US Reform Impact on the Private Wealth Industry

Transcription

1 STEP ASIA CONFERENCE 2018 US Refrm Impact n the Private Wealth Industry Hng Kng Nvember 2018 Jennifer Jrdan McCall, Partner Estates, Trusts and Tax Planning Grup Pillsbury Winthrp Shaw Pittman LLP 2018 Pillsbury Winthrp Shaw Pittman LLP. All Rights Reserved.

2 Histric Tax Refrm (Tax Cuts and Jbs Act): Dramatic impact n nn-u.s. persns investing in the U.S. Changes t tax rates fr individuals and crpratins Individual Tax Rates: Still 7 tax brackets 37% tp tax rate (previusly 39.6%) 3.8% NIIT remains 40.8% highest rate (previusly 43.4%) Lng term capital gain rates f 0%, 15% and 20% Crprate Tax Rates: Flat 21% rate (previusly 35% tp rate) Change is permanent 1 STEP ASIA CONFERENCE 2018

3 Tax Deductins and Exemptins: Changes t itemized deductins Increased estate tax exemptin $11,180,000 gift and estate tax exemptin (U.S. persns) Reverts t $5,600,000 (indexed fr inflatin) in 2026 $11,180,000 generatin skipping transfer tax exemptin (U.S. persns) Nn-U.S. persn estate tax exemptin remains at $60,000 N gift tax exemptin amunt beynd $15,000 annual gift tax exclusin Exceptin: $152,000 annual gift tax exclusin t nn-citizen spuse Offshre crprate devise still feasible 2 STEP ASIA CONFERENCE 2018

4 20% Qualified Business Incme Deductin: Qualified Business Incme: dmestic net incme frm all qualified U.S. trades r businesses Excludes cmpensatin (salary r guaranteed payments), investment incme, and incme frm specified services trades r businesses Specified Business Owner: health, law, accunting, actuarial science, perfrming arts, cnsulting, athletics, financial services and reputatin based businesses W-2 Wage Limitatin: Taxable incme belw $157,500 n limit Taxable incme abve $157,500 limitatin in phases: Lesser f (1) 20% f QBI and (2) greater f (i) 50% f the W-2 wages paid r (ii) 25% f W-2 wages paid plus 2.5% f certain capital assets 3 STEP ASIA CONFERENCE 2018

5 Carried Interest: 3-year hlding perid fr lng-term capital gain Capital gain passed thrugh t fund managers via partnership prfits in t r held exchange fr investment management services Applicable Partnership Interest - partnership interest that is transferred by a taxpayer in cnnectin with the perfrmance f services by the taxpayer r a related persn in any applicable trade r business, even if the taxpayer made cntributins t the partnership Lack f clarity if applicable t S-Crps Lack f clarity n hw t calculate 3-year hlding perid 4 STEP ASIA CONFERENCE 2018

6 Chice f Entity: C-Crp, S-Crp r passthrugh Changes in rate structure and limitatins n deductins makes chice cmplicated Old tax rate structure favred passthrugh entities Capital intensive businesses that reinvest rather than distribute prfits may prefer crprate structure with lwer tax rate S-Crps receive special treatment under new law Decreased crprate tax rate changes investment structures review existing investment structures Crprate rates may change structures fr substantial cmmercial real estate investments 5 STEP ASIA CONFERENCE 2018

7 Dispsitin f Freign Partnership Interests: New tax law affects structuring freign investment in U.S. Territrial apprach t taxing dispsitin f freign partnerships Freign partner in dmestic r freign partnership may be treated as effectively cnnected t U.S. trade r business Gains frm sale f interest in partnership ptentially taxable t nn-u.s. seller 10% withhlding tax n sale f partnership interests unless transferr certifies that is nt a freign crpratin r nn-u.s. persn 6 STEP ASIA CONFERENCE 2018

8 Eliminatin f 30-Day Rule: New tax act eliminated 30-Day Rule U.S. beneficiaries f freign trusts and estates previusly had 29 days t cure cntrlled freign crpratin tax prblems in the estate Expanded definitin f U.S. sharehlder includes U.S. persn wh wns at least 10% f vte r 10% f value f freign crpratin One day f wnership f tainted assets may prduce phantm incme fr U.S. sharehlders Irrevcable trust may avid the 30-Day Rule trap Ptential negative capital gains cnsequences fr U.S. beneficiaries Private Placement Life insurance is a ptential slutin 7 STEP ASIA CONFERENCE 2018

9 Freign Anti-Deferral Regime: New tax act mandates that U.S. sharehlders f cntrlled freign crpratin include in incme their ratable share f CFC s glbal tangible lw-taxed incme (GILTI) Similar t Subpart F incme 8 STEP ASIA CONFERENCE 2018

10 Abut Jennifer Jrdan McCall Ms. McCall is a Pillsbury partner and the Chair f the firm s Estates, Trusts and Tax Planning practice wh has been recgnized by Chambers fr the Natinal, Western and Nrthern Califrnia Regins and by Best Lawyers and Super Lawyers in Califrnia and New Yrk. She has been named Wealth Management Lawyer f the Year fr the last 3 years ( ) by Crprate INTL and M & A Tday. She is based in the Silicn Valley, New Yrk and Palm Beach ffices and represents private clients. She is a leading authrity n U.S. and internatinal gift and estate planning. Ms. McCall is admitted t practice law in Califrnia, Flrida and New Yrk. Silicn Valley Office 2550 Hanver, Street Pal Alt, CA New Yrk Office 1540 Bradway New Yrk, NY Palm Beach Office 324 Ryal Palm Way Suite 2200 Palm Beach, FL Hng Kng Office Suite 2404, 24/F Kinwick Centre 32 Hllywd Rad, Central Hng Kng Ms. McCall crafts tax-savings business successin and estate transfer plans that preserve wealth and enhance family relatinships. Her clients include internatinally renwned museums and crpratins, charities, fundatins, high net wrth families and individuals, fiduciaries and nnprfits. Jenny's experience includes cmplex trust and estate administratin and litigatin; gift and generatin-skipping transfer taxes; spusal rights f electin and rights f adpted children; endwments; and tax aspects related t dispsitin f crprate hldings and financial transactins. Ms. McCall is a Fellw f the American Cllege f Trust and Estate Cunsel ( ACTEC ), where she serves as a member f the Internatinal Tax Planning and Estate and Gift Tax cmmittees. She has lectured extensively and cnducts seminars n estate and tax planning. 9 STEP ASIA CONFERENCE 2018

11 Cntact Jennifer Jrdan McCall Partner and Chair Estates, Trusts & Tax Planning