The new tool will allow Russian tax authorities to find out the owners of companies with accounts in Europe

The European Parliament passed amendments to the anti-money laundering legislation last week. The fourth directive obliges each EU country to create a register of final beneficiaries of all companies registered in its territory, including in its offshore jurisdictions. It will contain the names, nationality, and place of permanent residence of the real owners of not only companies but also trusts.

The Netherlands, Luxembourg, Malta, and Cyprus (these countries are often used for the transit of capital flows between Russia and offshore companies) will make appropriate amendments to national laws in two years, in fact, the innovation will take effect from 2017, the website of the European Parliament says.

Quarter disclosure

Last week, the UK passed a law on the disclosure of information on beneficiaries from 2016. The register will include persons owning more than 25% of the company. If the company has four beneficiaries, it is not necessary to enter information about them.

First, unrestricted access to information from their registries will be obtained by law enforcement and government agencies of EU countries, as well as banks and law firms. 

Russian officials will have such an opportunity later, KPMG partner Anna Voronkova says: Russia joined the OECD initiative on the automatic exchange of tax information since 2018 it will technically be able to use the mechanism. Other individuals or organizations will be able to request information if they provide evidence that the beneficiary laundered money, financed terrorism, committed tax or corruption crimes or that he is simply a fraudster. Restrictions may be imposed in exceptional cases to protect the personal data of the owners.

This will be the first centralized beneficiary system in the world, notes Alexander Zakharov from the Paragon Advice Group: “So far there have been no requirements to transfer relevant information about the beneficiaries to government agencies, although banks have such information.” Creating a registry will be a serious risk for those who use transnational tax minimization schemes, says Deputy Head of the Federal Tax Service Daniil Egorov, but these risks materialize in 4–5 years. The new system will allow receiving information about the beneficiaries of trusts, he hopes: trust is not a legal entity, but an agreement, from the promised register it will be possible to learn both about the very existence of the agreement and about its beneficiaries. With such information, it will be possible to verify whether the reduced rates from the agreements on avoidance of double taxation are reasonably applied, Egorov notes.

The Directive concerns only a part of offshore companies – owned by EU members. If the Cyprus company is “a Seychelles Foundation without beneficiaries, who then should be disclosed? After all, the structure in Seychelles will not be affected by this directive, ”asked John Tiner & Partners partner Vladimir Gidirim. The beneficiaries of other offshore companies will also be in the registry, but as beneficiaries of transit companies in the EU, the tax partner of Timmermans & Simons International Business Lawyers is Rustam Vakhitov. Invisible to the new system, you can remain in only one way – not to have companies or bank accounts in Europe, he explains, and this is difficult – 

“Europe goes for legal protection, stability, tax treaties”. The holding company is offshore on about. Cook, who owns Russian assets without interlayers in Europe, – This is a maximum of taxes and serious risks, says Vakhitov. “Disclosure will be everywhere, this is without options,” he sums up.

Singapore may become a replacement for European offshore companies (there is an agreement on avoidance of double taxation with it), says Dmitry Klenov, a partner at UFG Wealth Management. You can find an opaque jurisdiction, but this is a temporary solution, PwC partner Ekaterina Lazorina warns: business with them is too expensive, and information around the world is becoming more and more open. This is a global trend and a new reality, says Voronkova.

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