The Corpag Group Corporate Management and Professional Trust Services
Recent changes and trends around some offshore and onshore jurisdictions
BRITISH VIRGIN ISLANDS (BVI)
BVI Main features: Most popular offshore jurisdiction Same levels of incorporation as before the global financial crisis Business Companies (formerly International Business Companies) Great flexibility, nil tax Pioneers (e.g. Belize new Regulation on bearer shares)
BVI Recent changes: New legislation introduced (into force from October 15, 2012) The BVI Business Companies (Amendment) Act, 2012 Not an in-depth revision -Alternate directors: same rights as the appointing directors -Removal of directors -Liquidation: prohibition for former directors to act as liquidators -Reduced time from striking off to dissolution -Power from any person who can establish an interest
BVI Recent changes (cont.): BVI Mutual Legal Assistance (Tax Matters) (Amendment) Act, 2012 No. 11 of 2012: Mandatory reliable accounting records -Companies and limited partnerships registered in the BVI -Sufficient information -Determine financial position with reasonable accuracy (at any time) -Underlying documentation -Five years period: completion of transaction or termination of relationship -In addition to Section 98 of the BVI Business Companies Act 2004
BVI Investors Fund Manager Class B shares (nonvoting) Class A shares (voting) Administrator Administration Agreement Fund Company (Business Co or Partnership) Management Agreement Auditors Subscription bank account Trading Account
BVI Recent changes (cont.): BVI Mutual Funds The Mutual Fund Regulations, 2010 Securities and Investment Business Act, 2010 (SIBA) Public Funds Code - Private funds, professional funds, and public funds -Professional funds are the most popular -No restrictions on investment strategy or borrowing -No need for local directors -No need for BVI auditor -Cost -Investment Manager, administrator, custodian and auditor? -Always an administrator and an authorized representative (for AR s) -Pre-approved list of jurisdictions for AR s
BVI Recent changes (cont. on Mutual Funds): The Investment Business (Approved Manager) Regulations, 2012 -Published in November 2012 -Less stringent regulatory regime for BVI investment managers or advisors of private and professional funds -Appeals to non-institutional investments managers and advisors -7 days after filing license application for 30 days
BVI Recent changes (cont. on Mutual Funds): Qualifications: -Closed-ended funds: * Less than USD 1 Billion; and * Professional investors (Net worth of USD 1 million and investments of USD 100,000); or * A maximum of 50 investors -Open-ended funds: * Less than USD 400 million; and * Private or professional funds (or equivalent from other jurisdictions) In short, it will not apply to managers of public funds
BVI Recent changes (cont. on Mutual Funds): Main Advantages: -No need to get a full license under SIBA -Financial statements, but no need to audit -No compliance officer and manual -File an annual return ( fit and proper )
BVI Trends: Focus in growing the jurisdiction as a friendly/ modern jurisdiction for funds Actions to comply with guidelines from multilateral organizations Exchange of information agreements (2012-2013) TIEAs : Entered into force: Initiated: Aruba Japan Czech Republic Turkey Germany Iceland Signed: India Guernsey 22 TIEAs, including one with the US. August 17, 2009 received new categorization by the OECD
BVI Trends (cont.): Potential automatic exchange of information with the United Kingdom New growth driven by Russians and CIS-based clients FATCA compliance * Model I B intergovernmental agreement ( IGA ), announced on April 04, 2013 * Cayman went a step further Increase penalties for non-compliant on due diligence matters Up to USD 250,000 USD 500,000 (rather than 25k 40k) Scandals/ Leaks. April 2013 Statement from Premier and Primer Minister
CYPRUS
Cyprus Main features: Highly used for planning and banking for Russians (DTT from 1998) Legal system based on English law Broad dividend income participation exception Exception on capital gains from shares and securities No withholding on dividends, royalties and interests paid to non-cyprus tax residents Access to EU Directives 45 DTT s
Cyprus EU or non-eu No withholding Effective tax @ 2% Cyprus License Agreement No withholding (EU Directive) EU Trading Company
Cyprus Recent Changes: IP rights box regime (Since May 2012) -Five year amortization of intangible asset -80% deduction/ deemed expense/exemption, after direct expenses Income tax rates from 10% to 12.5% Main features of tax system remained unchanged Protocol to DTT with Russia Regulations for providers of trust services and corporate management (December 2012) Enhanced compliance
SPAIN
Spain Main features: Favorable holding regime for non-spanish entities (ETVE regime) No taxation on dividends and capital gains (qualifying shareholding) - 1 year holding period - 5% or > 6 Million Euros - Subject to tax or TIET - Active business and business purpose. Case of sub-holding. - No tax haven Exception for Capital Gains (active business and subject to tax)
Spain Main features: Excellent treaty network 85 Treaties as of February 2013 Last 4 years: 17 Tax Treaties entered into force. Includes Barbados, Costa Rica, El Salvador, Hong Kong, Panama, Uruguay Focus in Africa and Middle East (Kuwait, Mozambique, Syria) TIET: Bahamas, Curacao. In negotiation: St. Lucia, Jersey, Cayman
Spain Main features: No Spanish capital gains taxation on the disposal of shares of ETVE by foreign shareholder(s) Functional currency, no exchange controls, reputable services, friendly administration (Administrador Unico) Bilateral Investment Treaties (BITs)
Spain Recent Changes affecting the ETVE regime: No capital duty on monetary contributions Management and control - Need of human and material resources to manage shareholdings in operating subsidiaries - Spanish directors - Tax ruling (February 23, 2012): Sufficient means to exercise rights and comply rights as shareholder. Exercise the rights and fulfill obligations arising from shareholder position
Spain Recent Changes affecting the ETVE regime (cont.): Transfer of legal and tax seat to Spain -Rulings from July 2012 -Continuance of legal personality -No Tax New/enhanced reporting obligations (similar to US FBAR and IRC Section 6038D) -Applicable to individuals and corporations -Spanish PE of foreign companies
Spain Recent Changes affecting the ETVE regime (cont.): Business test related to foreign real estate activities -Binding ruling from February 2010 -Substance requirements/ rental activities -Requirements on one company -Not includes: securities
Spain Non-Spanish Intermediate Holding Co. (e.g. Malta, Curacao EU Company) Substance requirements: - Full time employee - Separate premises for management activity ETVE Venezuelan Co Ecuadorian Co Colombian Co Real Estate Real Estate Real Estate
Spain Recent Changes affecting the ETVE regime (cont.): Qualifying dividends and capital gains -Binding ruling from August 2012 -Criterion for dividends -Criteria for capital gains: proportionality test
Spain Trends: Increased scrutiny (Case of Peru) Revision to treaties: Argentina (0.5% Wealth Tax) and the US Increased tax pressure (Special case of the Voluntary Disclosure and reporting obligations)
Spain Revision to Treaties: New Protocol US-Spain DTT: January 14, 2013 -PE Treatment: Construction or installation project extended from 6 to 12 months -Exclusive residence country taxation for dividends -Eliminates withholding tax on interest (from 10%) -Eliminates withholding on royalty payments -Both countries waived their right to tax at source capital gains of shares (except real estate holding companies) -Clearer LOB provisions
Spain US ETVE 20%--25% Operating Companies Latin America Operating Business
Spain Ecuadorian/ Non Ecuadorian Intermediate Holding Co. Organized market/ Exchange Listing ETVE (under S.A. form) Operating Company Ecuador Operating Business
Spain Argentinean/ Non-Argentinean Interest: 35% vs. 12 Royalties: 31.5% vs. 15% Capital gains: predictibility Intermediate Holding Co. (e.g. Uruguay) New Treaty signed in March 2013 ETVE 25 10%-15% vs. 35% on non-tax earnings Operating Company Argentina Operating Business
Spain Resident or Non- Resident Barbados/Curacao Alternatively, a Curacao SPF ETVE Operating Company Venezuela Operating Business
Spain Non Peruvian Intermediate Holding Co. (e.g. Malta) ETVE Operating Company Peru Operating Business
Spain China Hong Kong ETVE Venezuela/ Colombia/ Ecuador Latin America Real Estate
Spain China Hong Kong ETVE Venezuela/ Colombia/ Ecuador Latin America Real Estate
THE NETHERLANDS
The Netherlands Main features: Proven/ longstanding participation exemption regime Reliable industry of fiduciary services/ corporate management Network of 95 DTT Good network of Investment Protection Treaties EU Country/ developed economy
The Netherlands Changes: Dividend withholding tax on distributions by Cooperatives (Amendments to Tax Plan 2012 issued on October 2012): Business Assets -Abusive situations -Will only apply to distributions to members of the Cooperative aimed at tax avoidance -Equalize a membership right of a cooperative with a share of a company
The Netherlands Trends: Luxembourg as the main alternative to Cyprus Increased compliance requirements
The Netherlands Non-Dutch resident (e.g. LatAm) Top Holding Co. (e.g. Curacao) Dutch Cooperative Potential 8.3% --15% withholding Dutch B.V Operating Company Operating Business
The Netherlands Non-Dutch resident (e.g. LatAm) Top Holding Co. (e.g. Curacao) Intermediate Holding Co. (e.g. Lux or Spain) Dutch B.V Operating Company Operating Business
The Netherlands Non-Peruvian Private Foundation (e.g. Dutch Stichting or STAK) Holding Co. (e.g. DutchCo) Offshore PeruCo Peru Operating Business