Griet Vanden Abeele. Attorney, Counsel Tiberghien Lawyers

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2 Griet Vanden Abeele Attorney, Counsel Tiberghien Lawyers

3 A few stories Real life cases demonstrating the challenges and opportunities in international Wealth Planning 11 October 2017 Griet Vanden Abeele 3

4 Case 1 Moving to or from the UK? What about my will? Case 2 To donate or not to donate, is that the question? Case 3 - I move away and take with me. my company? 4

5 Case 1 Moving to or from the UK, what about my will? Mr. Azarov is an international businessman. He is a Russian national. After movig from country to country he finally settles in Belgium with his wife and three children. He obtaines Belgian nationality after 8 years here. During his business travels, he met Ariane, with whom he starts a relationship. Ariane lives in the UK, and is a UK citizen. He has two children with her, born out of wedlock. His wife finds out about the relationship and files for divorce. After his divorse, he decides to move to the UK and he moves in with Ariane and her two children. After he moves to the UK, he makes a will before an English notary (in 2014). In the will he states that he is domiciled in the UK and that This Will and any codicil to it shall be construed and take effect according to English Law. 5

6 Case 1 Moving to or from the UK, what about my will? In this will, he leaves almost all of his assets to Ariane and the two children he has with her. He desinherits his three children from his previous marriage entirely A few questions: What if Mr. Azarov dies as a UK resident in 2017? What if he moves back to Belgium, and dies in Belgium in a car accident in 2017? 6

7 Case 1 Moving to or from the UK, what about my will? Mr. Azarov Dies as UK Resident UK International Private Law Domicile at time of death; In case of UK Domicile: UK Inheritance law In case of a non-domiciled Resident: UK Inheritance law for immovable assets in the UK Inheritance law of Domicile for other assets Domicile Residence 7

8 Case 1 Moving to or from the UK, what about my will? What if Mr. Azarov moves back to Belgium and dies here in a car accident? He is a Belgian resident: EU Succession Regulation 650/2012 Jurisdiction; Applicable law to his estate Jurisdiction: concept of habitual residence (article 4) 8

9 Case 1 Moving to or from the UK, what about my will? Applicable law to the estate Formal validity of the will see article article 83, par 3 Succession Regulation: Formally valid under (i) the rules of the Regulation (national law) (ii) international private law rules in force in the country of habitual residence at the time the will was made or (iii) international private law rules of the state whose nationality the deceased possessed Conclusion 9

10 Case 1 - Moving to or from the UK, what about my will? Applicabe law to the estate Choice of law (article 83, par 2 Succession Regulation) Choice of law is valid under (i) the rules of the Regulation (national law) (ii) international private law rules in force in the country of habitual residence at the time the will was made or (iii) international private law rules of the state whose nationality the deceased possessed Quid application of renvoi (article 34 of the Succession Regulation) in case the law of a third state is applicable? Conclusion 10

11 Case 2 To donate or not to donate, is that the question? Mrs. A (divorced) is a wealthy private individual who currently lives in Switzerland. She is a Belgian national. She has one child (living in the Netherlands). Before moving to Switzerland, she used to live in the Netherlands. She left the Netherlands in At the time of her migration, she owned the shares of a Dutch Holding Company (subject to the protective assessment upon migration). The seat of effective management of the Holding Company is transferred to Luxembourg. Mrs. A. finds the love of her life in Belgium and wants to move here. Should she restructure her assets before moving to Belgium? 11

12 Case 2 To donate or not to donate, is that the question? Current situation: Switzerland does not levy federal gift and inheritance taxes between parents and children (depending on the canton/municipality local gift and inheritance taxes); Income taxes Pauschalbesteuerung (lump sum taxation for income taxation and wealth taxes) After the move to Belgium: Belgian Inheritance taxes (e.g. 27% in Flanders), what about the business succession facility (applicable rate of 3%/7%)? Income taxes (Share capital decrease before moving? Dividend distribution?) 12

13 Case 2 To donate or not to donate, is that the question? Why not donate? What about the protective assessment? Before moving or after moving to Belgium? What about the three year period in case the donor passes away as a Belgian resident within three years of a donation made before moving to Belgium? What about the position of the child? Is it interesting to donate now? Or is it better for the child to inherit the company? 13

14 Case 3 I move away and take with me my company Country A Country B Shareholder HoldCo Country C Sub(s) Starting position 14

15 Step 1: Shareholder migrates from Country B to Country A Shareholder Country A Country B Shareholder HoldCo HoldCo Transaction outline Country C Sus(s) Sub(s) 15

16 Step 2: Shareholder migrates from Country B to Country A Place of effective management (and registered office?) of HoldCo is transferred to Country A Country A Country B Shareholder HoldCo Shareholder HoldCo Transaction outline Country C Sub(s) Sub(s) 16

17 Step 1: Shareholder migrates from Country B to Country A Direct tax consequences for the shareholder Belgium If Belgium is the country of departure (Country B): No exit taxation for individuals If HoldCo remains a Belgium tax resident company nonresident taxpayer: Belgian dividend withholding tax on any dividend distribution including liquidation distributions application of DTC Non-resident capital gains tax in case DTC not applicable If HoldCo was not a Belgian resident company scope of Belgian taxation ends 17

18 Step 1: Shareholder migrates from Country B to Country A Direct tax consequences for the shareholder Belgium If Belgium is the country of arrival (Country A): No step up Dividend distribution No tax credit for foreign withholding tax Belgian income tax due on net dividend (after deduction of foreign withholding tax) Share capital decrease In principle free of income tax, proportionally taxed as of 1 january 2018? Tax abuse? 18

19 Step 2: Shareholder migrates from Country B to Country A Place of effective management (and registered office?) of HoldCo is transferred to Country A Belgium If Belgium is country of departure (Country B): deemed distribution Deemed disposal of assets Assets connected to Belgian PE: roll-over relief Assets not connected to Belgian PE: taxation of hidden gains / goodwill Gains on shareholdings: 0,412% (in case no SME), to be abolished Option for deferred payment in 5 yearly instalments (implementation of ATAD) Deemed distribution No deemed dividend income for individual shareholders, according to Ruling Commission Provided: legal continuity, i.e. cross-border corporate conversion 19

20 Step 2: Shareholder migrates from Country B to Country A Place of effective management (and registered office?) of HoldCo is transferred to Country A If Belgium is country of arrival Country A Shareholder s level: no deemed dividend income upon inbound migration, according to Ruling Commission (subject to legal continuity) Corporate level: Assets (shareholdings) enter Belgian tax jurisdiction at pre-migration book-value Option to re-valuate shareholdings prior to transaction? Equity components: tax qualification: No step-up of share capital Reserves (taxed reserves vs. tax free reserves) 20

21 Griet Vanden Abeele Tour & Taxis Havenlaan 86C B419 Ave du Port BE1000 Brussels t Grote Steenweg 214 B4 BE2600 Antwerp t Esplanade Oscar Van De Voorde n 1 BE9000 Ghent t Forte Building 2, rue Albert Borschette LU-1246 Luxembourg t