presentation to future events- rnx - showme · rbsi or investec investment(s) dead member...

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CRS- Why tax planning shouldn’t be postponed!

CONFIDENTIAL | Copyright @ 2017 Sovereign Group All Rights Reserved

By Richard Neal Director

rneal@sovereigngroup.com

Sovereign Trust (SA) Limited

17th Floor, GreenPark Corner

3 Lower Road, Morningside, Sandton

AGENDAAGENDA

• About Sovereign

• Why tax planning shouldn’t be

postponed

• FATCA

• Common Reporting Standards (CRS)

• Notice 212

• The DTC

• The answer-

Conservo International Retirement Plan

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Introduction to the Sovereign Group

Established in 1987

26 fully manned offices worldwide

Sovereign’s core business is setting up and managing companies, trusts and other structures to meet the specific personal/business needs of our clients. Typically these needs would include tax planning, wealth protection, foreign property ownership and facilitating cross-border business

Licensed and regulated Trust Companies in:Grand TurkIsle of ManGibraltarMonaco and Guernsey

Key client service centres: Gibraltar, Hong Kong, Dubai, Isle of Man and Guernsey. And an office in Cyprus (in Limassol)!

Over 13,000 vehicles under administration and management

Why tax planning shouldn’t be postponed

PRAVIN GORDHANFINANCE MINISTER

Business Day Live – 6 April 2016

“The world is systemically narrowing the scope for those who want to hide their offshore assets and avoid paying their taxes due to the South African fiscus”.

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• Enacted in 2010.

• aimed at foreign financial institutions (FFIs) to prevent tax

evasion by US citizens and residents through use of offshore

accounts.

• if a FFI does not enter into an agreement with the IRS, all

relevant US-sourced payments subject to a 30% withholding

tax payable to IRS.

• SARS reported to IRS on 30 September 2015.

• IRS reporting to SA in turn (and 33 other countries) on South

Africans with accounts in the US.

FATCA

Common Reporting Standard (CRS)

• Arises out of FATCA, developed by the OECD (2014)

• To date 100 jurisdictions signed up to share information

automatically – not on request

• Who will report- Financial Institutions (any account)

• 1 January 2016 “go live” date for early adopter countries.

• May 2017 commencement of reporting to local tax

authorities.

• September 2017 commencement of reporting between

countries.

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CRS- What is a reportable account?

Include accounts held by:

• Individuals; and

• Entities, including trusts and foundations.

• Gibraltar, Guernsey, Isle of Man entities: GBP250 000 threshold

(pre 2016).

• Individual accounts: no threshold.

• The standard includes a requirement to look through passive entities in order to report on the relevant controlling person.

CRS- Information to be reported

• Interest earned/received.

• Dividends earned/received.

• Account balance or value.

• Income from certain products.

• Sales proceeds from financial assets.

• Payments made with respect to the account.

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CRS- First Adopters

Anguilla Argentina Barbados Belgium Bermuda

BVI Bulgaria Cayman Islands Colombia Croatia

Curacao Cyprus Czech Republic Denmark Dominica

Estonia Faroe Islands Finland France Germany

Gibraltar Greece Greenland Guernsey Hungary

Iceland India Ireland Isle of Man Italy

Jersey Korea Liechtenstein Latvia Lithuania

Luxemburg Malta Mauritius Mexico Montserrat

Netherlands Niue Norway Poland Portugal

Romania San Marino Seychelles Slovak Rep Slovenia

South Africa Spain Sweden Trinidad Turks & Caicos

UK

CRS- Second Group of Adopters

Albania Andorra Antigua & Barbuda Aruba Australia

Austria Bahamas Belize Brazil Brunei

Dar Es Salaam Canada Chile China Costa Rica

Ghana Grenada Hong Kong Indonesia Israel

Japan Macao Marshal Islands Malaysia Monaco

New Zealand Qatar Russia St Kitts & Nevis Samoa

St Lucia St Vincent &

Grenadines

Saudi Arabia Singapore St Maarten

Switzerland Turkey UAE Uruguay

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Notice 212

Government Gazette - 16 March 2015Issued ito Sec 35(2) and 36(4) of the Tax Administration Act

Offshore trusts:

An arrangement ito which a

(i) SA tax resident makes a contribution to a non-resident trust

AND

(ii) Resident making the contribution is a beneficiary of the trust

AND

(iii) Value of the contribution or the interest of the beneficiary in the trust is

R10 million or more.

Notice 212

Who Reports?

- Promoter: “a person who is principally responsible for

organising, designing, selling, financing or managing the

arrangement.”

- Participant: “a Promoter or a person who directly or indirectly

will derive or assumes that the person will derive a ‘tax benefit’

or ‘financial benefit’ by virtue of the arrangement.”

When to Report?

• Within 45 business days of the date on which arrangement

becomes reportable

OR• If a person becomes a participant in an arrangement that is

reportable, within 45 days of the person becoming a

participant.

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Notice 212

Penalties?

• Participant: R50 000 per month

• Promoter: R100 000 per month

Anticipated tax benefit exceeds R5 million: penalty doubled!

Tax benefit exceed R10 million: penalty tripled

The Davis Tax Committee:

• 2 July 2013: Minister of Finance 2013announced this tax reform committee.

• Various sub – committees on VAT, estate duty,e- commerce, corporate tax, relationshipbetween, labour/business and others.

• Estate Duty: intention withdraw spousalexemption.

• Offshore trusts: tax all payments as income(even though capital) – been referred back toTreasury.

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What is the solution?

A structure which is reportable

but doesn’t trigger a tax liability

Retirement trust in:

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Conservo- Our Guernsey Retirement

Savings Plan

• Works well for South African tax residents

• Is a 40(ee) unapproved Scheme- 0% Guernsey tax

• We have high level tax opinion on the Plan- local

• Amazingly cost effective vs its closest relative

• Tax efficient contributions

• Flexible and tax efficient Estate Planning

Conservo- Why do we like Guernsey so

much?

British Crown Dependency

Politically stable

Highly regulated

Lily white reputation

Zero tax for non-residents of Guernsey

All ties into the rationale for setting up a Conservo Plan

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Conservo- Contributions

Conservo- Taking Benefits

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Conservo & Death of Member

Conservo International Retirement Trust

Cash and assetscontribution from

member

Bank account: RBSI or Investec

Investment(s)

Dead member

Beneficiaries

Discretionary Trust

Guernsey

No estate duty

Conservo- SA Tax Considerations

• Donations tax: NO (pension rights from age 50; not a gift to trust).

• Tax on lump sums received in SA: NO (return of capital).

• Tax on growth of investment: Only when paid to the Member:

• 40% of the capital gain taxable at the investors marginal tax rate when

vested.

• No CGT in the plan.

• Tax on income: Only when paid to the member: taxed at marginal rate.

• Estate duty on death: NO.

• No tax deduction for contributions to the Conservo (Not registered under

the SA Pension Funds Act).

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Conservo- Benefits to the Member

• Tax free growth on investment.

• Better control of a retirement plan, freedom to decide

where to invest.

• Pension plan in hard currency, i.e. GBP, USD, EUR.

• Can receive benefits from as early as 50.

• Part (or all) of funds can be taken as a lump sum on

retirement – consider tax consequences!

• Cost effective & transparent.

• Flexible: may convert structure to another structure when

Member relocates.

BahamasTel: +1 242 322 5444

bh@SovereignGroup.com

BahrainTel: +973 17 1515 71

bahrain@SovereignGroup.com

British Virgin IslandsTel: +1 284 495 3232

bvi@SovereignGroup.com

Cayman IslandsTel: +1 949 7555

cay@SovereignGroup.com

China, BeijingTel: +86 10 6582 0268

china@SovereignGroup.com

China, ShanghaiTel: +86 21 5211 0068

china@SovereignGroup.com

CuraçaoTel: +599 9 465 2698

cu@SovereignGroup.com

CyprusTel: +357 25 733 440

cy@SovereignGroup.com

DubaiTel: +971 4 270 3400

dubai@SovereignGroup.com

GibraltarTel: +350 200 76173

gib@SovereignGroup.com

RegisterAnAircraft.comTel: +350 200 76173

rana@SovereignGroup.com

RegisterAYacht.comTel: +350 200 51870

ray@SovereignGroup.com

Sovereign Accounting Services (Gibraltar) Limited

Tel: +350 200 48669sasgib@SovereignGroup.com

Sovereign Asset Management

LimitedTel: +350 200 41054

sam@SovereignGroup.com

Sovereign Insurance Services Limited

Tel: +350 200 52908sis@SovereignGroup.com

GuernseyTel: +44 1481 729 965

ci@SovereignGroup.com

Hong KongTel: +852 2542 1177

hk@SovereignGroup.com

Isle of ManTel: +44 1624 699 800

iom@SovereignGroup.com

MaltaTel: +356 21 228 411

ml@SovereignGroup.com

MauritiusTel: +230 244 3210

mu@SovereignGroup.com

The NetherlandsTel: +31 20 428 1630

nl@SovereignGroup.com

PortugalTel: +351 282 340 480

port@SovereignGroup.com

SeychellesTel: +248 4321 000

sc@SovereignGroup.com

SingaporeTel: +65 6222 3209

sg@SovereignGroup.com

South Africa, Cape Town Tel: +27 21 418 2170

sact@SovereignGroup.com

South Africa, JohannesburgTel: +27 11 305 7480

sajb@SovereignGroup.com

SwitzerlandTel: +41 21 971 1485

ch@SovereignGroup.com

Turks & Caicos IslandsTel: +1 649 946 2050

tci@SovereignGroup.com

United KingdomTel: +44 20 7389 0555

uk@SovereignGroup.com