although IP within existing regimes will retain the benefits until June 2021.

      A statement by the UK government said the agreement “aims to resolve the concerns countries have expressed about some features of the Modified Nexus Approach, and identify what further work is required in order to enable agreement to be reached on this issue during 2015.”

  • UK Court finds dispute falls outside Brussels I wills and succession exclusion
    • 10 October 2014, the UK High Court held that a claim regarding asset misappropriation raised a serious issue to be tried and the English court was seized of jurisdiction in respect of all the relevant defendants. Succession was regarded as the basis of the entitlement, rather than the principal subject matter of the claim, so Article 1(2) of the EU Brussels I Regulation did not operate to require a stay of the English proceedings.

      In Sabbagh v Khoury and Others [2014] EWHC 3233, the claimant Sana Hassib Sabbagh was the eldest of three children of the late Hassib Sabbagh, billionaire and co-founder of Consolidated Contractors Co International (CCC), a Middle East-based building company. She alleged that after her father suffered a stroke and until his death in early 2010, the defendants – her uncle and cousins – unlawfully conspired to misappropriate her father’s assets and interfere with her lawful inheritance through a series of investments with an estimated value of $75 million.

      She further claimed that since her father’s death, the defendants had unlawfully conspired to deprive her of entitlement to shares in CCG with an estimated value of $520 million. This allegation arose from a disagreement between Sabbagh and her relatives over whether her father held 39.915% of CCG’s share capital at the time of his death, pursuant to share transfer agreements entered into in 1993, 1995 and 1998.

      Sabbagh relied predominantly on Article 6(1) of Brussels I (and similar provisions in the Lugano Convention) to argue that the claims against the non-EU domiciled defendants were “so closely connected” to her claims against her UK-domiciled cousin that it was expedient for the claims to be heard together. One further defendant, not domiciled in the EU, was joined under CPR Practice Direction 6B, para 3.1(3) to the share deprivation claim on the basis that they were a necessary and proper party to the litigation

      The defendants disputed jurisdiction, arguing that her claims against her cousin were so weak that there was no risk of irreconcilable judgments from separate proceedings and therefore there was no basis on which to join the other defendants under Article 6(1); and the claims fell outside Brussels I under the “wills and succession” exclusion in Article 1(2) or, alternatively, the validity of corporate decisions (share and asset transfers) were at issue such that the natural forum for the dispute under Article 22(2) should be Lebanon.

      The High Court dismissed the claim for conspiracy to deprive the claimant of inheriting her late father’s shares on the basis that it had no real prospect of success. However, it found that there was an arguable related claim that many of the same defendants had unlawfully misappropriated assets and conspired to deprive the claimant of her inheritance.

      The Court was satisfied that Article 1(2) of Brussels I did not exclude the asset misappropriation claim because the legal and factual issues did not concern succession. There was no dispute between the parties that Sabbagh and her two brothers were each entitled to inherit one-third of their father’s estate under his intestacy. Succession was merely the root of Sabbagh’s entitlement; the claims before the court were based on allegations of tortious wrongdoing, rather than whether Sabbagh was properly entitled to inherit from her father.

      The Court also found that the claim was not founded on challenges to ultra vires corporate decisions such that Article 22(2) of Brussels I precluded the English court from hearing it. The claim related to an alleged tortious conspiracy to deprive Sabbagh of valuable assets; the validity of the investments was not principally at issue. As a result it could accept jurisdiction and rejected the defendants’ application for a stay in favour of proceedings in Lebanon.

  • UK High Court finds inheritance tax liability on bequest to a Jersey trust
    • 18 September 2014, the UK High Court held that for a disposition in a will to a charitable trust to be exempt from inheritance tax, the trust concerned had to be subject to the jurisdiction of the UK courts.

      In Routier and Another v Revenue and Customs Commissioners, Peter Routier and Christine Ann Venables, as executors of the estate of the late Beryl Coulter, were appealing against a determination by the Revenue and Customs Commissioners that the disposition of the residue of her will to a charitable trust – the Coulter trust – was liable to inheritance tax because the trust was governed by Jersey law.

      Mrs Coulter died on 9 October 2007 and was domiciled in Jersey at the date of her death. Her will was dated 1 October 2004, and was stated to be governed by the law of Jersey. Probate was granted in the Probate Division of the Royal Court of Jersey on 25 October 2007. In her will Mrs Coulter left legacies to various people totaling £210,000, but HMRC took the position that the gift of the residue to the Coulter trust was not exempt from inheritance tax of between £591,724 and £633,571.

      Section 23 of the UK Inheritance Tax Act 1984 provides: “(1) Transfers of value are exempt to the extent that the values transferred by them are attributable to property which is given to charities. … (6) For the purposes of this section property is given to charities if it becomes the property of charities or is held on trust for charitable purposes only, and ‘donor’ shall be construed accordingly.”

      The issue between the parties was whether the gift to the Coulter Trust fell within section 23(1) because it fell within the second limb of section 23(6), being a gift that was held on trust for charitable purposes only. The appellants argued that the plain words of subsection (6) indicate that all that was needed for the exemption to apply was that there was a trust and the trust’s purposes were exclusively charitable purposes under UK law.

      HMRC contended, however, that there was an implied requirement in both limbs of subsection (6) that the body of persons or trust (in the first limb) or the trust (in the second limb) were governed by the law of some part of the UK. It concluded that because the Coulter Trust was governed by the law of Jersey it did not qualify as a ‘trust for charitable purposes only’ for the purposes of either limb.

      In dismissing the appeal, Mrs Justice Rose said subsection (6) of section 23 was only a definition section. The primary exempting provision was subsection (1), which referred only to property given to charities. The word “charities”, as defined in section 989 of the Income Tax Act, clearly imported the requirement that the trust should be governed by the law of some part of the UK because it referred to bodies established for charitable purposes.

      If parliament had intended to extend the scope of the exemption to overseas trusts, she found, it would have made that clear in subsection (1) rather than using a word that imported the requirement for a UK link. The expression “held on trust for charitable purposes” in section 23(6) of the Inheritance Tax Act 1984 required not only that the charitable purposes be UK law charitable purposes but that the relevant trust be subject to the jurisdiction of the UK courts as well.

  • UK regulator withdraws “high risk country” list
    • website following representations from the Cayman Islands government. It said that it did not plan to publish such a list in the future and has committed to a full review of the methodology.

      The previously unpublished list of 95 countries was released by the FCA on its website on 18 July after it had entered the public domain following a freedom of information request in early July. The Cayman Islands was the only UK overseas territory and the only major offshore financial center classified as “high risk” for financial crime.

      The Cayman Islands government said it was “astounded” to find Cayman on the list, despite its international compliance track record and high ranking in the assessment by the OECD’s 2013 Global Forum on Transparency and Exchange of Information for Tax Purposes, which put Cayman on par with the UK and higher than most G8 countries. “The third-party data and assessments on Cayman’s regime speak impartially and unambiguously regarding the strengths of our system,” said Minister of Financial Services Wayne Panton.

      The list was used by the FCA to evaluate regulated financial firms’ anti-money laundering compliance. Financial institutions in the UK are required to develop their own country risk categories based on publicly available information. After learning of the FCA’s internal high-risk country list, financial firms called for its publication to assist with their anti-money laundering efforts.

  • US insurance regulators recommend “qualified” status for Bermuda
    • 13 November 2014, Bermuda was recommended for approval as a qualified jurisdiction by a working group of the US regulatory support organisation the National Association of Insurance Commissioners (NAIC). If approved by the full NAIC membership, Bermuda will be placed on the NAIC’s first List of Qualified Jurisdictions effective 1 January 2015.

      Approval would mean that Bermuda-domiciled reinsurers licensed in the appropriate classes will be eligible to be certified for reduced reinsurance collateral requirements under the NAIC’s Credit for Reinsurance Model Law.

      Jeremy Cox, chief executive of the Bermuda Monetary Authority (BMA), said: “The United States remains Bermuda’s largest trading partner. As such, being approved as a qualified jurisdiction is highly relevant for Bermuda in terms of potentially facilitating efficiencies in the cross-border operations of Bermuda reinsurers with the US insurance market.”

      In August 2013, the BMA was the first insurance supervisor to agree to participate in an expedited review under the NAIC Process. In December 2013, Bermuda was granted conditional qualified jurisdiction status and the BMA continues to fully participate with the NAIC.

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