Ir 2015[3] - luis santine

Private Client Practice Group

September 28, 2015The Brewery, London

By João Valadas Coriel

Luis SantineJuan Carlos Madrigal, and

Nicholas V. Chen

山雨欲來，風滿樓　Wind in the Tower Warnsof Storms in the Mountains

Tang Dynasty Poem by Xu Hun‘Coming troubles cast their

shadows before them’

Table of Contents• Multilateral Convention on Administrative Assistance

(João Valadas Coriel) The Automatic Exchange Of Information What Is Covered?

Reportable Information Reporting Entities Reportable Financial Information Owners

Competent Authority and Standard Looking Over the Horizon: What to Expect and When?

Table of Contents• BSI First Swiss Bank to Sign Non Prosecution Agreement

IRS and 70 Swiss Banks negotiating NPA's• Two More Swiss Banks Prosecuted

Number 13 and 14• Singapore Private Bankers and Clients Sweat Loss of

Secrecy 51 Countries with Automatic Reporting

• Carlyle Rogers, Anguilla

Table of Contents• Lessons and Take Aways: What Can IR Members

Consider As Options: Solutions Segregated Trust Companies and other favorable structures

(Luis Santine ) Alternative Asset Classes: Collectible Rare Gold Coins (Juan

Madrigal) Structuring Considerations (Nicholas V. Chen)

• Questions and Answers/Discussion

João Valadas CorielManaging Partner

www.valadascoriel.com Advocating for winners in a changing world

http://www.valadascoriel.com/

THE MULTILATERAL CONVENTION ON ADMINISTRATIVE ASSISTANCE IN AUTOMATIC EXCHANGE OF INFORMATION OF TAX MATTERS:

THE END OF TAX HAVENS AND OFFSHORE CENTRES?




Previous General Rule:

• Exchange of information at request made by a tax authority to another in specific and concrete cases.

Future General Rule:

• Automatic exchange of information between tax authorities of multiple countries on the basis of financial information compulsorily gathered by banks, financial institutions, securities depositaries, brokers, dealers and mutual funds or investment fund management companies and insurance companies, sent on an annual basis related to all income and or capital gains earners, allowing for “fishing” for defaulting taxpayers in home/residence/nationality/countries.

Entry Into Force:• January, 1st 2017; BUT Retrospective effect: January, 1st 2016.

Multilateral Convention on Mutual Administrative Assistance on Automatic Exchange of Information in Tax Matters: The End of Tax Havens and Offshores Centres?



• Previously, the Multilateral Convention, although foreseeing already an automatic exchange of financial information in tax matters, had no efficient and effective mechanism to ensure such automatic exchange of information;

• As from the 1st of January 2017 - with retrospective effect in relation to income, capital gains and taxable estate or assets referred to as of the 1st of January 2016 in some cases- the new Standard allows for such an efficient and effective automatic exchange of financial information in tax matters mechanism;

• Since October 29, 2014 around 80 countries- several inclusive being “classic” tax havens or offshore centers- have agreed to sign the CAA and adhere to the new Standard, any jurisdiction not signing the Multilateral Convention, the CAA and the new Standard will find increasingly difficult, if not even impossible to transfer monies, securities, assets and or to have its residents or companies to open deposit and or investment accounts in any country or jurisdiction adherent to the new Standard.

Multilateral Convention on Mutual Administrative Assistance on Automatic Exchange of Information in Tax Matters: The End of Tax Havens and Offshores Centres?



Model CAA: Multilateral Competent Authority Agreement

• Determines the tax authorities of the contracting states competent to collect the financial information in tax matters and to send the same to the tax authorities of the other states;

• Rules on the way to collect, exchange and use of such financial information, including on the maintenance of its confidentiality.

CRS: Compliance and Reporting Standards

• Rules on compliance and reporting of financial information imposed on banks, financial institutions, other financial intermediaries and insurance companies.

Standard for Automatic Exchange of Information in Tax Matters (the “Standard”)Operation instruments



Reportable Information:

• Dividends, profits and other companies’ earnings distributed or placed at the disposal of shareholders or partners or deemed as attributable to the same;

• Interest, results of any sort and or any financial outcome of whatsoever nature arising, paid, accrued and or distributed on bonds, debentures, notes and or any other financial products or instruments of any kind;

• Royalties, author’s rights and any other rights derived from industrial and or intellectual property.

Compliance and Reporting Standards (CRS)



Reportable Information:

• Capital gains and any other profits or earnings of whatsoever nature derived from financial investments or insurances of whatsoever nature;

• Balance of any current and or time bank deposit accounts, investment accounts and or any deposits of whatsoever nature or kind derived from the sale, otherwise disposal, exchange, liquidation, and or redemption and or amortization of any financial assets and or products of any kind either made in money and or in or converted into any other financial assets or products.




Reporting Entities:

• Banks, financial institutions and financial intermediaries;

• Brokers and dealers in securities, financial assets and certain life insurances;

• Depositaries of any securities, financial assets and or wealth or asset management companies;

• Insurance companies, especially those dedicated to certain life insurance areas and to wealth and asset management.




Reportable financial information owners:

• Individuals;

• Trusts, associations, foundations and companies dedicated to the mere ownership and management of financial assets and or companies which receive only “passive income”;

• “Passive income” is income derived from the mere holding of financial assets, authors’ rights, other intellectual or industrial property rights or technical assistance;

• Individuals whom are the “effective economic beneficial owners” of trusts, associations, foundations, other legal entities and or companies receiving only “passive income”.




Competent Authority and the Standard:

• Previously, the Competent Authority for the Exchange of Information was designated in the Convention;

• In the future, it is intended to designate the Competent Authority for the automatic exchange of information in the Multilateral Convention;

• On an annual basis, the Competent Authority of the country of the source of the reportable information exchanges the same with the Competent Authorities of the other countries concerned signatories to the Multilateral Convention.




Competent Authority and the Standard:

• The Standard provides a model form where specific codes are assigned to each given type of income, earning and or capital gain to which the reportable information refers to, thus, rendering the collection, processing and exchange of financial information in tax matters uniform and easy to understand by all Competent Authorities, across language barriers;

• Any Competent Authority of any given country may determine, in accordance with its own tax laws and regulations, a prior notification to the information owners just before the sending of said information to the Competent Authorities of the other states.



• BSI First Swiss Bank to Sign Non Prosecution Agreement IRS and 70 Swiss Banks negotiating NPA's

Carlyle Rogers, Anguilla

"The Offshore World as We Know It Is Ending. The Offshore World Was Never Intended to Be for Tax Cheats"

-Shanghai May 2015

Lessons and Take Aways: What Can IR Members Consider As Options: Solutions Discussion

STC/PCC (Protected Trust Cell)A company that has the ability to create one or more trust

cells with assets and liabilities that are legally segregated from the assets and liabilities of other trust

cells and the STC/PCC itself. (Luis Santine)

Main Uses:• Investment Funds• Captive Insurance Companies• Holding structure for assets such as real estate, aircraft,

vessels, other (i.e. rare coins)

A High Performance Portfolio Asset Class for Privacy and Wealth Preservation

Alternative Asset Classes: Collectible Rare Gold Coins

Table of Contents• Why Are U.S. Rare Coins an Attractive Investment Class?

Investment Performance Investment Safety (A Hedge on a Hedge) Potential Future Market Growth Privacy Transparent Certification System (Cash Guarantee) Liquidity Portability High Value/Size Ratio Durability

• Asset Class Comparison Table• Background

Why are These Coins Rare? Melt Value vs. Rarity Premium Commodity vs. Rarities

Why Are U.S. Rare Coins an Attractive Investment Class?

Investment Performance

• Demand and prices for rare U.S. coins are trending steadily upward 1996: First Rare U.S. coin crosses the million dollar barrier 1999: 2 more coins join the “Million Dollar Coin Club” 2005: 11 new coins join the club 2012: A total of 57 members 2013: First coin breaks the US$10,000,000 barrier

• Today there are hundreds of rare U.S. gold and silver coins in the Million Dollar Coin Club


Hypothetical U.S. rare coin portfolio purchased for US$1,000 in 1970. Growth prior to 2000 primarily shows collectors’ market impact, while growth after 2000 reflects the increase in “non-collector” investors’ market involvement.

Investment Safety (A Hedge on a Hedge)

• Investors traditionally buy gold and silver bullion as a hedge against inflation

• Bullion prices are volatile and subject to external factors other than market fundamentals

• In an uncertain global economy, wise investors want a premium asset class to store wealth and deliver value appreciation in good times and bad

• Rare U.S. coins provide this because: Melt value rises along with commodity gold prices,

providing a hedge against inflation When bullion prices fall, the coin’s rarity premium

provides considerable support and price stability, since there is an entire market of collectors that trade these coins without consideration given to bullion prices

Investment Safety (A Hedge on a Hedge)

Jan '03 Jan '04 Jan '05 Jan '06 Jan '07 Jan '08 Jan '09 Jan '10 Jan '11 Aug '11 Jan '12 Sep '13 Apr '140

500

1000

1500

2000

2500

3000

MS65 $20 SG MS64 $20 SG Spot Gold

Potential Future Market Growth

• Traditionally, collector market has been U.S. centric

• “Non collectors” in North America and Europe gave the market a large boost in the 2000s

• Recently, investors in China, India, Russia and other emerging markets have taken an interest because of the asset’s benefits in terms of wealth preservation, privacy and portability

• Industry watchers predict that increased interest in emerging markets might fuel a new boost within the next 5 years

Privacy

• Investments in rare gold coins are very private and offer the investor complete anonymity

• Unlike securities and real estate, there are no registration or government reporting requirements for the purchase of rare coins

• Rare coin portfolios can be held personally or through corporate or trust entities

Transparent Certification System

• Rare U.S. coins are certified by one of two major independent third-party certification services PCGS NGC

• These certification services provide cash-back guarantees If any certified coin is determined to be

counterfeit or altered, the customer receives full fair market value from the certification service

No other collectible offers this type of guarantee

• This level of transparency generates confidence in the market and increases liquidity PCGS and NGC certified coins can be sold online

to buyers willing to purchase “sight unseen” (with a few exceptions such as rarities)

Liquidity

• Rare U.S. gold coins are a very liquid asset class

• Since coins are certified by trusted third parties in advance, trading can take place anonymously online without having to inspect the coins

• Certified coins are traded every day on major online trading networks called the Certified Coin Exchange (“CCE”), and CoinPlex Each has over US$100 million in coins for sale

every day • Commodities and rarities have different

levels of liquidity

Portability

• U.S. rare coins enjoy true portability and ease of secure storage

• U.S. rare coins do not pay customs duties when moved across borders In the UK, coins that were at one point legal tender

are not considered luxury goods In the US, coins are considered US manufactured

products being repatriated Every other type of asset (diamonds, stamps) needs

to be valued and duties have to be paid when they are moved across borders, which leaves written records of the movement and reduces privacy.

• In most other jurisdictions, if duties are levied, they are calculated on the coin’s “face value”, which ranges from 5 cents to 20 dollars.

High Value/Size Ratio

• Rare U.S. coins allow investors to concentrate large amounts of wealth in an object the size of a mobile phone that can be easily, discretely and legally moved across borders at any time

• This is ideal for individuals looking to protect their wealth from unstable political regimes or the threat of armed conflicts in their region or country

• The investor can either hold the coins at home and take them with him in case of an emergency, or they can be stored in a safety box overseas either in a bank, or at specialized gold storage facilities such as Malca Amit

Durability

• Unlike other collectibles such as stamps, wine, paintings, ceramics, or paper currency, gold coins are extremely durable

• Last year, a couple in the U.S. found over $10M in gold coins buried in their back yard. The coins had been buried there

for over 100 years Many coins were in perfect

condition

Asset Class ComparisonAsset Class Portability Durability Value/Size Ratio Volatility Appreciation Privacy Certainty of

Authenticity

Rare US Coins Uniquely High Very High High Very Low High High Uniquely High

Gold Bullion High Very High Low Very High Low Low High

Diamonds High Very High High Medium Medium High High

Real Estate NoneMedium (requires maintenance)

LowHigh/Medium (Depending on Location)

Low/Medium (Depending on Location)

Very Low High

Classic Cars Medium

Low (Original parts become increasingly rare over time)

Medium Low High Medium Medium

Classic Watches High Medium Medium Low Low High Medium

Fine Wine Medium Medium Low Very High Medium High Low

Jewelry High High Medium Medium Medium High High

Chinese Ceramics Medium Low Medium Medium Low High Low

Fine Art Low Low Medium Very High Medium High Medium

Why Are These Coins Rare?

• In 1933, U.S. president Dwight D. Eisenhower signed Executive Order 6102 The order forbade “the Hoarding of gold coin, gold bullion,

and gold certificates within the continental United States“ All U.S. citizens were required to surrender their gold

holdings to the government• It is estimated that more than 50% of existing pre-

1933 U.S. gold coins were melted into bullion. Most surviving specimen were held by European collectors

• Only a small fraction of the remaining specimen are in “mint” condition

• Today, the trading of rare U.S. gold coins is a $20 billion dollar industry, with high liquidity and very transparent pricing

Melt Value vs. Rarity Premium

• The market price of a particular coin depends on two factors: The “melt value” of said coin, if it was melted

and made into bullion The “rarity premium”, which is the additional

amount investors are willing to pay above melt value because of the coin’s specific condition and limited supply

• Melt value mirrors the spot prices of bullion gold, while the rarity premium tends to either remain constant, or increase when drops in bullion prices present buying opportunities for collectors

Commodity vs. Rarities• An investment portfolio of U.S. rare coins will usually consist of two

components: “Commodity” Coins: These are pre 1933 U.S. coins that are available in the market

in larger quantities therefore their value reflects the price of bullion more closely Their rarity premium provides a hedge against drops in gold prices They are extremely liquid and can be sold anonymously online almost immediately. They can

also be sold through hundreds of dealers over the telephone and in person at galleries and at weekly conventions throughout the U.S.

They are often used as a safer alternative to bullion and are ideal to hold in the mid term (3-5 years)

“Rarities”: These are extremely rare coins that are often bought and sold for millions of dollars. Most of the value of these coins is in the rarity premium, so their prices do not move along with

bullion prices It is not unlikely for extreme rarities to double or triple in value every time they are traded These coins are less liquid since they are usually sold in highly publicized auctions These coins are ideal wealth preservation and appreciation tools for the long term (10+ years)

Structuring Considerations• Structuring Considerations

Why?: Preserve Confidentiality and Privacy Asset Value Preservation Generation Skipping Professional Management

When?: Prior to 31, December 2016

What?: Value Based Advisory

Structuring Considerations Who?:

HNWI's Family Offices and Group Wealth Managers Investment Groups

How?: KYC Post-Tax Funds Separate Jurisdictions for Trust, Trustee, Bank, Entity and separate

firewalled service providers for plausible deniability Beneficiary as classes of charities and others designed Beneficiaries can be changed or not designated

Structuring Considerations Distributions based on instruction Professional Trust management Use of attorney-client privilege if available Use of trusts, foundations, stichtings Can consider civil law trust structures, ie no legal person but a

relationship Donor's assets entry considerations Multiple layers of trusts/foundations Use of options agreements for safety valve Use of custodian/depositary to owner's share and preserve control

at top Asset classes not covered on CLAA eg collectible rare gold coins

Questions and Answers/Discussion

Ir 2015[3] - luis santine

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