Private Wealth Deloitte 2015 Wealth planning in a more stable environment Private Wealth 1

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1 Private Wealth Deloitte 2015 Wealth planning in a more stable environment 1

2 Your contacts in Luxembourg Private Wealth Leader Advisory & Consulting Pierre-Jean Estagerie Partner - Tax pjestagerie@deloitte.lu Vincent Gouverneur Partner - EMEA Investment Management Leader vgouverneur@deloitte.lu Tax Raymond Krawczykowski Partner - Tax Leader rkrawczykowski@deloitte.lu Benjamin Collette Partner - Strategy, Regulatory & Corporate Finance Leader bcollette@deloitte.lu Raphaël Glohr Partner - Indirect Tax rglohr@deloitte.lu Pascal Martino Partner - Strategy, Regulatory & Corporate Finance pmartino@deloitte.lu Adriano Picinati di Torcello Director - Art & Finance apicinatiditorcello@deloitte.lu Audit Laurent Fedrigo Partner - Audit lafedrigo@deloitte.lu 2

3 Dear Reader, During the present decade, the wealth management professionals have been facing new challenges in an evolving international tax environment. The financial crisis has lead the jurisdictions and international organizations to take actions strengthening the tax transparency in a more stable environment for onshore wealth. The wealth management professionals had also to expand the frontiers of their traditional core markets to take into consideration the emerging countries. These countries attest a high potential for the business of their clients who already have adopted their business models from which arise new expectations. At the same time, a generation of successful entrepreneurs are considering their wealth transfer and are seeking advice to prepare the transfer in a tax efficient way as well as to prepare the future management of their business. In this context, managing wealth is now more than ever a matter of careful planning anticipating international and national pressure to built, side by side with your trusted tax adviser, a stable experience which could stand the test of time. The purpose of the present Deloitte Private Wealth booklet is to provide you with resources to leverage in planning for long term success through today s economic, tax and regulatory environment. We hope that the new visual layout of the Deloitte Private Wealth booklet enables you to tap into the content and the many considerations that are the most relevant for your specific situation. Best regards, Pascal Rapallino Private Wealth Leader Deloitte Tax & Consulting 3

4 Contents Introduction Current environment Clients Services Resources 4

5 Introduction For our Private Wealth practice, serving private clients (business owners, entrepreneurs, wealthy families, artists, etc.) goes beyond a technical tax advisory relationship. Our practice focuses on the situation of each client with a deep understanding of the business issues. The final objective is to help them to address their tax positions and declarative obligations. In addition to your specific circumstances, our specialists bring a deep understanding of the current environment and how it may affect your company and your personal situation, from regulatory changes to globalization to the ups and downs of our economy. In the past few years, the wealth management industries have changed significantly. The financial crisis has increased investor s tolerance to risk, and the current low yield environment has made it more challenging to meet investor's expectation of returns while limiting risk. In addition, the pressure for global tax transparency from governments around the world to crack down on tax evasion and tax fraud, has caused a significant shift from offshore to onshore wealth. In this current environment, tax considerations play a critical role when tailoring an appropriate approach for a private company and its owners. The services outlined on the following pages are important resources to leverage in planning for long-term success through today s economic and regulatory environment. Deloitte Private Wealth Deloitte Private Wealth focuses on the specialised needs of the ultra-affluent, including families with multigenerational wealth, entrepreneurs, and closely held business owners. In an area of complex tax laws, stringent regulations Goingand forward turbulent investment environment, we highly valued as trusty wealth adviser with knowledge and experience, broad resources and global scope. [ ] a deep understanding of the current environment and how it may affect your specific situation [ ] Those concerns with tax planning must consider some key questions, amongst other : To what extent the international tax environment change can affect my personal situation? How can I structure my estate in a tax efficient way? What is the timeline to restructure? 5

6 The current environment In this section: Impacts of the financial crisis Onshorisation of assets Foreign Account Tax Compliance Act ( FATCA ) & Common Reporting Standard ( CRS ) Base Erosion and Profit Shifting ( BEPS ) Impacts of the papyboom (i.e. intergenerational wealth transfer) on family-owned group Globalization of client s expectations 6

7 Current tax environment Financial crisis FATCA / CRS Onshorisation BEPS Reactions Trusted advisor Efficient and stable structuring Intergenerational wealth transfer A wide generation of entrepreneurs will transfer their business / wealth to the next generation Simple and compliant structuring Tax efficient financing mechanisms Tax Regulatory Regulatory, tax and KYC/AML/CTC challenges Asset protection Management and ownership Globalization The new markets with new investments expand the nature of the sophisticated clients seeking to achieve an efficient structure at any level Leadership development Leadership change 7

8 Clients In this section: Focus on customers profiles both in B2C and in B2B relationships 8

9 Clients A wide range of expertise For our Private Wealth practice, serving private clients goes beyond a technical tax advisory relationship. Our practice focuses on the situation of each client, with a deep understanding of the business issues B2C B2B Entrepreneurs Athletes, Artists and Fashion Models Wealthy Families Family Offices Private Banks Asset Managers 9

10 Services In this section: Tax planning for wealthy families International tax and estate planning Succession and intergenerational wealth transfer planning Restructuring of family-owned group Management of Intellectual Property Art & finance tax planning Tax reclaim assistance for private clients Assistance in private equity transactions Initial Public Offering and listing services Family governance Corporate governance Family office set up Income tax compliance and planning 10

11 Tax planning for wealthy families Tax services Individuals and families with substantial assets can find themselves faced with difficult and complicated decisions associated with protecting and growing their legacy. Developing a detailed plan for your own long-term financial goals, the goals you have for your family and special causes can help bring perspective and discipline to longterm wealth planning. Deloitte is well versed in addressing the many facets of wealth planning for you, your family and your business. We can assist you in exploring issues to consider for an overall wealth plan and available options in pursuing your goals alongside your other advisors to help keep your plans current. Our Private Wealth professionals have experience with the many complex issues involved in estate gift, trust and charitable planning and we can tailor our services to your specific circumstances. [ ]assist you in exploring issues to consider for an overall wealth plan and available options to pursuing your goals [ ] For example, we can advise on the creation and structure of trusts, partnerships and other planning vehicles, design gifting programs for heirs or chosen cause, and assess charitable planning vehicles. Our goal is to help you and ultimately your estate fiduciaries, construct and implement a wealth transfer plan that preserves assets, manages tax risks, considers regulatory and tax changes and reflects your goals. 11

12 International tax and estate planning Tax services Increased mobility among High-Net-Worth Individuals and families has coincided with a broad expansion of a globally integrated economy with greater cross-border trade and investment. These families face myriad possibilities for tax and estate planning, especially when they have international residency or investments. Our range of services Deloitte works closely with clients to address international residency and tax matters and assess investment opportunities from a tax-aware vantage point. We provide information based on the nuances of investing in specific countries and asset types. Our specialists also help to take this knowledge into account with your other investment and wealth planning goals so you can make an informed decision when considering if, how and where to invest your wealth overseas. 12

13 Succession and intergenerational wealth transfer planning Tax services Every business owner or leader has his or her own vision for the company s future. It takes careful planning and consideration to give your business every chance to realize that goal, even after you are no longer leading the company yourself. Succession plans should be made long before you are prepared to leave leadership, allowing time to identify successors, cultivate support for your successor and your goals and organise the related tax and estate planning considerations. Deloitte understands the complexity of the succession planning process. We have helped multitudes of private companies through the process, with the end goals as varied as the people and industries they represent. Guide you through the tough decisions and help you to see value from the perspective of prospective leaders and/ or buyers with an awareness of tax consequences to consider for both the business and the stakeholders. 13

14 Restructuring of family-owned group Tax services During turbulent times, many companies are uncertain how best to proceed and may be unaware of the available options when facing a restructuring either in or outside of a bankruptcy. It is also important to consider the tax implications of restructuring or reorganization, while planning for a framework that will allow for future tax efficiency. By taking control of your restructuring or reorganization process, you can closely manage the decisions you make to better consider potential pitfalls that can lead to unintended loss of tax attributes and unfavorable tax positions. We have significant experience in working with financially troubled entities or those in bankruptcy and their complex tax issues and helping them reorganise in a taxefficient manner. In doing so, we can assist with identifying opportunities to preserve the value of tax attributes such as net operating losses and tax basis. Consulting and assisting with implementing taxefficient acquisition and financing structures. Deloitte assists companies through the various aspects of the restructuring and reorganization process to help address the tax implications for the business, owners and other stakeholders. 14

15 Management of Intellectual Property Tax services Managing this Intellectual Property (IP) has become a vital part of any management team s work, as there are ample opportunities to enhance returns when financial exploitation, legal protection, and tax strategies are combined effectively. One of the most difficult and significant decisions in managing this IP lies in where to develop and hold it, as this can have a far reaching effect on the rate of return. Luxembourg offers the following benefits for IP management: Tax incentives for research and development activities; Low effective taxation of the holding vehicle; Access to double tax treaty network providing for substantial withholding tax reductions on cross-border royalty payments; Favorable VAT rates and optimization of input VAT recovery; Absence of strict domestic transfer pricing rules. Furthermore, Luxembourg has been proactive in developing its IP standards and is party of all the major IP treaties and conventions, making it an ideal place to develop or manage IP. 15

16 Art & finance tax planning Tax services Art can be viewed from several perspectives as store of wealth, a masterpiece to cherish, a family heirloom, a business, a part of trust or estate, an investment or a gift to a cultural institution. Deloitte Luxembourg has been actively involved in the development of an art and finance cluster in Luxembourg as part of the diversification of the Grand-Duchy s economy. We offer a full range of services coordinated by one team, for a seamless approach that best suits our client s needs. Through a single point of contact in Luxembourg, you will access the Deloitte Global network and benefit from its support when dealing with complex tax issues related to owning and dealing art as well as investing in the global art market. Deloitte Luxembourg and the global network offer a wide array of art-related services to address clients needs on a worldwide basis, including: Gift and estate tax planning for collectors, family offices, wealth managers, and art advisors; Intellectual Property rights for artists and heirs; Corporate tax for brick and mortar art businesses and online art businesses; Philanthropy and charitable planning for collectors, family offices, wealth managers, and art advisors; Import and export considerations for art stakeholders. The Global art market is transforming, creating new opportunities. 16

17 Tax reclaim assistance for private clients Tax services Tax Reclaim, an innovative differentiator for your institution Luxembourg private bankers will have to differentiate and be innovative to maintain their attractiveness vis-à-vis clients that are now more than ever, looking for advice to optimize their investments. In this context, efficient tax management of their clients investments is a true value-added service that private bankers need to consider. Tax Reclaims improves the performance of clients portfolio. There are a lot of factors putting pressure on the wealth management and private banking industry, where its is getting more and more difficult to achieve significant returns. A successful implementation of tax reclaim process could enhance client's portfolio performance by 0,10% to 0,15% and consequently, increases client portfolio Assets under Management. Tax reclaim services can be a major differentiator when it comes to service offering for U/HNWI which will not only increase client satisfaction and retention but also attract new clients. Tax reclaim services offer the opportunity for relationship managers to get in touch with clients with good news which will not only create a wow effect but also provide great opportunities for cross-selling 17

18 Private equity transactions Tax services Many private companies plan to ultimately sell all or parts of their business. Other companies have endured distress and know that selling certain parts of their business may be their best approach for growth. A private equity firm is often part of this process. Help you make taxinformed decisions to support your goals and work through the pre-and post-sale periods. In order to be prepared for the possibilities, private companies should consider a number of issues, from understanding the value of their company (from the perspective of private equity firms or other buyers) to the tax implications and opportunities involved with a sale in whatever form. Whether you are considering selling all or a part of your business, you can begin to prepare your company now for your near- or long-term objectives. Deloitte works with both sellers and buyers, including private equity firms. We have the knowledge and experience to help you analyze your enterprise value Help you make taxinformed decisions to support your goals and work through the pre-and post-sale periods. 18

19 Initial Public Offering and listing services Global assistance We offer a one-stopshop solution to clients who want to list on the exchange. From time to time, holding companies seek to list in a stock exchange for various reasons other than raising capital. Being a recognised international listing market for a wide range of securities and financial vehicles, Luxembourg provides a competitive scope of listing opportunities and alternatives. Companies can benefit from access to a large pool of international investment capital, high standards of regulation, a flexible and transparent trading platform and a choice between several markets. A proper and efficient Initial Public Offering (IPO) structure from a tax perspective, needs to be thought about from inception to divestment and should focus on some main items. Investor tax impact upon IPO as well as impact of controlled foreign company legislation and applicable withholding taxes on actual dividend distribution are also key features to guarantee a successful go to market decision. Our services include our expertise in multi-disciplinary services tailored to each issuer s needs, such as listing agent services, preparation and review of offering documents/prospectus and other application requirements, advise on legal structure and tax optimization measures, project management and coordination, legal review and pre-issuance with the stock exchange. 19

20 Family governance Global assistance Families often require and promote responsible and ethical behavior that is elementary for maintaining a trusting and altruistic future for a family s heritage and wealth. Therefore, understanding and managing a family business and its various activities builds on an increasingly in-depth financial awareness. Deloitte has expertise in the use of a variety of educational resources and project management tools that will allow a Family Office to handle and solve governance related issues appropriately. Deloitte has expertise [ ] that will allow a Family Office to handle and solve governance related issues appropriately Foundation of a good family governance: Education and learning, specific trainings; Family councils and committees; Corporate governance and management structuring; Relationship management. 20

21 Corporate governance Global assistance Achieving a robust corporate governance framework is key for an organization. Deloitte Luxembourg's Corporate Governance HealthCheck assists in identifying improvement opportunities to help achieve this goal. A roadmap for achieving excellence in corporate governance At Deloitte Luxembourg, we can assess your organization's governance processes, measure them against best practices, and ensure they meet the needs of the business. We can also make sure you comply with the changing regulations. It is important for senior executives to ask themselves when they last studied their organization's corporate governance framework, and whether they are confident that it's robust and underpinned by integrated, resilient processes. Executives and directors should question the effectiveness of the organization's controls. We can help businesses evaluate the effectiveness of their organization's governance processes, develop solutions to close the gaps and enable change to minimize risks and maximize benefits. 21

22 Family Office set up Tax services The size and scope of a Family Office can vary significantly depending on the particular objectives and needs of the family. The optimum structure and entity type through which the Family Office should operate will be dependent on a number of factors, including the location of the various family members, tax considerations and the resources required to operate the Family Office. Key to setting up a successful Family Office is to understand the needs and desires of the family as early as possible. Our servicein this area include : Assessment of family s needs and agreeing process to establish this (e.g. by discussing with family members); Design of an appropriate commercial and tax efficient structure through which to operate the Family Office; Establishing internal controls and defining responsibilities; Assistance with design of competitive remuneration structure for employees; Advice on creation of corporate, trust, foundation and charitable structures; Advice and implementation of information technology strategies. 22

23 Income tax compliance and planning Tax services We can help you explore tax-savings opportunities and prepare for changes in the tax and economic climate. The environment of income taxes, with ever-changing rules and regulations, is often the most complex area of business and personal financial planning. Income tax issues affect virtually every aspect of your financial situation. It is important that you conduct informed tax planning on a year-round basis and in some circumstances, on a multi-year basis. At Deloitte we specialize in helping you understand legislative and regulatory conditions and their potential tax impact on your business and individual financial goals. Experienced in addressing the complex issues of business owners, their families and Family Offices, we can help you evaluate the potential tax consequences of various business and personal wealth decisions, keeping your tax, business and personal objectives in mind. We also can assist with tax examinations, drawing on the specialists of our tax controversy services group. 23

24 Resources 24

25 Deloitte Private Practice We are with you Deloitte Private is a private business-focussed practice. We believe differentiating the needs of private businesses from the needs of large businesses assists our multi-disciplinary professionals to recognise the opportunities and challenges unique to private businesses. Our network High net worth individuals and families Deloitte Private is focused on delivering a fully integrated service offering to high net worth individuals and families. Our depth of experience, access to thought leadership and to the wider resources of global Deloitte, uniquely positions Deloitte Private as the leading provider of professional services to high net worth individuals and families. We anticipate the needs of private businesses and focus on delivering innovative and effective solutions, while maintaining high quality service levels. Our local knowledge, coupled with access to our global networks, uniquely positions us to best serve the Luxembourg private market. Succession planning Succession planning is a complex process involving many business disciplines. It becomes more complex as many different business, financial and personal issues come into play. A good succession plan for private companies looks at a range of issues. Tax Advice from tax professionals, who have the industry experience necessary for recognizing and implementing real savings, can help companies to minimize their income and capital tax liabilities. Our professionals can also assist with private companies expanding or restructuring their offshore and international businesses and investments. Our specialists in income and capital gains tax can recognize a wide range of potential tax planning opportunities, as they have access to some of the best tax practitioners in Luxembourg and around the world. Accounting Our accounting and tax compliance service is offering strategy meetings and regular contact with you to ensure an efficient and coordinated approach to issues, reporting obligations and achievement of business objectives. 25

26 Resources The Private Wealth Booklet is intended as a start to conversation that will continue and progress as your personal situation situations changes and grows. You can find current resources to reflect new developments on our website. Contact us Deloitte Luxembourg 560 Rue de Neudorf 2220 Luxembourg Phone.: Learn more Stay connected Deloitte - Sharing the latest news, whitepapers, podcasts, events and more from Deloitte Luxembourg. AnyWealth Mobile application Deloitte Luxembourg at your fingertips 26

27 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte's approximately 200,000 professionals are committed to becoming the standard of excellence. 27