Venice Conference 2019

Chairman: Milton Grundy
05 - 07 June

Meeting Summary
  • 1. La Dolce Vita for Non-doms – Luigi Belluzzo
    • Italy has recently introduced various measures to attract new residents. The new resident tax regime is designed to attract ultra HNW individuals. They pay a £100,000 a year for 15 years and are free of tax on their foreign income and inheritance and gift tax on foreign assets.  There is no requirement for disclosure of foreign assets. The individual must take up residence in Italy, not having been resident in the last nine out of ten years. A ruling is available.

      Italy also has a programme for granting investment visas, and a new 7% regime for retired individuals resident in the South of the country – in villages with a population of no more than 20,000. From 1st January next year, there will be new rules attracting HNWI, talents and workers by reducing the tax rate for periods varying from five to ten years or more. Tax will be reduced to 15% or less than 5%.

      The new resident tax regime lends itself to inheritance tax planning and compares favourably with similar regimes in other countries.

  • 2. IFCs: Threats and Opportunities – James Quarmby
    • Blacklists, BEPS, Beneficial ownership registers and BREXIT present serious obstacles to tax planning. BEPS is collaborative.  The EU needs a high rate of tax to fund its social spending. The substance concept is bound to be damaging to the BVI, but some 90% of BVI companies are equity holders, which have “substance”.

      The UK was the first to introduce a beneficial ownership of companies register. Mr Corbyn may bring in sanctions to force the overseas territories to introduce disclosure rules. There is conflict between transparency and privacy – a right enshrined in Article 7 of the ECHR.  The GDPR rules and the Anti-Money Laundering Directive are in conflict.

  • 3. Managing Tax Risk – Fiona Fernie
    • Since the financial crisis, there has been increasing government and media pressure to prevent tax avoidance and evasion. Is this the death knell for tax planning? Arguably not, but the risk of failure has become greater. Professionals and fiduciaries are treated as “centres of infection”. Investigation by tax authorities is time-consuming and stressful. There is always a risk that the tax authorities will take a different view of the law or interpretation of the facts. There are risks of information flow and communication. The approach to tax risk is changing, with the growth of strategic thinking – the taxpayer managing his relationship with the tax authority. In the UK – the Revenue are receiving a lot of information relevant to the liability of taxpayers. Productive risk management requires identifying tax risk and taking “internal” and “external” actions. Managing tax risk must be a holistic approach with a “ringmaster.

  • 4. Lessons from the Paradise Papers. A Cybersecurity Viewpoint – William Wright
    • Businesses, wherever located and however large, are exposed to cyber risk. A business needs to know what information it has, and where; it may need to patch systems against attack.  What would be the effect of cyber shut-down? The result can be expensive. There is need for businesses to qualify their cyber risk. Mossack could have prevented the hacking. The Appleby cyber-attacks was of a similar nature, but better managed. Maersk suffered from a worm, but were able to restore data. The NHS was exposed to a ransom claim. A business attack needs a programme of recovery, as well as prevention. Insurance is the central feature of a prevention programme.

  • 5. Are You in Breach of Trust? Corporate sales by Trustees – Chris Cooke
    • Professional trustees always have a conflict between their need to show a profit and their duty to the beneficiaries, especially where they have illiquid assets. It can be difficult to change trustees. Trustees can have exposure to tax, to contractual liabilities, to penalties for incorrect tax return, to fines or imprisonment (in the UK, under ss89 and 90 of the Financial Services Ac 2012). The STAR trust in Cayman and the VISTA trust in the BVI may protect trustees in their own jurisdiction, but query whether the protection would be recognised elsewhere. Trustees selling a company need to be careful of the warranties they are asked to give. Selling in the USA brings its own problems, e.g. under the PATRIOT Act, and the frontier between parent and subsidiary may be blurred by the concept of the “single business enterprise”. Suitable drafting can limit liability to the net assets of the trust fund.

  • 6. Israel Re-visited – Alon Kaplan
    • The population of Israel has risen from 806,000 in 1948 to a present 9,909.000. Israel has free trade agreements with the EU, USA and EFTA, many large “start-up” companies and 69 tax treaties. The legal system is derived from Ottoman law, as modified by the British Mandatory government and subsequently by the Israeli Knesset and Supreme Court.

      The country has VAT, income tax, capital gain tax and tax on purchase of real property. Following the Law of Return, the tax law offers tax incentives to new immigrants, exempting their foreign assets from tax for ten years. Tax rulings are available. A foreign company may do business in Israel be appointing an agent, opening a branch or establishing a subsidiary. A trust – “Hekdesh”- is governed by the Trust Law of 1979 and taxable under a law 2006. Purpose trusts are permitted. A foreign resident trust is a trust with a foreign settlor and foreign beneficiaries; there is no tax liability. The “underlying” company holds trust assets. There is no forced heirship. Israel participates in international exchange of information and anti-money laundering.

  • 7. EU Reporting Obligations of Tax Planning Intermediaries – Niklas Schmidt
    • Disclosure of aggressive schemes of tax avoidance is required in several countries and are recommended by the OECD. The EU has passed a Directive for Member States to introduce such rules. Reporting is required from intermediaries and taxpayers, and the information is exchanged with other Members States.

      “Intermediary” is defined and includes law firms. The rules apply to “reportable” arrangements. These are cross-border and have certain “hallmarks – of which there are five categories, including transfer of hard-to-value assets. The rules will take effect from 1st July 2020.

  • 8. EU Public Registration of beneficial Ownership – Filippo Noseda
    • The UK introduced a Register of Trusts last year. It applies to “tax relevant” trusts. Information is required about the settlor, the protector and the beneficiaries (including the objects letters of wishes). There is also a Register of interests in companies. And there is CRS and FATCA. These constitute a serious invasion of privacy and need to be opposed. More than 10,000 people have complained that their details in Companies House in England have been stolen by fraudsters.

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