Intax Insider
30.04.2020

Financial crisis is coming: challenges and solutions for private clients. What speakers were talking about.

According to the IMF, the world has already slid into a recession. Intax Insider decided to find out practitioners’s point of view and held another online discussion, “The financial crisis is coming.  Challenges and solutions for private clients”, in which experts from the banking and tax sectors Alexey Bely, Bank Julius Baer & Co. Ltd. (Switzerland), Artem Toropov, Baker McKenzie (Russia) and Sergey Bezborodov, Angles AG (Switzerland) shared their predictions about financial future of wealthy clients and advised how they can withstand under new conditions.

Large business and private investors have already faced tax innovations such as amending the convention for the avoidance of double taxation, new taxes for large investors, etc.

Artem Toropov emphasized that many clients now have to make changes to their business structures. While exemptions for business come into force in the EU, in Russia, on the contrary, the situation is deteriorating. Let us, at least, recall the announced changes in tax agreements with Cyprus, Luxembourg, and Malta. However, it is worth considering that many American and European concessions are quite difficult to obtain for companies that belong to non-residents. The same applies to individuals. So, for instance, if you have real estate in the UK, but you are a resident of the Russian Federation and just decided to self-isolate in London, there is a big query whether your case will fall under the general rule and whether you will receive British benefits. It is also worth remembering that according to information sharing, tax authorities can easily check which country the company is actually managed from. Sergey Bezborodov also mentioned client cases when the bank stopped servicing and even intended to arrest the accounts of a foreign company, which was actually managed from Ukraine, and demanded to register in the country where the bank was located and pay taxes.

Speaking about business structuring, Sergey Bezborodov emphasized that the most secure option is not a corporate structure. If you have less than $ 5 million, then complex structures simply will not be paid off: even direct ownership of accounts and investment portfolios are appropriate.

Important tip: to structure business, wealthy CIS clients should consider how to use the foreign mechanism with local tax law. Ideas of adjusting foreign holdings to local markets, re-domicilations, combinations of such holdings with foreign trusts to protect are also appropriate. Alas, with the current realities in Russia, tax conventions are unlikely to save you. As it was clarified by Alexey Bely, in terms of tax and investment issues, European structures are more preferable. The bank does not care whether the company is located offshore or in European jurisdiction, the main thing is that you comply with the legislation of your country and keep your corporate structures in good order.

Now, the issue of inheritance planning will also gain momentum. A lot of people have faced problems that they did not manage to pay attention to earlier. It also concerns partnerships in business – if shareholders did not manage to reach agreements, it’s high time to deal with them, so that in situations when shareholders suffer losses amid the crisis and cannot finance the business in equal shares, they will not have further disagreements regarding return on investment.

Intax Insider continues a series of discussions with leading experts in wealth management and tax planning.

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