CRS, FATCA and the new challenges for your financial privacy
Long gone are the days when bank secrecy was seen as basic human right and economic value. With the turn of the century, new challenges emerged and the world governments are now fighting vigorously terrorism, tax evasion and money laundering. This fight, although fully justified, comes at a price. Not only the privacy of the criminals is at stake, but unfortunately, the average law abiding citizen is now suffering from all international reporting agreements and the never ending “leaks” of stolen financial and bank information.
So are there any options left for those who still believe in the right of financial privacy? The proven old maxima, the constitutional principle of English law, that “Everything which is not forbidden is allowed” seems outdated already. Now, one should be thinking more like “Only what is explicitly allowed is not forbidden”. Offshore companies, although perfectly legal in most jurisdictions, are now seen as taboo. Many governments threatened that all their citizens, which names appeared in the many offshore leaks scandals are under suspicion and will be thoroughly checked and questioned. Swiss bank accounts are being seen now as an incriminating prove of guilt – only the fact that a person or a company has a financial relation in the Alps is considered dodgy, least to say. World governments are paying dishonest financial employees for stolen customer’s information, a controversial practice that is now a common standard among most of the Western countries.
So is there a legal solution? What can a law abiding taxpayer do to protect its privacy and its investments? One thing is clear – whatever he or she does, it must be 101% legal. Even the slightest doubt of the legality of the arrangement will surely backfire with the next offshore leak or the next international agreement for information exchange.
The most obvious solution would be using a nominee. However, under the latest legislative acts, CRS, FATCA and others, nominees have to declare explicitly the true beneficiary. In many cases, this is fine and the privacy of the investor will be still preserved, to a certain degree. In other cases however, it is unacceptable. Disclosure agreements and information exchange policies, combined with unfavorable national legislation may result in very serious consequences. Our specialists can assist you, taking into consideration your personal tax position and advice you on to whether nominee structure is appropriate in your particular case.
Another option is setting a private foundation under Bulgarian law, which has many advantages. You will not only achieve full legal compliance, but you will also stay away from any controversial nominee arrangements. We can not outline all benefits here, but assets protection comes first in mind. The assets of the foundation do not belong to any shareholder or owner (as with Limited Liability Company – LLC), so they are virtually not subject to any “confiscation” measures. The Bulgarian law on foundations is very flexible and when setting up the articles, there are endless possibilities to safeguard and protect additionally the foundation’s assets. Last, but not least, the records of the Bulgarian foundations are not publically accessible online, which is another layer of privacy protection. Bulgarian foundations are governed by a separate law, clearly distinguishing them from commercial entities. It is of utmost importance to set up the foundation correctly with clear vision in mind for asset protection, privacy and tax consequences.