According to a notice published on the OECD's web site, in 2014 Cyprus and 43 other jurisdictions (including Malta, the Netherlands, Great Britain, the Isle of Man and the islands of Guernsey and Jersey) confirmed that the first automatic transfer of tax information, in accordance with the standards proposed by the OECD, would take place in September 2017. It is expected that this group is likely to increase in number as the above countries are joined by other countries willing to support the automatic exchange of tax information.
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Cyprus: automatic exchange of tax data, new property tax rates
Currently, structures with Russian operation companies and Russian beneficiaries/ owners often include intermediate holding companies which are registered in jurisdictions with low taxes or in offshore zones. There may be a number of reasons for structuring holdings in this way, but, in view of the steps being taken by the Russian government to “de-offshorize” the Russian economy, the use of such structures may cease to be expedient from a tax perspective.
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Using CUITs to create a holding structure
Structures involving CUITs have a number of advantages over those using limited liability companies: CUITs are not legal entities, and are therefore not taxpayers, although they do keep accounting records of revenues received in the form of dividends arising from the company's operations, and capital gains from its sale.
Who are the target clients? - Owners of businesses
What is the project? - Creation of a holding structure using a CUIT.
How does the project work?
1. Shares (participatory interests) of the organizations that form part of the holding's management structure are put into a long-term direct investment CUIT.
2. Management and administration are carried out by the CUIT.
3. The resulting income may be reinvested into the business without any interim tax liability or it can be paid out, in full or in part, as dividends to the holders of investment units in the trust.
Advantages:
1. Optimization of the owner structure, in the interests of the ultimate beneficiary
The use of CUITs makes it possible to avoid fully disclosing the beneficiary ownership structure. The structure is administered by a Managing company, which also does all the reporting to regulatory bodies.
2. Asset Protection
A unit investment trust is not a legal entity. The management of UITs, as multiple-asset objects, is carried out and supervised by organizations which are licensed to do so by the Bank of Russia. Information about the owners of units in a UIT is not disclosed to anyone. Furthermore, assets held by a unit investment trust cannot be seized to satisfy debts of the management company or unit owners. All these characteristics provide a high level of protection against hostile takeover of the assets.
3. Tax optimization
Income from UITs is not subject to profit tax (income tax). It may therefore be reinvested into the business without the need to pay any tax at the interim stage (tax-free reinvestment).
4. Increased Liquidity
A unit in a unit investment trust is an uncertificated security which serves as evidence of ownership of the property that is included in the UIT. Rights to such units are recorded in a register maintained by a special organization licensed to do so by the Bank of Russia. The unit has all the characteristics of a security, including the ability to use it in transactions. This makes it significantly easier to assign a business, or withdraw from it, simply by transferring the rights to the units in the unit investment trust.