Are you affected by the 2017 Liechtenstein directive?

Are you affected by the 2017 Liechtenstein directive?
A recent directive affecting trustees and trust companies licensed to practice in Liechtenstein has introduced a number of tax compliance measures with respect to establishing new or managing existing legal entities, such as foundations, trusts and establishments. Where these entities involve settlors, beneficiaries or unitholders who are resident for tax purposes in the UK (‘relevant persons’) the trustees are required to adhere to the new regulations.

Who is affected?
The term ‘relevant person’ means a person who is resident in the UK for tax purposes. In the case of companies this includes any individuals who ultimately, either directly or indirectly:
  • hold or control 25% or more of the shares or voting rights in the entity;
  • have an interest of 25% or more in the profits of the entity;
  • or exert any other form of control over the management of the entity.
In the case of foundations and trusts, a relevant person includes individuals who are the actual, non-fiduciary founders or settlors, beneficiaries, and any other individuals who ultimately control the entity as a result of direct or indirect ownership rights or by some other means. 

The 2017 Leichtenstein directive
The directive entered into force on 6 April 2017 and is intended to assist the relevant person with the process of completing and filing tax returns in relation to assets under management in Liechtenstein.

The directive requires that all relevant persons appoint a UK tax adviser. Formal contact between the trustees and the tax adviser must then be established. The relevant person must authorise the trustees to disclose information to the UK tax adviser and any available information that the UK adviser may require must be supplied by the trustees if requested by the relevant person or UK adviser. If a Liechtenstein entity is itself a UK taxpayer, the trustees must appoint a UK adviser.

The need to appoint a UK tax adviser is particularly important where the relevant person is a discretionary beneficiary. Any distributions equal to or greater than CHF 30,000 in a UK tax year cannot be made to any relevant person who is a discretionary beneficiary without a UK tax adviser having been appointed. Any relevant person who is a discretionary beneficiary should provide self-certification of tax compliance to the trustees in respect of any distributions less than CHF 30,000 in a UK tax year. However, if no self-certification has been provided, distributions cannot be made.

Tax compliance and CRS
The directive requires that all relevant persons appoint a UK tax adviser and in some cases that a UK tax adviser is appointed before any distribution can be made. Given this, and related tax compliance developments such as the UK ‘Requirement to Correct’, and the advent of Common Reporting Standard it is vital both that all relevant persons have appointed a UK adviser, and that there is effective communication between trust companies and those affected. 

For further information on the new directive and how Moore Stephens can assist with the requirements, please contact your usual Moore Stephens adviser.

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