Overview of Significant Investor Visa Pauline O Loughlin & Cherie Wright Australia China Business Council

Transcription

1 30 July 2013 Overview of Significant Investor Visa Pauline O Loughlin & Cherie Wright Australia China Business Council

2 Topics Introduction Overview of Skilled Migration Permanent Visa Program Statistics Summary of key legislative changes Key features of Business Innovation and Investment Program Overview of Significant Investor Stream (Provisional Sub class 188) Overview of Significant Investor Permanent Stream (sub class 888) Other key considerations 1

3 Summary of 2012 legislative & policy changes Visa simplification SkillSelect GSM changes and proposed new post study work arrangements for tertiary students Employer Sponsored Permanent Residence New Business Innovation & Investment program 2

4 Skilled Migration permanent visa program 2013/14 Skills (Planned at 190,000 ) GSM 44,990 (23.6%) ENS/RSMS 47,250 (24.8%) Distinguished Talent 200 (.001%) Business Skills 7,260 (0.38%) Family 60,885 (32%) 3

5 Key features Inclusion in SkillSelect Renaming the Business Skills Program to the Business Innovation and Investment Program Introduction of a points test for some provisional streams No minimum English requirements (although points factor) Abolition of independent visa categories 4

6 New Business Innovation & Investment Program Business Talent (Permanent) Subclass 132 Venture Capital Entrepreneur stream: for those who have sourced venture capital funding of at least AU$1 million from an Australian venture capital firm Significant Business History stream: for high calibre business owners who wish to own or establish a business in Australia that will benefit Australia economically Business Innovation & Investment (Provisional) Subclass 188 Business Innovation & Investment (Permanent) Subclass 888 Business Innovation stream: business owners (must meet points test and generally under 55 years of age) Investor stream: AU$1.5 million in Govt Treasury Bonds (must meet points test and generally under 55 years of age) Significant Investor stream: AU$5 million in complying investments. No points test or age limit. Business Innovation stream Investor stream Significant Investor stream 5

7 Some statistics at a glance NSW state nomination process within 5-10 working days In NSW 126 applications, 95% being Chinese investors Estimated to generate $62 billion over next 4 years Average age of applicants within 40 s NSW and VIC leading in terms of volume 1) NSW 260 lodged applications, 79 at visa stage 2) VIC 213 lodged, 67 as visa stage 3) QLD 55 lodged, 17 at visa stage 4) WA 19 lodged, 6 at visa stage 5) SA 8 lodged, 2 at visa state 70% express interest in only investing in Waratah bonds, 22% in private companies, remainder in managed funds 6

8 Process Subclass 188 visa Step 1 contact relevant State/Territory if applicable for pre EOI-nomination Step 2 lodge EOI and State nomination Step 3 if invited, lodge Sub class188 visa application 7

9 State/Territory Nomination Must have genuine intention to reside in State / Territory Example of individual State requirements - NSW - WA - VIC - QLD Is it possible to change States? Time frames 8

10 Business Innovation and Investment (subclass 188) visa Schedule 1 Internet application First VAC second VAC not having functional English and 18 or over Applicant may be in Australia or overseas Must be invited to apply by DIAC and apply within time period specified Applicant must be State or Territory nominated 9

11 Business Innovation and Investment (subclass 188) visa SIV stream Sch 2 Make investments of at least Au$5m into complying investments No points test or upper age limits No English requirements although must pay 2 nd VAC Valid for 4 years (up to two extensions each valid for 2 years) Reduced residence requirement: 160 days in 2 years, 240 days in 6 years (after 1st extension) or 320 days over 8 years for 2nd extension Must agree not to sue Commonwealth for any loss! Include dependant family members 10

12 What are complying investments? Reg 5.19B Commonwealth, State or Territory government bonds Australian Security Investment Commission (ASIC) regulated managed funds with a mandate for investing in Australia Direct investment in Australian proprietary companies that are not listed on the Australian Stock Exchange Must be unencumbered, lawfully acquired & owned by applicant (and/or spouse) Who can make investment? 11

13 Managed Funds Specified by the Minister which includes: 12 - Infrastructure projects in Australia - Cash held by Australian deposit taking institutions - Bonds held by a Commonwealth, State or Territory Government - Bonds or equity, in Australian companies listed on the Australian Stock Exchange - Bonds or term deposits issued by Australian financial institutions - Real estate in Australia - Australian agribusiness - Investments into other ASIC regulated funds that invest in the above list Fund manager must complete form 1413 for each investment in a managed fund

14 Direct Company Investments Ownership interest in a qualifying business - Operated for a profit, not passive or speculative Must be registered with ASIC but not listed on ASX Must not have been established wholly or substantially for purposes of SIV Ownership interest - Shareholder - Partner - Sole proprietor - Trusts 13

15 Changing Investments? Re-invest in a complying fund Sum re-invested corresponds with sum withdrawn Within 30 days Condition

16 888 Permanent Residence Schedule 1 Internet application First VAC; second VAC Applicant may be in Australia or overseas Applicant must be State or Territory nominated 15

17 Permanent resident Significant Investor visa requirements (Sub class 888) Continuously held a complying investment for the lifetime of the provisional Significant Investor visa Have held the provisional Significant Investor visa for a minimum period of four years Have been resident in Australia for a cumulative period of at least 40 days for each year or part year that an applicant has held the provisional Significant Investor visa May be able to extend the provisional Significant Investor Visa Must be State/Territory nominated 16

18 Other considerations Australian tax implications of the investment vehicle Source of funds for the investment and tax implications of the source jurisdiction Investment risk profile of the applicant Choice of investment vehicle Ability to meet the temporary residence requirement Financial advice Marketing considerations Maintaining permanent residence Citizenship requirements 17

19 How can Fragomen help Specialist knowledge and legal expertise immigration is not just a practice area within our firm, it is our core practice. Dedicated bilingual SIV team including on the ground support in China - core team includes an experienced immigration lawyer based in Fragomen s Beijing office. 18

20 Q&A This presentation provides only a summary of the material it purports to cover. While all care has been taken to ensure that the contents are up to date and accurate, these resources are not intended to be relied upon as a substitute for legal or other professional advice. 19

21 Significant Investor Visa f Tax and Structuring Considerations Australia China Business Council Sydney, 30 July 2013 Darren Lee Taxation Director Bentleys NSW Pty Ltd E darren.lee@bentleysnsw.com.au P (02)

22 Agenda General Tax Considerations Permitted Structures Scenario 1: Direct Investment Scenario 2: Direct via Company Scenario 3: Interposed

23 General Tax Considerations Tax consequences will depend on various factors and individual circumstances of the investor. Some of the main considerations include: Tax residency status / country of residency Capital Gains Tax (CGT) considerations Tax treaties / profit repatriation Structure of investment Taxation impact in home country (e.g. China)

24 General Tax Considerations (cont.) Immigration status vs. tax residency SIV test: 160 days or 40 days per year over 4 year period Tax residency generally determined separately to immigration status, but immigration status can have an impact on an individual s tax obligations

25 General Tax Considerations (cont.) Tax residency Resident Non resident Temporary resident Dual residency and tie breaker provisions under applicable tax treaty

26 General Tax Considerations (cont.) Tax Residency Scope to Australian Tax Resident Taxed on worldwide sourced income Non resident Australian sourced income and CGT on Taxable Australian Property Temporary resident Subject to same income and CGT rules as non resident. Exception is income from foreign employment which is taxable (assuming already tax resident)

27 General Tax Considerations (cont.) An individual may qualify for the temporary resident concessions if they: 1. are a holder of a temporary resident visa granted under the Migration Act 1958 (e.g. subclass188 visa) 2. are not an Australian resident within the meaning of the Social Security Act do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991

28 General Tax Considerations (cont.) CGT considerations Becoming tax resident Exit of investment 50% CGT discount concession now limited to tax residents only Small business CGT concession

29 General Tax Considerations (cont.) Country of residency for tax purposes may impact on various tax outcomes such as: Tax concessions in certain investments (e.g. MITs) Application of CFC rules Tax treaty relief

30 General Tax Considerations (cont.) Tax treaty and profit repatriation considerations. Withholding tax rates: Domestic Rate China / Australia Treaty Dividends 30%* 15%* Interest 10% 10% Royalties 30% 10% * Where dividend unfranked.

31 Agenda General Tax Considerations Permitted Structures Scenario 1: Direct Investment Scenario 2: Direct via Company Scenario 3: Interposed

32 Permitted Structures Trust Company Government Bonds In NSW, at least $1.5m invested in NSW Waratah Bonds Complying Investment Certain Managed Funds Australian infrastructure projects Government bonds /certain cash deposits Certain interests in Australian listed companies and listed trusts Australian real estate Australian agribusiness Other Managed Funds investing in the above Australian proprietory company Must carry on a qualifying business Passive or speculative type income excluded (e.g. income from rental property)

33 Complying Investments Complying Investment Commonwealth, State or Territory Bonds Australian proprietary company Comments Withholding tax considerations and possible exemption. Assessability / deduction on disposal. Tax registration requirements and filing obligations. 30% tax rate. ASIC regulated managed fund (managed investment scheme) The interests in the managed fund cannot be traded on a financial market. Potential favourable withholding tax rates.

34 Permitted Structures Holding Entity Ownership Conditions Individual Company Trust Either 100% or held together with spouse or de-facto Shareholder must be investor either alone or together with spouse / defacto. Can hold via interposed company, partnership or trust. Beneficiaries limited to investor and spouse / de-facto. Does not appear to have any restriction as to whether a fixed or discretionary trust but primary applicant (or spouse) must be the trustee and beneficiary

35 Agenda General Tax Considerations Permitted Structures Scenario 1: Direct Investment Scenario 2: Direct via Company Scenario 3: Interposed

36 Scenario 1a: Direct Investment Foreign Country Australia 100% Qualifying Investment Federal / State / Territory Bonds Tax Considerations Expect that in many cases, investor and spouse considered non-resident or temporary resident during period of holding subclass 188 visa. Interest paid to non-residents generally subject to 10% withholding tax though exemption from withholding tax may be available if bonds satisfy public offer test and certain other conditions met. Marginal rates on interest payments if and when investor becomes resident. Potentially complex rules in relation to Taxation of Financial Arrangement Rules (TOFA) and qualifying securities.

37 Scenario 1b: Direct Investment Foreign Country Australia 100% Qualifying Investment Tax Considerations Where the Managed Investment Scheme qualifies as a Managed Investment Trust (MIT) concessional treatment on fund payments to EOI countries at 15% withholding (or 10% in certain limited circumstances) otherwise 30% withholding. Managed Investment Scheme Non fund payments such as dividends, interest and royalties subject to normal withholding rules and any applicable tax treaty.

38 Agenda General Tax Considerations Permitted Structures Scenario 1: Direct Investment Scenario 2: Direct via Company Scenario 3: Interposed

39 Scenario 2: Via Company Foreign Country Australia 100% Austco Pty Limited Qualifying Business Funds into Austco must be unencumbered. Failed if there was scope for a direct claim upon the funds by a third party. Tax Considerations Tax residency status will impact on tax treatment on profit repatriation and future disposal. Assuming non-resident then withholding tax on dividend payments from Ausco to the extent unfranked. Assuming non-resident tax status on disposal then no CGT on disposal of shares if qualifying investment not Taxable Australian Property. If Taxable Australian Property, note removal of CGT discount concession for non-residents. Consider transition rules from non-resident to resident. Consider exit strategy / composition of assets (real property vs. other).

40 Agenda General Tax Considerations Permitted Structures Scenario 1: Direct Investment Scenario 2: Direct via Company Scenario 3: Interposed

41 Scenario 3: Interposed Tax Considerations Foreign Country Australia 100% Ausco Pty Limited 100% Tax Consolidated Group Consolidated structure may be favourable if acquiring target in order to obtain push down of purchase price to underlying assets. Subco 100% Aust Target Co. Unfranked dividends subject to 30% withholding tax but may be reduced under applicable tax treaty (15% under China / Australia treaty). Qualifying Business

42 Any questions? Fragomen Pauline O Loughlin Senior Associate Migration Agent MARN: poloughlin@fragomen.com Bentleys Darren Lee Taxation Director darren.lee@bentleysnsw.com.au Cherie Wright Senior Associate Accredited Specialist, Immigration Law MARN: cwright@fragomen.com

43 Disclaimer This presentation does not constitute advice. You should not act solely on the basis of the material contained in this presentation. Items herein are general comments only. We therefore recommend that our formal advice be sought before acting in any of these areas. Presentation written by Bentleys NSW Pty Ltd. A member of Bentleys, an association of independent accounting firms in Australia. The member firms of Bentleys are affiliated only and not in partnership. A member of Kreston International. A global network of independent accounting firms.