Middle East Wealth Management Forum 2020 - Exclusive Insights - Deepak Malhotra - 2
Deepak Malhotra of Mayfair Private
Jan 31, 2020
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1. For older structures, with the development of economic substance / CRS etc. is there sufficient focus on reviewing and remediating these structures? What are the opportunities here?
Video transcript
1. For older structures, with the development of economic substance / CRS etc. is there sufficient focus on reviewing and remediating these structures? What are the opportunities here?
I think economic substance, in particular, is a big opportunity for the UAE. Traditionally, many families around the world would have companies in jurisdictions, for example, like the BVI, or Cayman, or otherwise, where they may have trading activities, holding company activities, or others. But in today's age would not meet the test for having substance. Now, one of the carve-out for that is to be a tax resident in another jurisdiction. The UAE is a jurisdiction where these entities could be tax resident and then it's about having the economic substance. Given the environment here in terms of availability of staff, office, business infrastructure, what we are seeing, and an opportunity for this jurisdiction, is for families to create substance here, given from a practical perspective, it's very difficult to do that in a jurisdiction like the BVI. And given that this is a low or nil tax regime, this can work very well, but it's all down to substance. But this jurisdiction does lend itself well. If one then talks about CRS, I don't like to use the word "remediation". I'll use the word "review". What's happening now is families are now conscious, and their advisors are working with them, for them to understand what does CRS actually mean? Particularly in the context of a structure. So one takes a trust structure. What does it mean if you're the settlor? What does it mean for a beneficiary? What does it mean if you're a protector? Often, when we're setting up structures now, there's a great emphasis in, "Well, where is the protector resident?" So if I make my protectors resident in, for example, the UK. Does that mean the UK is going to have access information even though there's very little other nexus with the UK? I think there's great thoughts to set up new structures. I think there's certainly opportunities for reviewing existing structures and understanding the information flow. So when you have bank accounts - Where does the information go? Who is disclosing what to which jurisdiction? And making sure that there is not over-disclosure, making sure whichever institution the trust has an account with, for example, is following exactly what they need to do in terms of what they disclose. Who's the controlling person? What happens when the settler is not around? There is complex issues here. But, I think review is certainly happening, and I think there's an awareness of this. But remediation, I would say, no. It's more about reviewing these structures.
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