News Letter Title:Government Surplus and Tax Handouts
July, 2015 | www.zetland.biz/
Dear Friend of Zetland,
People who make wills in common law jurisdictions (Testators) generally have testamentary freedom to leave their estate to whomsoever they please.
It’s widely known that wills may be challenged, primarily in the UK via the provisions of the Inheritance (Provision for Family and Dependants) Act 1975 as amended by the Civil Partnership Act 2004 by the dependants of the deceased. If such reasons are good and true, the court will take them into account.
If you wanted to leave your close family out of the will, then the general advice is to leave a written statement saying why this is the case. If such reasons are reasonable, the court will take them into account.
Imagine my surprise when I read the papers the other day that the Court of Appeal ruled that one (allegedly) able bodied Mrs Heather Ilott would otherwise face a life of poverty because she was on benefits and could not afford to go on holiday or buy clothes for her children.
A brief background Was Melita Jackson left her GBP 500,000. Mrs Jackson’s relationship with her daughter (Mrs Ilott) broke down when she ran off with her future husband, Nicholas Ilott, when she was 17. The couple went on to have five children, three of whom are now over 18. Failed attempts at reconciliation were blamed on both sides.
Mrs Ilott’s father died before she was born and the final falling out came when she named her fifth child after her paternal grandmother, whom her mother did not like, the court heard, Before her death in 2004, Mrs Jackson wrote in a letter to lawyers: “I can see no reason why my daughter should benefit in any way from my estate.
Mrs Ilot challenged this and after an eight-year court battle, she was granted a third of that money on the grounds that her mother did not leave “reasonable provision” for her in the will.
The Court of Appeal ruled that Mrs Ilott would otherwise face a life of poverty because she was on benefits and could not afford to go on holiday or buy clothes for her children.
The fact that Mrs Jackson had little connection to the charities to which she left her money played a part in the ruling, the judges said.
It is suggested that Testators may want to leave an additional statement demonstrating tangible connections to the beneficiaries.
It will however make it easier for adult children who are disinherited by their parents to challenge their wills and gain a proportion of any estate, according to lawyers.
For more information on wills contact James Lee at firstname.lastname@example.org.
Group Managing Director
Zetland Fiduciary Group
Taxes and Duties in China Imposed on Import and Export
One of the most important issue companies face conducting trade with China is the subject of taxes and duties imposed on goods imported into and exported out of the country. This is a complex subject, and rates and regulations differ of course from product to product, however there are general tax principles to follow, and we outline the most important issues foreign companies should be aware of below.
Importing to and exporting from China generally involves three types of taxes:
- Value-added tax;
- Consumption tax
- Customs duties.
1. Value-added Tax for Imported Goods
Imported goods to China are subject to value-added tax (VAT), and the applicable tax rates are the same as those applied to goods sold within the domestic market (i.e. 17 percent, and 13 percent for some goods). VAT is payable on the day of customs clearance.
The input VAT imposed on importing goods can be used to deduct the output VAT paid when the imported goods are sold in the domestic market.
2. Consumption Tax for Imported Goods
Items subject to consumption tax (CT) include luxury products such as high-end watches, non-renewable petroleum products such as diesel oil, and high-energy consumption products such as passenger cars and motorcycles.
Import CT is collected either on an ad valorem basis or quantity basis, with tax rates and amounts varying greatly. CT should be paid within 15 days from the day that Customs issues the Import CT Bill of Payment.
3. Customs Duties
Customs duties include import duties and export duties, with a total of 8,238 items taxed, according to China’s 2013 Customs Tariff Implementation Plan (“2013 Tariff Plan”). Customs duties are computed either on an ad valorem basis or quantity basis.
Duty rates on import goods consist of:
Most-favored-nation duty (MFN) rates;
Conventional duty rates;
Special preferential duty rates;
General duty rates;
Tariff rate quota (TRQ) duty rates; and
Temporary duty rates.
Duty Paying Value for Imported Goods
The amount of import taxes and customs duty payable is calculated based on the price or value of the imported goods. This value is called the duty paying value (DPV). DPV is determined based on the transacted price of the goods – i.e. the actual price directly and indirectly paid or payable by the domestic buyer to the foreign seller, with certain required adjustments.
DPV includes transportation-related expenses and insurance premiums on the goods prior to unloading at the place of arrival in China. Import duties and taxes collected by Customs are excluded from DPV.
Import taxes and duty payable should be calculated in RMB using the benchmark exchange rate published by the People’s Bank of China.
Export duties are only imposed on a few resource products and semi-manufactured goods. In 2013, China continues to levy temporary tariffs on exports including coal, crude oil, chemical fertilizers and iron alloy to conserve resources.
The tax base for export duties are the same as import duties – i.e. the DPV. The DPV for export duties is based on transacted price, i.e. the lump sum price receivable by the domestic seller exporting the goods to the buyer. Export duties, freight-related expenses and insurance fees after loading at the export spot, and commissions borne by the seller are excluded.
Zetland can assist in advising companies through our professional network in China.
Please contact Ms. Phoebe Luo at email@example.com for more information
Two-Phase implementation of Companies (Amendment) Act 2014
On April 15, 2015, ACRA has announced that the legislative changes to the Companies Act will be effected in two phases. The first phase has been implemented on 1 July 2015, and the second phase will commence in the first quarter of 2016. These changes will be the largest since the enactment of the Act. The changes are intended to reduce regulatory burden, provide greater flexibility and improve the corporate government landscape.
Some of the key amendments that have come to force:
1 ) “Small company” concept for audit exemption
To move further to risk-based approach and to reduce the regulatory burden on small companies, a new company concept has been introduced for exemption of statutory audit. To be exempted, it must be a private company that meets at least 2 of 3 criteria for the immediate past two financial years:
- Total turnover not more than S$10M
- Total assets not more than S$10M
- Number of employees not more than 50
To determine if a company qualifies as a small company in its first 2 financial years after its incorporation, the company must assess if it fulfills the requirements in each of the years. For example, if a company is incorporated after 1 July 2015, in order to determine whether a company would qualify in its first financial year, the company should look at whether it is a private company and whether it meets the 2 out of 3 quantitative criteria in that year. If it does not qualify that year, it will still get a chance to qualify in its second financial year.
Nevertheless, we would recommend our clients to get its first set of financial accounts to be audited, to ensure that the risk and responsibilities of the directors are properly managed and accounts are prepared in accordance with the Singapore Financial Reporting Standards.
2 ) A company may issue shares with no consideration.
3 ) A company may use its share capital to pay for commission or brokerage incurred in an issue or buyback of shares.
4 ) Removal of prohibition against financial assistance by private companies and introducing new exceptions to financial assistance.
5 ) Auditors of non-public interest company may resign upon giving notice to the company. However, auditors of public interest companies and their subsidiaries must obtain ACRA’s consent for premature resignation.
Public interest companies are:
- Companies listed or in the process of listing on the Singapore Exchange or a securities exchange outside of Singapore;
- Selected financial institutions eg companies that are part of banking and payment system; insurers and insurance brokers; and capital market infrastructure providers; and capital market intermediaries; and
- large charities or institutions of public character which are companies.
6 ) No requirement for alignment of financial year end between parent and subsidiary company with the repeal of the Companies Act
7 ) ACRA, the Companies Registry of Singapore and regulating body has set out in regulations the circumstances which indicate a company is not carrying on business and ACRA will initiate the striking-off process. The circumstances include:
- The fact that the company has failed its Annual Return;
- The fact that the company has failed to respond to correspondence sent by ACRA by registered post,
- The fact that the company has failed to respond to correspondence sent by ACRA via registered post, where a response is required;
- The fact that credible information has been received by ACRA indicating the company is not carrying on business;
- The fact that none of the locally resident directors of the company can be contactable or located by ACRA; or
- The fact that the sole resident director or the last remaining director as reflected in ACRA’s register, has passed away or disqualified from acting as director.
Most of the procedures for implementation of striking off will be introduced in Phase 2.
For information on the complete list of key amendments of Phase 2 listing, you may visit the weblink at https://www.acra.gov.sg/key_amendments_phase_2_listing.aspx
For more information on any specific amendment, you may contact Su Lee, General Manager of Zetland Singapore at firstname.lastname@example.org or +65 65572071
New Regulatory Requirements for Corporate Services Providers in Singapore
The new regulatory requirements for Corporate Service Providers (“CSPs”) in Singapore aiming to ensure the quality and professionalism of corporate service providers became effective on 15 May 2015. With the new regulation Singapore looks forward to strengthen its reputation as a trusted international finance and business hub even further.
The requirements of the new regime are aligned with recommendations issued by the Financial Action Task Force, the global standard setter for anti-money laundering and counter terrorism financing. A Filing Agent (“FA”) must have its registration renewed annually. It also must have at least one registered Qualified Individual fulfilling fit and proper requirements meeting a qualification standard and professional experience. A FA must perform ongoing customer due diligence and transaction monitoring to prevent money-laundry or financial terrorism. Zetland Singapore is fully compliant CSP. Our Singapore office may request updated due diligence documentation, but overall the implications for clients should be minimal.
The CPS regulations will make Singapore even more competitive amongst low-tax jurisdictions and increase the business confidence in Singapore companies overall.
For more information, please contact Su Lee Chan at Suleec@zetland.biz.
Belize Options for Wealth Management Structures
Zetland Belize as a licensed Registered Agent can assist in the formation and registration of the corporate structure of your choice. Every business situation has different financial, legal, tax and operational factors that will affect the decision of what corporate structure to use. You may select to incorporate an International Business Company (IBC), Foundation, Trust or Limited Liability Company (LLC).
The IBC is normally formed for asset protection and confidentiality. It is a proven corporate vehicle suitable for a wide range of offshore trading, investment and activities. Forming an IBC has many advantages. It allows you to protect your asset by registering them under the company’s name, conduct your business without using your name, avoid paying local taxes, flexible, maintaining your privacy – details of shareholders and directors are not registered at the IBC Registry. It is used by those who want to hold assets or hold a bank account in the company’s name. IBC’s are fairly easy and may be formed within 24 hours.
The primary benefit of a Trust is that it allows the legal ownership of property to be distinguished and separately vested from the enforceable rights of use and enjoyment of that property. This makes the Belize trust an extremely sophisticated, flexible and creative instrument for asset protection, investment planning, tax, estate and preservation of confidentiality. A significant benefit of forming a trust in Belize is the level of asset protection guaranteed to the settlor, due to the fact that under Belize law, a Belize Court cannot vary or set aside or recognize the validity of any claim against the trust property pursuant to the law of another jurisdiction or the order of a court of another jurisdiction in respect of the personal and proprietary consequences of marriage or the termination of marriage, succession rights (whether testate or intestate) including fixed shares of spouses or relatives or the claims of creditors in an insolvency. Belize’s Trust Law is one of the strongest and most flexible asset protection trust legislations in the world and highly favoured for estate planning, asset protection and investment purposes.
The structure of the Belize International Foundations is very similar to that contemplated for trusts and their administration. The crucial difference lies in the fact that a foundation in contrast to a trust enjoys legal personality and may be set up by unilateral declaration of the founder and the assets of the foundations only need to be endowed rather than be transferred physically. It is established notwithstanding any foreign law, rule or regulation, the foundation shall not be void or voidable due to the fact that it is voluntary and without valuable consideration being given for a disposition to a foundation or to it being established for the benefit of the founder, or the founder’s spouse or children. Some other potential uses of foundations are for succession planning and wealth management, discrete structures, discretionary benefits, and charitable or non-charitable purposes. Belizean Foundations are exempt from business tax and offer a no tax haven for offshore investors and may also be used as an alternative to asset protection.
A Limited Liability Company or LLC is another flexible business entity with strong asset protection features. LLC is a hybrid between two familiar business structures, namely a corporation and a partnership. An LLC combines the best of both worlds by offering the advantage of both a corporation and a partnership without the disadvantages of either form. A limited liability partnership avoids multiple taxation but it does require unlimited liability exposure of at least one general partner. Such exposure to risk is too great for an individual to assume and thus limits the usefulness of partnerships. An LLC is a legal entity with separate rights and responsibilities distinct from its members and managers. Other main attributes are that LLC’s are exempt from taxes and duties and exchange control in Belize. There is no requirement to prepare annual accounts or to appoint an auditor; however, a simple annual return in the form specified by regulations would need to be lodged with the Registrar setting out the name of the LLC and the address of the registered agent. Also LLC’s from other jurisdictions may transfer their domicile to Belize and Belize LLC’s may move to another jurisdiction.
Feel free to contact us if you are interested in finding a corporate structure suitable to your needs.
For further information, please feel free to contact Anju Gidwani, Director of the Belize Office (email@example.com)
HK:Sep 3 & Sep 28
Singapore:Aug 10 & Sep 24
Belize:Sep 10 & Sep 21
Japan:Sep 21 – 23
Hong Kong Tax Residency Certificates
The Hong Kong Inland Revenue Department (IRD) introduced a new application form to obtain a certificate of resident status (COR) for Hong Kong companies to be used when claiming double tax treaty benefits or reduced withholding tax rates under Hong Kong’s Comprehensive Double Taxation Agreements (CDTAs). The new application forms became effective on 1 February and the information to be provided includes:
- Particulars and business nature of the company including location of management of control, headquarter and branches
- Name and residence of beneficial owner
- Nature of income for which tax benefits are being claimed
- Place of business, meetings of directors and banking information
For applications for the Mainland, a company incorporated in Hong Kong normally does not need to apply for a COR unless requested by the Mainland tax authorities. A Hong Kong company should produce to the Mainland tax authorities a copy of its Certificate of Incorporation in Hong Kong or a Certified Extract of Information on the Business Register to prove its Hong Kong resident status.
A Hong Kong company is generally considered to be a resident company by incorporation regardless of its economic substance. In, what seems to be, an effort to avoid forum shopping and treaty abuse, the Inland Revenue Department, however, applies are more prudent approach, evident by the information requested in the application forms and “where it is clear that the person would not be entitled to [tax] benefits”, the IRD ”may refuse to issue a Certificate of Resident Status”, if “that person does not fulfill the criteria of the particular article under which that person intends to claim benefits”. The IRD stresses to uphold the terms and purpose of Hong Kong’s CDTAs and to prevent treaty abuse.
The benefit of having a Double Taxation Agreement is the certainty investors have on the taxing rights of the contracting parties which helps investors in the evaluation of their potential tax liabilities on economic activities in the respective countries. A DTA may also provide an added incentive for overseas companies to do business overseas. Hong Kong has entered into 32 CDTAs with other jurisdictions as of today.
For more information or assistance with the application for a COR, please contact us at firstname.lastname@example.org.
Status Update of Hong Kong DTAs and TIEAs
As an international trading and financial centre, it is vital for Hong Kong to provide a business friendly and stable environment for businesses and investors. In order to provide investors certainty in respect of taxing rights and incentives for carrying on business in Hong Kong the government has established a growing network of Comprehensive Double Taxation Agreements (CDTA). The CDTAs ensure that investors doing business through a Hong Kong company will not have to pay tax twice on a single source of income. The CDTAs will bring tax savings and a higher degree of certainty on taxation liabilities for investors from the respective places when they engage in trade and investment activities with Hong Kong and vice versa. Hong Kong has entered into 32 CDTAs with other jurisdictions as of today
|Jurisdiction||Dividends %||Interest %||Royalties %|
|Austria||0 / 10||0||3|
|Belgium||0 / 5 / 15||10||5|
|Brunei||0||0 / 5 / 10||5|
|Canada||5 / 15||10||10|
|China||5 / 7||0 / 7||7|
|France||10||0 / 10||10|
|Hungary||5 / 10||0 / 5||5|
|Indonesia||5 /10||0 / 10||5|
|Ireland||0||0 / 10||3|
|Japan||5 / 10||0 / 10||5|
|Korea*||10 / 15||10||10|
|Luxembourg||0 / 10||0||3|
|Malaysia||5 / 10||10||8|
|Mexico||0||0 / 10||10|
|Netherlands||0 / 10||0||3|
|New Zealand||0 / 5 / 15||0 / 10||5|
|Portugal||5 / 10||0 / 10||5|
|South Africa*||5 / 10||10||5|
|Spain||0 / 10||0 / 5||5|
|Switzerland||0 / 10||0||3|
|Thailand||10||0 / 10 / 15||5 / 10 / 15|
|UAE*||0 / 5||5||5|
|UK||0 / 15||0||3|
|Vietnam||10||0 / 10||7 / 10|
The orders of implementation of the CDTAs with South Africa and the United Arab Emirates have been published on 15 May 2015, and the CDTAs will be effective after passing local legislation and completing the ratification procedures.
Further expanding the CDTA network, Hong Kong is actively negotiating CDTAs with the following jurisdictions:
|1. Bahrain||2. Bangladesh||3. Finland||4. Germany||5. India||6. Israel|
|7. Latvia||8. Macao SAR||9. Macedonia||10. Mauritius||11. Pakistan||12. Romania|
|13. Russian Federation||14. Saudi Arabia|
In addition to the CDTAs Hong Kong has one Tax Information Exchange Agreement (TIEA) in force which is with the United States in conjunction with FATCA.
With regard to the upcoming OECD standard towards international tax transparency, the automatic exchange of financial account information in tax matters (AEOI), Hong Kong has launched a consultation exercise on AEOI in April and targets to implement the AEOI by the end of 2018.
According to the standard promulgated by OECD, AEOI involves systematic and periodic transmission of financial account information by the source jurisdiction to the jurisdiction of residence of the account holders (i.e. non-Hong Kong tax residents) concerning all types of investment income, account balances or values, and sales proceeds from financial assets on an annual basis. The information which is exchanged is collected in the source jurisdiction on a routine basis, through reporting by the financial institutions (“FIs”) to the competent authorities. Hence, “automatic exchange” does not mean a free flow of information amongst jurisdictions.
The scope of financial account information to be exchanged is prescribed and unified under the OECD standard:
- personal data (i.e. name, address, date and place of birth, jurisdiction of residence and taxpayer identification number (“TIN”) of the account holder).
- financial data (i.e. interest, dividends, account balance or value, income from certain insurance products, sales proceeds from financial assets and other income generated with respect to assets held in the account or payment made to the account).
This covers accounts held by individuals and entities (which include foundations and trusts). FIs will be required to look through passive entities and to report on the relevant controlling persons (i.e. the beneficial owners).
Hong Kong Tax – Notification of Chargeability
Although the Inland Revenue Department (“IRD”) has already issued the 2014/15 Profits Tax returns in early April 2015, some corporations may not receive the 2014/15 Profits Tax returns from the IRD as it is the common practice of the IRD not to call for annual submission of Profits Tax returns by corporations in the circumstances where:
- The company has not commenced trade / business or has ceased and not recommenced; or
- Trade / Business carried on by the company does not give rise to assessable profits (before setting off any tax losses brought forward).
However, according to Section 51(2) of the Inland Revenue Ordinance, a person, including corporations, chargeable to tax for any year of assessment shall inform the Commissioner of the IRD in writing that the person is so chargeable not later than 4 months after the end of the basis period for that year of assessment unless the person has already been required to furnish a tax return. As such, if your company commences or recommences to earn assessable profits liable to Profits Tax and have not received a Profits Tax return, you have to write to the IRD for a Profits Tax return within 4 months after the end of the basis period for the year of assessment concerned (e.g. for cases where the year-end date are on 30 June 2015, those company are required to inform their chargeability on or before 30 October).
Should you require further assistance on the above, please contact us at email@example.com.
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