25
Mar
2020
Law No. 129, which deals with the establishment and regulation of a beneficial owner register, was approved in Panama on 17 March 2020 and became law on 20 March 2020.
In summary, the new Law requires a resident agent to file certain information in relation to the ultimate beneficial owner (the “UBO”) at the Superintendence of Non-Financial Institutions (the “Superintendence”) on all Panama legal entities (such as companies and foundations) for whom it acts as resident agent.
As is internationally understood, a UBO is regarded as the natural person or persons who directly or indirectly own or control a legal entity.
What shall be reported?
The following information is reportable in relation to the UBO:
a) Full name;
b) ID number, such as passport or any other personal identification number;
c) Date of birth;
d) Nationality;
e) Address; and
f) Date on which the natural person became a UBO of the legal entity.
When shall reporting be made?
For new legal entities the resident agent should register the UBO information within 30 days of incorporation. For existing legal entities, the resident agent shall have 6 months.
If the UBO of any legal entity shall change then the resident agent has 30 days to report such change.
Shall the information be publicly available?
No, the Law provides that the information filed by the resident agent will not be made public and can only be accessed by the resident agent of the legal entity and two designated persons of the Superintendence. Should anyone gain unauthorized access to the register then they can be fined $200,000.
What is the sanctions for non-compliance?
Should the required information not be provided to the Superintendence then, the Superintendence may order the Panamanian Public Registry (the “PR”) to suspend the legal entity. A legal entity will be dissolved at the PR after 2 years of failing to file the UBO information.
Should the resident agent be unable to update the UBO information due to refusal of the UBO to provide it then, the resident agent should resign as resident agent of the legal entity.
Panama extends the Tax Amnesty period
Panama recently approved an extension to the Tax Amnesty period. The original regulation adopted through Law 99 2019, provided an amnesty on interest and penalties in relation to outstanding annual taxes for companies and foundations and was due to expire on the 29 February 2020. This is now extended for four months until 30 June 2020. Under the terms of the extension, interest and penalties in relation to outstanding annual taxes are discounted by 85%.
This is very helpful if you wish to get your companies and foundations back in good standing at a much reduced cost.
Should you have any queries in relation to the new Beneficial Owner Register and the Tax Amnesty extension then please do not hesitate to contact Lidia Ramos or Alvaro Almengor.
22
Jan
2020
Bill No. 169 (the “Bill”), which deals with the establishment and regulation of a beneficial owner register, has been approved by the Panamanian National Assembly. The Bill will become law once executed by the Panamanian President and published in the Panamanian Official Gazette.
The Bill requires resident agents to file relevant information, such as details of the ultimate beneficial owner (the “UBO”), at the Superintendence of Non-Financial Institutions (the “Superintendence”) on all Panamanian legal entities.
UBO definition
For the purposes of the Bill, UBO is defined as: “A natural person, who directly or indirectly owns controls, and/or has a significant influence over the account relationship, contractual relationship and/or the business or the natural person benefitting from a transaction, or who ultimately controls the legal entity’s decisions”.
Ownership, control or influence
The Bill also provides the following points when considering ownership, control or influence over a legal entity:
1) Shareholding Participation: the natural person who ultimate owns or controls, whether directly or indirectly, 25% or more of the shares or voting rights in a legal entity, except if the shares are listed on a recognized stock exchange.
2) Control:
a) The partner or partners who control the partnership;
b) The trustee, the settlor, the beneficiary, the protector or other person who controls the trust;
c) In case of a legal entity which is in liquidation, bankrupted or under administrative receivership, the natural person who is appointed as liquidator or administrative receiver; and
d) In case of a shareholder in a corporate entity who would otherwise be the UBO but is deceased, the natural person acting as executor or personal representative of the deceased’s estate.
3) Management: the natural person who ultimately exercises control over the management of the legal entity.
Reportable information
The following information is reportable:
1) Legal entity information: a) Full name; b) Folio Number; c) Incorporation date; d) Address; and e) Activity.
2) UBO information: a) Full Name; b) ID Number, passport or any other personal identification number; c) Date of birth; d) Nationality; e) Address; and f) Date on which the natural person became a UBO of the legal entity.
Restricted access
The Bill provides that the information filed by the resident agent will not be made public and can only be accessed by the resident agent of the legal entity and two designated persons of the Superintendence. Should anyone gain unauthorized access to the register then they can be fined $500,000.
Sanctions
The Bill establishes that the Superintendence can order the Panamanian Public Registry (the “PR”) to place an annotation of suspension of the corporate rights against the records of the legal entity for not being registered or failing to update the Superintendence in respect of any changes to the UBO. Suspension of corporate rights means the legal entity will no longer be able to register any act, documents and/or agreement at the PR or apply for any certificates. The legal entity can be dissolved by the PR after 2 years of failing to file the UBO information.
Should the resident agent be unable to update the UBO information, for example due to the refusal of the UBO to provide the required information, then the resident agent should resign.
Effective date
The Bill will be effective from the day after its publication in the Panamanian Official Gazette. Once the law is effective the resident agent should register the UBO information within 30 days of incorporation. For existing legal entities the resident agent shall have 6 months from the effective date.
Should you have any questions, please do not hesitate to contact Lizst Real or Alvaro Almengor.
25
Oct
2019
Panama has recently approved a new law, Tax Amnesty in Panama Law 99 of 2019 (the “Law”), relating to outstanding fines and penalties payable by Panamanian companies and foundations.
Currently, companies and foundations that do not pay their annual tax of $300 and $400 respectively incur fines and penalties, which over time do add up.
The benefit of the new Law is that it will allow such entities to be reinstated and/or returned to good standing, at a much reduced cost, since it will not be necessary to pay outstanding penalties and fines. Please note that overdue annual taxes will still be payable.
The Law proposes that the amnesty will expire on 28 February 2020 and so there is only a short window to take advantage of this opportunity. It is notable the Law provides that there shall be no further amnesties until 2024.
For overdue annual tax payments made before 30 November 2019 then 100% of the fines and penalties shall be waived. This reduces to 95% for December 2019 payments, 90% for January 2020 payments and 85% for February 2020 payments.
If you have any queries, then please do not hesitate to contact Giselle Ocampo or Lidia Ramos.
22
Oct
2019
On October 9, 2019 the BVI International Tax Authority published the final version of their ‘Rules and Explanatory Notes’ (the “Rules”) on Economic Substance. The Rules replace the draft BVI Economic Substance Code (the “Code”). The Rules provide very important guidance and explanatory notes to assist with the interpretation of the Economic Substance (Companies and Limited Partnerships) Act 2018 (“ESA”) that was passed into law in December 2018. The Rules contain limited material changes from the draft Code, with the majority of the guidance provided within the draft Code remaining consistent in the Rules.
Now that the ‘Rules and Explanatory Notes’ are issued, we strongly recommend that all companies take immediate steps to ensure their entities are correctly classified.
As a reminder, the reporting periods as they relate to existing and newly registered BVI companies are now in effect.
It should be noted however that whilst the Rules are now finalised, they will not become effective until a further amendment to the BVI’s Beneficial Ownership Secure System Act comes into effect. This amendment, which is already anticipated by the Rules, is expected to be passed and become effective very shortly.
For assistance with classification please contact us at enquiries@hatstone.com.
24
Sep
2019
By way of background, a first draft Economic Substance Code was published by the BVI International Tax Authority (“ITA”) in April 2019. It is anticipated that the final code, now referred to as Rules (and Explanatory Notes), will be published on 30 September 2019 (the “Rules”). A further update will be circulated once the final Rules are available.
The Rules will provide important guidance on how the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the “Act”) is interpreted by the ITA.
It is important to note that:
- The BVI authorities have expressed their view that all BVI entities in-scope of the Act should be able to demonstrate their basis for classification under the Act, as well as to keep any relevant documentation in the event that authorities request such information in the future.
- The first “compliance period” has commenced already for all BVI companies and limited partnerships with legal personality as set out in the Act.
- Any company and/or individual failing to classify may be subject to significant fines and other penalties, such as the possibility of being struck off, or in extreme cases, the imprisonment of non-compliant individuals.
- In order to avoid fines and other penalties, you should classify your BVI entity under the Act as soon as possible.
We would be happy to assist you with a review of your BVI entity for the purposes of the required classification. Upon review, Hatstone will issue you with advice which can form part of the records of the BVI entity.
Hatstone Substance Services
Hatstone can assist you with the establishment of economic substance in the event that the assessment of your BVI entity triggers the need to create economic substance in the BVI.
Hatstone substance services include:
- Individual directorships provided by experienced BVI resident professionals.
- Outsourcing services to assist with core income generating activities that are being conducted in the BVI, including assistance on human resources, recruiting and seconding staff.
- Accounting, payroll, record keeping and mail correspondence services.
- Provision of office space, board rooms and office infrastructure.
- Assistance with obtaining local licences and permits.
For more information please contact – enquiries@hatstone.com
29
Aug
2019
Sanmari Crous has recently qualified as a CERTIFIED FINANCIAL PLANNER® Professional with the Financial Planning Institute of South Africa (FPI). This achievement comes after successfully completing a post-graduate diploma in Financial Planning at the University of Free State in 2018, which she passed with distinction, and sitting the professional competency exam in February this year.
The CFP® designation is the premier financial planning accreditation in the world and is recognised in 26 different countries. In 2019, it is estimated that South Africa had approximately 100,000 financial advisors, of which only 4,881 of them were CERTIFIED FINANCIAL PLANNER® professionals, accounting for less than 5% of the industry.
Although Sanmari does not intend to enter the traditional financial planning industry, she says becoming a CFP® Professional was worth it. Sanmari believes that applying the knowledge and skills she has gained on the broader aspects of financial planning, especially in the context of cross-border planning and structuring in the private client industry, enables her to provide a more holistic service to clients.
To view Sanmari’s Profile, click here.
18
Jul
2019
Following the introduction of the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the Act) in the British Virgin Islands (BVI) on 1st January 2019 all BVI companies and all limited partnerships with legal personality will need to assess their compliance with the Act and submit compliance reports within six months after the end of their financial reporting period. This means that all existing BVI companies and limited partnerships with legal personality will need to submit a report in 2020.
Depending on the assessment, some BVI entities must establish economic substance in the BVI in order to comply with the requirements of the Act.
This BVI legislation was enacted in response to requirements established by the EU Code of Conduct Group in June 2018. Similar legislation has been enacted in other offshore jurisdictions such as Bermuda, Cayman Islands, Jersey, Guernsey and the Isle of Man.
Rules on Economic Substance in the Virgin Islands” (the Rules) were published by the BVI International Tax Authority (ITA) on 9th October 2019. The Rules provide important guidance on how the Act is interpreted by the ITA. The Rules will take effect on the date when the Beneficial Ownership Secure System (Amendment)(No.3) Act, 2109 comes into effect.
Which entities are caught by the Act?
Under the Act, “legal entities” carrying on “relevant activities” are caught. Legal entities are, broadly speaking all BVI companies and Limited Partnerships (except for Limited Partnerships without legal personality), excluding legal entities which are tax resident in a jurisdiction outside the BVI except for certain non-cooperative jurisdictions listed by the European Union. If an entity conducts a relevant activity and claims to be tax resident in a jurisdiction outside of the BVI (which is not listed as a non-cooperative jurisdiction by the European Union) then it will need to supply evidence of such tax residence. An entity that is deemed to be tax transparent under applicable tax legislation abroad will need to demonstrate tax residence outside of the BVI with reference to each person participating in that entity.
Which activites are caught by the Act?
Only relevant activities (as defined in the Act) are caught, being:
– Banking business
– Insurance business
– Fund management business
– Finance and leasing business Headquarters business
– Shipping business
– Holding business
– Intellectual property business Distribution and service centre business
Legal entities conducting any of these relevant activities will have to comply with the economic substance requirements as set out in the Act.
The business of being an investment fund is not a relevant activity. It is outside the scope of the economic substance requirements under the Act in the same way as all other forms of business activity which are not specifically mentioned. However, self-managed investment funds may well fall under the category of holding business.
What does Banking Business mean?
The Act follows the definition of “banking business” in section 2(1) of the Banks and Trust Companies Act, 1990 (as amended), following which banking business is the business of accepting deposits of money which may be withdrawn or repaid on demand or after a fixed period or after notice, by cheque or otherwise and the employment of such deposits, either in whole or in part,
a) in making or giving loans, advances, overdrafts, guarantees or similar facilities; or b) the making of investments,
for the account and at the risk of the person accepting such deposits.
What does Insurance Business mean?
The Act follows the definition of “insurance business” in section 3(1) of the Insurance Act, 2008 (as amended), following which insurance business is the business of undertaking liability under a contract of insurance to indemnify or compensate a person in respect of loss or damage, including the liability to pay damages or compensation contingent upon the happening of a specified event, and includes life insurance business and reinsurance business.
What does Fund Management Business mean?
Fund Management Business means the conduct of an activity that requires the legal entity to hold an investment business licence pursuant to section 4 and category 3 of Schedule 3 of the Securities and Investment Business Act, 2010 (as amended) (SIBA). Fund Management which is not regulated under SIBA and non-discretionary investment management will not be relevant activities pursuant to the Act.
What does Finance and Leasing Business mean?
Finance and leasing business means the business of providing credit facilities of any kind for consideration. The consideration may include consideration by way of interest. The provision of credit facilities as an incidental part of a different sort of business will not be caught. Only where the provision of credit facilities can be seen to be a business activity in its own right will the legal entity be treated as conducting finance and leasing business.
Legal entities which hold debt or debt instruments for the purpose of investment will not be regarded as being in the business of providing credit facilities.
What does Headquarters Business mean?
Headquarters business means the business of providing any of the following services to an entity in the same group:
a) the provision of senior management;
b) the assumption or control of material risk for activities carried out by any of those entities in the same group; or
c) the provision of substantive advice in connection with the assumption or control of risk referred to in paragraph b)
but does not include banking business, financing and leasing business, fund management business, intellectual property business, holding company business or insurance business.
What does Distribution and Service Centre Business mean?
Distribution and service centre business means the business of either or both of the following:
a) purchasing from foreign affiliates
(1) component parts or materials for goods; or
(2) goods ready for sale; and
(3) reselling such component parts, materials or goods;
b) providing services to foreign affiliates in connection with the business,
but does not include any activity included in any other relevant activity except holding business.
What does Shipping Business mean?
Shipping business means any of the following activities involving the operation of a ship anywhere in the world other than solely within British Virgin Islands waters (as defined in section 2(2)(a) of the Merchant Shipping Act, 2001)
a) the business of transporting, by sea, persons, animals, goods or mail;
b) the renting or chartering of ships for the purpose described in paragraph a);
c) the sale of travel tickets or equivalent, and ancillary services connected with the operation of a ship;
d) the use, maintenance or rental of containers, including trailers and other vehicles or equipment for the transport of containers, used for the transport of anything by sea;
e) the management of the crew of a ship.
What does Holding Business mean?
Holding business means the business of being a legal entity that only holds equity participations in other entities and only earns dividends and capital gains. If a legal entity holds any assets other than equity participations, e.g. an interest-bearing bond, then it will not be carrying on holding business as defined in the Act.
What does Intellectual Property Business mean?
Intellectual property business means the business of holding intellectual property assets and intellectual property asset means any intellectual property right in intangible assets, including but not limited to copyright, patents, trademarks, brand, and technical know-how, from which identifiable income accrues to the business (such income being separately identifiable from any income generated from any tangible asset in which the right subsists).
Income in respect of an intellectual property asset includes:
a) royalties;
b) capital gains and other income from the sale of an intellectual property asset; c) income from a franchise agreement; and
d) income from licensing the intangible asset.
The relevant activity consists merely of holding an intellectual property asset from which identifiable income accrues (if no identifiable income accrues there is no intellectual property asset at all). The definition does not therefore apply to a business which owns intellectual property merely as an adjunct to its business. Most businesses will own some form of intellectual property – trademark protection, copyright in their advertising material, technical know-how relating to their processes, but this property, like premises or plant and machinery, does not earn specific amounts of revenue – it simply contributes to (or protects) the general profitability of the business.
How does a Legal Entity comply with the Economic Substance Requirements under the Act?
The spectrum of economic substance requirements applicable to a legal entity depends on the type of relevant business the legal entity is conducting.
The requirements for legal entities conducting holding business are less onerous than for other relevant activities. A holding company will need to comply with existing statutory obligations and to have adequate employees and premises for holding equitable interests and where it manages those equitable interests it will need to have adequate employees and premises for carrying out that management. For a legal entity carrying on a passive holding business only, the substance requirements will be lighter than for a legal entity that actively manages its equity participations. It is anticipated that a legal entity conducting passive holding business will most likely meet the substance requirement by having a BVI registered agent and registered office.
Legal entities carrying on relevant activities other than holding business must manage and direct the relevant activity and conduct core income-generating activity in the BVI. They must also have an adequate level of employees and expenditure in the BVI and appropriate office space for the core income generating activity in the BVI. Outsourcing is permitted in certain circumstances. It is expected that further guidance on the requirements will be published shortly.
Entities carrying on intellectual property business will be subject to more onerous requirements than entities carrying on other relevant activities.
How does a Legal Entity comply with the Reporting Requirements under the Act?
In order to allow the ITA to monitor compliance with the Act, all entities (including all BVI companies and limited partnerships with legal personality) have to make a report under the Act on their compliance with the Act during the previous reporting period, regardless of whether or not a relevant activity pursuant to the Act was conducted. We await further clarification on the reportable information. We anticipate that some form of factual information on the business activities and an assessment of a legal advisor of the same under the Act will need to be submitted or be readily available at the request of the ITA.
The reporting will be done via the already existing Beneficial Ownership Secure Search System (BOSS). The BOSS system was introduced to hold information on beneficial ownership of BVI entities.
What is the Timeline?
Compliance with economic substance requirements pursuant to the Act is generally assessed over a period of one year.
For legal entities formed in 2019 or later the reporting period started or will start on the day of formation and will end one year after its formation.
For legal entities formed before 1 January 2019 the reporting period started on 1 July 2019 and will end 30 June 2020.
Compliance reports must be submitted within six months after the end of each reporting period. This means that for entities formed before 2019 compliance reports will need to be submitted no later than by the end of December 2020. Entities formed in 2019 or later will have to submit first reports no later than 18 months after the date of formation, i.e. first deadlines will be end of June 2020.
Importantly, non-compliance may lead to substantial penalties, imprisonment and/or strike off.
How can Hatstone help you?
All BVI entities will have to properly assess their business activities in light of the Act and report their findings. Hatstone is ready to assist you.
A number of entities will need to consider immediate modifications to their operational business model. We have bespoke solutions which we are happy to discuss with you.
For more information, please contact enquiries@hatstone.com
21
May
2019
Hatstone Lawyers Incorporated recently advised an industry leading IT company in the successful conclusion of an agreement for the supply of virtual healthcare services in collaboration with one of the largest pharmaceutical retailers in South Africa.
The service which is set to roll out nationally towards mid 2019 will allow patients to interface with a healthcare professional remotely via live video and specialised digital medical equipment from the premises of the pharmaceutical retailer’s clinic.
It allows for patient treatment without the need for in-person consultation with a healthcare professional and is aimed at medical conditions requiring simple treatment methods.
Menko Hoeksema, Director of Hatstone Lawyers Incorporated, highlighted that the new service will be “a pioneering integration of medical services and technology”.
We are proud to have played a role in setting up a platform which will make simple healthcare more accessible and more affordable.
If you have any questions, please contact Menko Hoeksema.
01
May
2019
According to last year’s reports published by CoinShare, the British Virgin Islands (BVI) is the 2nd largest cryptocurrency market in the World (after the USA) and is responsible for 2 of the largest 3 Initial Coin Offerings. Perhaps this follows given that the BVI is also a very well-known and regarded domicile for investment funds.
Hatstone have developed a Crypto Asset Fund product to assist start up managers to launch a small to medium sized lightly regulated and cost-efficient investment fund in the BVI. The Crypto Asset Fund will be set up and regulated as an Approved Fund pursuant to the Investment Business (Incubator and Approved Fund) Regulations 2015.
Key features of the Crypto Asset Fund will be:
- Limited to 20 investors;
- Assets do not exceed US$100m.
- Hatstone acts as the Administrator providing the Crypto Asset Fund with registrar and transfer agent and NAV calculation services; and
- No requirement to appoint either an Auditor or a third-party Investment Manager. The Crypto Asset Fund will be managed by its Directors. Alternatively, the Directors may set up a BVI Approved Manager which would serve as a third party manager. The Approved Manager is also a lightly regulated, cost-efficient and an ideal counterpart to the Approved Fund.
Banking, brokerage and custody are major considerations for any fund. Hatstone has developed relationships with third parties that understands and specialise in Crypto Assets (cryptocurrencies, tokens and other kinds of blockchain assets) as well as access to a platform with 11 Crypto exchanges and over 73 coins which will help to ensure a smooth and easy establishment process and ongoing operations. The client simply needs to nominate two persons with relevant expertise in the area of Investment Business and Crypto Assets to act as the Directors of the Crypto Asset Fund.
If you have any questions, please contact Daniel Cann and Philipp Neumann.
16
Apr
2019
Following the introduction of the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the Act) in the British Virgin Islands (BVI) on 1st January 2019, BVI entities conducting certain business activities must meet economic substance requirements in the BVI.
This BVI legislation was enacted in response to requirements established by the EU Code of Conduct Group in June 2018. Similar legislation has been enacted in other offshore jurisdictions such as Bermuda, Cayman Islands, Jersey, Guernsey and the Isle of Man.
Which entities are caught by the Act?
Under the Act, “legal entities” carrying on “relevant activities” are caught. Legal entities are, broadly speaking all BVI companies and limited partnerships (except for limited partnerships without legal personality), excluding those which are tax resident in a jurisdiction outside the BVI that is not listed by the European Union as a non-cooperative jurisdiction.
Which activities are caught?
Only relevant activities (as defined in the Act) are caught, being:
- banking business
- insurance business
- fund management business
- finance and leasing business
- headquarters business
- shipping business
- holding business
- intellectual property business
- distribution and service centre business.
Legal entities conducting any of these relevant activities will have to comply with the economic substance requirements as set out in the Act.
What does Holding Business mean?
Holding business means the business of being a legal entity that only holds equity participations in other entities and only earns dividends and capital gains.
What does Fund Management Business mean?
Fund Management Business means the conduct of an activity that requires the legal entity to hold an investment business licence pursuant to section 4 and category 3 of Schedule 4 of the Securities and Investment Business Act, 2010.
How does a Legal Entity comply with the Economic Substance Requirements under the Act?
The spectrum of economic substance requirements depends on the type of the relevant business the legal entity is conducting.
The requirements for legal entities conducting holding business are less onerous than for other relevant activities. A holding company will need to comply with existing statutory obligations, to have adequate employees and premises for holding equitable interests and where it manages those equitable interests it will need to have adequate employees and premises for carrying out that management. Further guidance from the BVI legislator on what constitutes “adequate employees and premises” in this context is expected to be published towards the end of April 2019.
Legal entities carrying on relevant activities other than holding business must manage and direct the relevant activity and conduct core income-generating activity in the BVI. They must also have an adequate level of employees and expenditure in the BVI and appropriate office space for the core income generating activity in the BVI. Outsourcing is permitted in certain circumstances. Again, it is expected that further guidance on the requirements will be published by the BVI legislator shortly.
Entities carrying on intellectual property business will be subject to more onerous requirements than entities carrying on other relevant activities.
What is the Timeline?
Legal Entities formed in 2019 will have to comply for a reporting period ending on or after 31 December 2019, depending on the date of formation. Legal entities formed before 2019 will need to show compliance with economic substance requirements no later than 30 June 2019.
Importantly, non-compliance may lead to substantial penalties, imprisonment and/or strike off.
How can Hatstone help you?
The much-awaited legislative guidance will provide further detail and clarity as to the precise scope of the Act. We will be circulating follow-on client updates once such guidance is available and will be happy to advise you on whether or not your BVI entity is caught by the Act and, if it is, how to ensure compliance with the Act.
Lastly, we share the prevalent view in the BVI finance industry that not all clients will be impacted by this.
If you have any questions, please contact Calum Mckenzie and Philipp Neumann.
