Foreword - December 2019 - January 2020

Among the most important news of next year will be the introduction of ultimate beneficial ownership (UBO) registers and the reporting of aggressive tax arrangements.

The EU Fifth Anti-Money Laundering Directive (5AMLD) is due to come into force in January 2020. One of its requirements is the establishment of a fully public UBO register for companies in each EU Member State, as well as a UBO register for trusts and similar arrangements that will be accessible to people with a ‘legitimate interest’ only.

Many Member States have not implemented the UBO registers provided under the EU Fourth Anti-Money Laundering Directive, and are therefore creating them now under 5AMLD. Some issues have not been covered in 5AMLD nor the national implementing legislation of many Member States. For example, if a company is controlled by a trust or a private foundation, who are the ‘beneficial owners’ for the purposes of the UBO register? Various positions appear to be maintained in different Member States, and even within them, as is seen in Kinga Romanovska and Piotr Augustyniak TEP’s article on Poland’s implementation in this issue.

The publication of the details of beneficial owners in the UBO register is just one piece of the jigsaw that professionals and their clients must put together. Some jurisdictions, such as Italy, require residents to disclose any foreign assets they own, including those of which they are beneficial owners. This involves an accurate analysis as to whether the beneficiaries of a discretionary trust qualify for this disclosure. Other jurisdictions, such as France, impose a tax on entities that control local assets but fail to disclose the identity of their beneficial owners. In any case, financial intermediaries all over the world, even outside the EU, must identify the beneficial owners of any entities that wish to open an account with them.

By 31 August 2020, the first reporting under Council Directive 2011/16/EU (DAC6) will have taken place in relation to any arrangements implemented since 25 June 2018, where tax savings are the main benefit (or one of the main benefits). Simon Gorbutt TEP discusses DAC6 and how its implementation impacts insurance-based tax planning across borders in this issue. Different approaches have been adopted in different jurisdictions, ranging from the exclusion of reporting of any arrangements that are in line with the purposes of the legislation they purport to apply, to the opposite extreme, which widens the scope of reporting to purely domestic (i.e. not cross-border) arrangements.

We are accustomed to the increasing complexity of international tax planning. Nonetheless, even the EU Succession Regulation, a piece of EU legislation that has no tax implications and was primarily intended to harmonise the rules governing succession, is giving rise to a number of unforeseen issues that are systematically brought to the attention of the Court of Justice of the European Union. These issues range from practical matters, such as the use of certain forms, to more substantive ones, such as the question of whether notaries in some countries perform the same functions as courts in succession matters.

Complexity is continually increasing in all branches of the private client business, mainly in relation to increased transparency requirements. Specialisation remains a key factor for the successful exercise of a legal, corporate, fiduciary and financial profession. The frequency and pace of change also requires the ability to constantly adapt to the new regulatory environment and to change the processes under which our activities function. The risks inherent in our professional lives nowadays include an increased ability for the regulatory authorities to mete out civil penalties on companies, as well as the individuals who occupy senior management positions in them.

As 2019 comes to an end, it is the right time to pause and reflect on ways to ‘give back’ to society in the form of philanthropy or voluntary activities. Some articles in this issue may offer some food for thought in this respect.

Merry Christmas, Season’s Greetings and a prosperous New Year to all!