EUROPEAN RESIDENCY AND CITIZENSHIP – Providing for your family and future generations BREXIT – The End of the Beginning UPDATES FROM OUR Global Office Network COPORATE SERVICES – PRIVATE CLIENT SERVICES – RETIREMENT PLANNING CONTENTS SOVEREIGN REPORT NO.52 3 | CEO’S REPORT – by Gerry Kelly, 4 | FROM THE CHAIRMAN – by Howard Bilton, Chief Executive Officer of the Sovereign Group Chairman of the Sovereign Group INSIDE SOVEREIGN 5 | Sovereign Corporate Services – 7 | Sovereign Private Client Services 9 | Sovereign Retirement Planning increasing in substance – safe, sustained growth in a – 2020 vision fast changing world OFFICE REPORTS 11 | China’s new foreign investment 14 | Hong Kong 2019 – a turbulent 18 | Singapore – steady as she law year goes! 11 | Cyprus – tax residency and 15 | Mauritius recognised as 19 | South Africa relaxes policy on trusts compliant with EU tax good loop structures for individuals governance principles 12 | Gibraltar – the gateway to the 20 | Overview of the Middle East UK 16 | Malta positions itself as the ‘Blockchain Island’ 21 | SMART funds – Smarter than 13 | Growth and Evolution for the average Experienced Sovereign in Guernsey 17 | Portugal – The World’s Investor Fund Leading Destination 22 | EUROPEAN RESIDENCY AND CITIZENSHIP – Providing for your family and future generations 25 | BREXIT – the end of the 26 | SAF REPORT – Making things 28 | CONTACT AND INFORMATION beginning better! ®Sovereign Media (IOM) Limited 2020 Editor Christopher Owen All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by means, electronic, mechanical, photocopying, Design Joanne Bae recording or otherwise, without the prior written permission of the Sovereign Group. The information provided in this report does not constitute advice and no responsibility will be accepted for any loss occasioned directly or indirectly as a result of persons acting, or refraining from acting, wholly or partially in reliance upon it. Printer Asia One Printing 2 CEO’S REPORT SOVEREIGN REPORT NO.52 CEO’s Report Gerry Kelly A positive approach has been seen in almost all the jurisdictions Chief Executive Officer where Sovereign is located, whether in Europe, Asia, the Middle The Sovereign Group East or Africa. All have followed the EU and OECD guidance on new substance requirements, but there is still scope for selecting one or more jurisdictions as a result of the changes enacted. n most jurisdictions in which we operate, the trust and Icorporate services industry is now used to being challenged on Typically, the new laws include requirements to manage the several fronts by international pressure. Initially, plans to enforce business and conduct ‘Core Income Generating Activities’ (CIGA) economic substance rules caused industry-wide alarm. It was locally, as well as guidance on the numbers and experience of even feared that the very future of several international financial local staff and overall expenditure in the jurisdiction. This has led centres was in doubt. to the threat of sanctions receding and in some cases previously blacklisted countries have been reinstated. This has not happened and, as we review how economic substance has been implemented across the world, the process Mauritius, for example, has taken active steps to radically has not proved as negative as first thought. Perhaps a more overhaul its previous company law regime in order to comply with reasonable outcome may result. I am certainly of this view and new economic substance requirements. New rules now govern am increasingly optimistic about the way forward. its international company sector – the Global Business Licence regime – where companies become licensees and are presented The dash by a number of low tax jurisdictions to introduce new with clear guidelines relating to substance. These include both legislation began in earnest following the publication of new the number of suitably qualified persons who may carry out the substance guidelines by both the EU and the Organisation for CIGA locally and whether such work can be outsourced to a local Economic Co-operation and Development (OECD). Both were management company. seeking to impose new global standards so that low-tax countries were prevented from attracting profits from elsewhere without Banking in the same jurisdiction as a company’s place of any corresponding economic activity – real local substance – incorporation is an increasingly important consideration in future being proven. planning. Over 20 banks operate in Mauritius and, in addition to traditional banking services, they offer a range of specialised The EU drew up a blacklist of jurisdictions that had not yet services ranging from custodial services to cross-border activities. introduced economic substance legislation, while the OECD’s BEPS project set out a range of business activities, including Sovereign is committed to ensuring that its corporate clients meet several typically offered by the low-tax jurisdictions such as substance rules. As a group, we now employ close to 500 staff in headquarters activities, financing, leasing, insurance, shipping over 20 offices worldwide. A growing proportion of these staff are and holding structures. fully qualified and boast legal, accounting and banking expertise. Most affected jurisdictions started implementing new rules The recent opening of an office in Riyadh is a demonstration of by 2018 and this effort is ongoing. As a result of innovative Sovereign’s commitment to the Middle East, our fastest growing legislation by many, the most negative effects have, in the main, regional market. Saudi Arabia is an exciting new market and been avoided. In fact, recently issued guidance has shown that Sovereign is now well placed to assist international companies with not as many companies will be adversely affected as was feared. all their market entry and growth requirements. Readily available solutions will allow international business Economic substance is of growing importance but the feared owners to ensure they remain compliant with the new rules, but consequences have not materialised. Sovereign can provide professional advice should be sought at an early stage. With our reliable, professional advice on these matters from the outset; global presence, Sovereign is able to provide solutions through readers should contact their local office for a ‘no obligation’ one or more of our offices, depending on specific circumstances. discussion without delay. This may involve re-domiciling part or all of an existing structure but the costs and management time involved should be considered money well spent to ensure compliance. 3 FROM THE CHAIRMAN SOVEREIGN REPORT NO.52 From the Chairman By Howard Bilton, Chairman of the Sovereign Group ecent times have not been easy for those of us who live and signed between Hong Kong and Mainland China for the reciprocal Rwork in Hong Kong. Last year we had the protests. Now we recognition and enforcement of judgments in civil and commercial have, like many other places, the coronavirus. We recognise the matters. The commencement date is not yet announced. motives of the demonstrators but we question some of their methods. For the moment they remain silent, possibly because Litigation in China is fraught with difficulties. The strength of of the virus. Hong Kong is that UK law applies for at least another 30 years so anyone investing into China via the tax-efficient Hong Kong Hong Kong remains well placed to deal with the new virus. route can now litigate in Hong Kong under UK law and then Remember, we were previously affected by swine flu and then execute that judgment in China with little further procedure. SARS. The authorities here took immediate action over COVID-19 This is a massive advantage. and seem to have it under control but the situation obviously changes on a daily basis. Our sympathies go to all affected. The other matter dominating the news around the world has been Brexit. By the time you read this, the UK will have formally Despite this, we remain confident in Hong Kong’s long-term left the EU with a withdrawal deal. The easy bit is over. Now for future and it appears that investors share this sentiment. There the trade negotiations. The removal of some of the uncertainty are a record number of listings scheduled for the Hong Kong has already had an impact. It seems that house prices in London Stock Exchange this year, no reduction in the number of new are again on the march and commentators are predicting the companies coming to Hong Kong (despite many of them seeking biggest annual rise for a considerable time. That may or may not reassurances) and our Hong Kong office had one of its busiest be a good thing, but it is certainly an indication of the renewed years ever. confidence of investors in London and the UK. In our view, civil unrest is almost always caused by economic It also now appears that the Trump administration and China may factors. In Hong Kong over one million people live below the official be starting to settle their differences over trade and row back on government poverty line. That is both a surprise and a disgrace for the damaging tariff war. As someone once said: “Now this is not one of the richest cities in the world. We continue to try and assist the end. It is not even the beginning of the end. But it is, perhaps, through the Sovereign Art Foundation which has now raised over the end of the beginning.” If this proves to be the case, it will be US$9 million that we have used to help disadvantaged children relief all around and more good news for Hong Kong. around the region and in Hong Kong in particular. Pressure on offshore financial centres (OFCs) to improve Thanks to all SAF supporters for assisting our efforts in helping transparency and stop abusive tax practices continues to mount to make Hong Kong a better and fairer place, not least through but there are still many legitimate ways to structure your affairs our ‘Make it Better’ programme which offers empowering offshore to reduce tax.