Livestream – Qualified Trusts – Hong Kong VS Singapore VS New Zealand- 10th May 2021
So, I'm going to mute everyone and all right. I think everyone is inside and with that good morning, everyone. Great to see you. Welcome, I guess is the first time we're doing a regional tax webinar for Moores Rowland Asia Pacific? So, anyone who was watching in https://mooresrowland-asiapac.com/, the title today is Qualified Trust Hong Kong Versus Singapore Versus New Zealand. And to deliver that talk, we have three very distinguished gentlemen.
We have Joe Teng and Sebastian Hay Oz who is based in Singapore as well and David Willis, who's coming to us from New Zealand. So just a bit of background on Amicorp from their website. So global team of over 700 specialists, I'm a Amicorp group is a growing independent global provider of coop second fiduciary services, providing entity administration services, including companies trusts and fund administration services, assurance services, and outsourcing services. Now, without further ado, I hand it over to you guys, Joe, you're in charge.
Yes. Good morning everybody. Well, thanks for the extensive introduction, Derren. That means I can actually leave it immediately to my colleagues, David Willis who's based in Auckland, New Zealand and Sebastian who's based in Singapore. I'm also based in Singapore. Just practical matter if you have any, any questions. Well, while we are talking, just raise your hand or unmute yourself and ask the question. We encourage people asking questions. While we go into the presentations. So, David, can I ask you to share your screen to start off for today?
Yeah, sorry. I was trying to unmeet screens pretty little. So, I'm trying to press all the buttons and not to lose myself. Hi everyone. I'm in Auckland, New Zealand here. What we thought we'd do is go through, first of all, I'll tackle some of the New Zealand things, just a very basic thing on a trust and go through some structures and some things that you'll fail and you go under the law and some of the tax aspects, and then Sebastian will follow with some of the, of aspects of the thing before. And then we can have a curious cover Q and A. Now I need to share my screen. I've got a few rather than stare at my face. I've got a few slides, which might be a bit more, I don't know if they're interesting enough to be honest, but just to be able to see some words on the screen, I'll just try and share the access to share my screen. Derren, do I, can I, should I? Let me see on the video. Yeah. It's not letting me share anything. Let we look down the bottom share screen that point, right? Hopefully. Perfect. Okay. So, I'll just make that a bit nicer to view hopefully without losing everybody. Okay. All right. So basically, what we've got here is it's just a little introduction for those who aren't familiar with trusts. This is fact. So, the basic sort of concepts in terms of what a trust is and splitting the legal and beneficial ownership of assets, but it's basically, it’s some people forget when we're talking about tax. People get pretty excited and start calling these things entities, which it gets with textbooks as they are. But for the pure sense of the third, they're not into the whole, that just basically obligations. So, you know, your, your threat, lower person creating the trust with the assets, give them to somebody else. Well, the trust fee has a whole lot of obligations towards beneficiaries of which they can be one-off generally than writing. And it can also be for charitable purposes as well. You can mix and match purposes and beneficiaries, corporate individuals to try to put this all in one. Generally, we say there and writing in the old days, you could have, you can create trusts, but typically nowadays you see them that generally there's a bead, usually a deed of trust, or it can be a declaration that's very basic, but it is just remembering it as an obligation. So, it's not a legal entity, as we kind of mentioned that it's nice to, it's basically sorts of principles and common law and statutes where you happen to be selling your profit up. You're splitting legal and beneficial ownership, obviously from the assets, usually it's the settler. We'll give them by way of gift, but there's other strategies that are employed depending on the nature of the tax requirements of how they want to put assets in, could be style. Buybacks can be loans things like they just going to be a little bit careful with those. And then we sort of have the trustee sites may, or the start a company becomes a legal owner and all our name, the company trustee name is where you'll see your name on all the asset holding property. It'll be Amicorp Trust to get the trust, if it's investments or bank accounts, same thing in the US. The trust, obviously know the trustee, but that trust bank accounts will be the name of the different, different other parts of the world.
Other parties that you might come across. If you're dealing with trusts, if you're dealing with a lot of little groundswell concepts, they should be using tangible, depending on where you're from, protect us beneficiaries, investment advisors, all these people can be corporates who individuals protect us. You can have committees in these things as well. So, and we try and be careful not to give too much control to the set law or the grant, or because there's a whole lot of case law that's been around for quite a long time now, where if you have too much control, you can really jeopardize the trust full-stop, which makes it bit of a waste of time.
Trust needs themselves very flexible, most laws now, and they have a lot of different aspects built into them, whether or not it's discretionary, it's irrevocable it's revokable. And those can be adjusted depending on the local law. Almost, you're going to focus a little bit on New Zealand very shortly, but most countries will have their specific things they have in the law deal with certain aspects of how they've created up, whether or not through an offshore onshore trust structure. And generally, the feature, another feature is that you'll see with these, as opposed to facing like a foundation or a company, is the puddle limited life. In some cases, most of them have a lifespan or a trust period or acuity period.
Not all, there's some jurisdictions around the world have no trust period. New Zealand for example, is 125 years, but that's just to give you an idea. And the idea of around that was in the tax rolls is the tax man wants to get taxed at some point. So, the idea is that it distributes out of structure at some point in the future. As I said, some other jurisdictions have no life that can go on forever or dynastic. It can go on for a very long period of time. So, there's some, just some of the, some of the features that you have, some of the locations that we do again, I really want to focus on New Zealand, but just to give you a flavor of queries that you might have, if you're dealing with things and you come across something, and you think, I wonder who I can ask the question all about this particular area then, you know, we operate in these areas dynamical, and we can certainly help. I can deal with a lot of queries myself. If it becomes very specific to a local law, we can delve into the local officers there to get the answers that you might require for clients. Or you're just thinking about structuring something, or however it works, whatever works for you. The little funny ass structures there, just because of the nature of some of our businesses are Switzerland. If it doesn't have its own trustable yet. So, it's sort of piggybacks on say the UK, Bahamas a lot and they can actually use any law. It requires, we've often worked with US for scarce and the New Zealand for New Zealand trust. So, it, it just depends on how that works. And our Bahamas office is not a licensed trust office. It's that those sorts of activities at Bahamas had done safe through Cayman or through our, through Switzerland. We have to do off trust queries, Wars, help, right. And Zealand interesting stuff. So, what's good about New Zealand, what's it all about? So, it's quite a favorable jurisdiction, worldwide reputationally. We've never really been blacklisted by anywhere anybody we have what traditionally a high tax jurisdiction with exception of foreign trust, which I mentioned at the moment, lots of access to double tax agreements, PTI. We have a whole lot of different we'd have signed most of the international agreements, multilateral cooperation agreements. We are a sort of a big player in that area. Our laws are pretty modern, robust. We've got our trust. Law was just modernized, just came into Lords a couple of months ago, before that it's been around for a long time. The original, the act was 1956 was modernized. It's taken them 20 odd years. So maybe not quite 20 years, but it feels like that long to get it updated to where they are now, which has a bit more sort of user-friendly for, for beneficiaries and for lay people do understand what trusts are about law is pretty much in line with the rest of the world.
A lot of our laws are kind of, I guess, the roots thought from UK, but not always, but our trust law certainly was. And it's very much in line with international standards and any legal cases that happen around the world they take notice of is pretty stable. Zoe has been a lot in the last sort of 12 months because COVID response, which shut them off. What's good or bad, but at the moment, our borders are still currently closed. We do have a nice little bubble with Australia, so you can come and go, but otherwise we'll be coming back into our country. Right now. You're going to be quantitative for a couple of weeks, which is probably similar to most places. Hopefully we'll open that up a little bit this year, but makes traveling almost next to impossible, unless you want to spend two, which coming back in on a hotel like you have to pay for.
So, trust the private trust private trust companies are often the vehicle that we see the most of in, in our office down here generally. And it's I net worth people; family officers are generally interested them. Just go through a little bit more of the detail, why that is you Zealand runs a, a set load-based regime taxation. So, it's consequently, that's a little bit like Hong Kong and Singapore, and the expect of its more almost as a territorial type of field. So, if you're not a New Zealand settler and you have any needs, you don't beneficiaries, you don't have an easy loan asset. You don't have an exposure to New Zealand income taxes on the trust. So even though we are an OECD country, we have this regime in place and it was pretty much set up. So, people like me setting up my own trust, offshore and hiding it from the actual people in New Zealand. So, they did it the other way around. And that's created a, a market here for some time now, which is good because with the world, changing some countries becoming less stable than others. They've always wanted a good place to put their assets for the trustees and be profitable, profitable without your word. And also, to make sure that they know everything else.
So, time zone wise, isn't that bad for us, European time zones, a little bit tricky, but generally speaking, I deal with most people that might not sometimes really early morning, depending on how they're placed. So, we do have a system how you maintain this tax system. How does it work well until recently? Well, so very recently there'll be changes a few years ago, the way we have to register trusts. So New Zealand operates that system as a, as a reaction to the Panama papers is all the negative things that have happened over the years. Then it's not a public register. So, you do have to register them to maintain your tax exemption, but it's not something that you can Google or dial into and have a look at it. If you just can't do it, the regulator or the tax authorities are the ones who are maintaining this information. So just to up, just to make sure it's popular, it's not, it's not public at all. We don't have that in a lot of other taxes in New Zealand. So, if you're thinking about inheritance taxes, gift taxes, stamp duties, all those other things we don't, we don't have them in New Zealand. Its pretty straightforward to income tax or other tax that we are subject to is GST or VAT, which is a fairly efficient tax from a New Zealand perspective. So, when you're looking at distributions to beneficiaries who aren't residents of New Zealand, then they're not going to be subject to tax in New Zealand on that income, assuming that they haven't invested or put a big investment in a land or buildings or something that's going to generate income for them and investment portfolio.
Some people do actually want to do that. You have some clients who decided that they want to have a tax base. So, they, they want to have an investment tracker fund or something. And he's only wanted to pay that back for what helps them in the local jurisdiction. It's all subject to their obviously. So, we don't have capital gains theory either that just, if you following news and New Zealand, they have been tying around with our real estate. This is fairly local, but it's the real estate market is almost not out of control, but it's super-hot. And the average person is way out of line in terms of salaries and wages to house prices.
So, they're trying to put a cap on that a little bit with do with investment properties and holding investment properties for a certain period of time. So, they used to flip properties and it was always made me laugh when you'd, you'd have a front-page newspaper saying I flipped my property. I bought it for a week and I've made $500,000. You think the tax people will be interested in that? Absolutely. And it made some little changes to stamp that down a little bit and they've increased. It's, it's quite a technical area now, but they've increased the period from sort of five-year tests for 10-year tests, trying to have some of the international investment property, pushing prices up, meaning local people can't afford to do it.
But as we see around the world, house prices, property prices are still relatively high and a pretty good source of debt holding and, and good source of income in the future. So, it's still, it hasn't really done anything right now to do the prices. So, we are going to see how that goes in the next, next future and in the near future. So, distribution of assets tax-free in terms of the foreign assets. And that can happen up to the lifespan of the trust, which I mentioned earlier, as a, as 125 years, it was 80 years, a few months ago, it was just increased. So, I just move along to sort of, for those, what a trust scenario, what actually might look like now, this is a scenario. It can fit into most places where it's a corporate trustee, it's a professional trustee set up. So, there's lots of different committees and things going on there. But to give you the flavor, we, we use these quite commonly for consolidation of assets. So, if you look it down and the underlying entities, I'll put underlying entities under the trust, but you cannot trust holding it. And I would typically say that book, low risk sort of things, bank accounts, things like that, things where they are not going to generate too much risk with the trustee perspective. We review these things from time to time to make sure that that's the case. And if they've got lots of different assets and it's good to park them, they already have a holding vehicle in mind that we can put that onto a trust.
Once you get that across, some people get a little bit nervous about properties because they don't know them. You know, we're, we're regulated. It gives them a bit of peace of mind. If they have other issues, they can put people like protective them to give control over the prostate a little bit, but trust, they can't just be things out without consent. They can also have a little bit of input as, and depending on the tax situation or legal situation, they might not be able to have any say whatsoever on the writing of this process, which is quite good from a trustee perspective, very robust. But if they want to have that, they say they might have some decisions on investments. I mean, you can sort of build those committees or even words into your trustee to, to allow that without any issues from a process perspective, there's nothing really, you can't hold.
I'm assuming if you can legally hold us and obviously Amoco hooks, happy to hold it, depending on what type of asset it is. If we will, you can help put it in a trust that we can be controverted or both. So, depending on how you want to structure it, and that includes operating companies. So, we have some, we have a number of clients of the States that are thinking about future planning, longevity, succession, planning, all those things apply here, operating companies. Now w if they want a certain level of control, we can talk about that in the next couple of slides about how, how they might feel about the trustees, most professional trustees won't particularly like dealing with overriding companies because they don't know anything about them. So, there's a few things that we can do there to help and still have your trust set up. So, if you think back to the emphasis of your trust, you've mentioned state planning, which everyone talks a lot about affecting their wealth. It can be also used for retirement planning. You can also use these things for employee benefit type structures, where it gets when you get more of the corporate sort of feeling unitrust come in and supply here. Not so much in New Zealand, we don't use them in the foreign world because, you know, trusts are taxed like companies from New Zealand perspective, but they are used a lot for other purposes overseas, especially for fund structures and Singapore has those, and it always could be purely charitable. I work with a lot of charitable organizations where there's trust involved, and we help them out from all over the world where the Melissa and that, that can be very small or very large. It just depends on how they, how they wish to, to help them and what they want to do with them. And some of the other trusts that you might see or hear a lot of us purpose trust, we don't have purpose trust in New Zealand. We don't have non-charitable purpose trust, where you see them a lot on the offshore world for holding shares and say a private trustee company, which I'm going to mentioned next. Or you can have the most sophisticated locations like Cayman, which have star and DVR have Vista, which can be a mix of they're very different regimes, but they can be used for purpose trusts as well.
So, I just want to go through, and the next scenario I wanted to talk about was these types of arrangements and partnerships in New Zealand. There's a little bit where people want to have a New Zealand vehicle because of the tax jurisdiction, we don't have a lot, we have the trust, our trust regime, but we have partnerships with just transparent. So, with the partnerships, we can hold assets on the partnerships level. Say if we don't want to hold the assets directly. As I mentioned earlier, where the general partner would have to be a New Zealand company. And that's just how the partnership goals work in New Zealand.
And I've got 0% as a general partner, because quite a lot of the that's just how the law is. We're able to have partners that don't have a percentage. So, we've got the limited partner having a hundred percent particular case. And the general partner has zero. The good thing about that from New Zealand company perspective, as it's not taxable, so it doesn't have any income. It has no rights to anything. It acts as almost like a director and you can hold assets through the structure quite nicely. And it's quite good for bank account opening. For example, New Zealand is quite well known internationally for the international banks. So, it's quite easy to open up bank accounts. We can also hold other operating businesses through this. It can hold shares in another company, in real estate. There's nothing, there are no particular restrictions on holdings there. So, it just gives you an idea of what else you can do other than just having the trust and the New Zealand perspective. Now, with partnerships, you just got to remember because they're a corporate vehicle, the rest tax responsibilities for the tax filing and there's financial statements requirements. The tax filing is mainly, it's more informational that the government wants to know what income it's generated, but you're not going to be paying tax on it unless you've got assets here that operate similar to how the, the strong trust works. So, the other metric, one of the talks about quickly was the private trust company.
We talked a little bit about control and how clients, you know, how they feel about not having any control, which is a problem for some people. So, we have been doing a lot of private trust companies to help them get around that. So, you get a lot more sort of family office type of feel. The important thing is called good corporate governance. So if it's a New Zealand company, which is what PGCs are in this particular context, they need to have a New Zealand resident director. So, we don't have, we don't have corporate directors of New Zealand. So, you, you will need to have at least one of us on the board to try and help, and that'll help from a compliance perspective, due diligence, the governance aspects of that, keeping you up to speed of what you need to do.
And the filings of the company from a company law perspective, and from a trustee perspective, also, we work closely with boards of individuals on the boards to help them make sure they all doing things properly. They're thinking of it from the perspective of what a trust actually is acting in the best interests of the beneficiary, looking at, you know, making decisions properly, especially when it comes to things in relations to operating businesses where we see these used a little bit, but not necessarily, it can just be case of high-net-worth individual wanting their own trustee may having greater, greater control, greater control of that level. And so, as you see here, I'll have, haven't put him typically to tend not to say things like protect does another thing's happening here because the trustee is basically either not the client or the client's representatives and if it's not a third-party professional trustee, so then they have a lot more control of that level. You can still have investment advisors, but underlying entity level. And there's nothing wrong with that. You can protect us, then you can, you can certainly have all those different levels of control as well, because if you're not going to be on your own on the board, so it's a set law, then you might still want to have those layers and plies, which is probably fine. The quite a lot of times, because the way they are structured, they want to be, they're trying to be fairly independent. So, there'll be pointing people. Why maybe it's the lawyers or trusted individual. It could be someone in the business. And the operating side is close family brand, who is a professional as well.
You can really, you can really be quite flexible. So, the vehicles, in terms of this last thought, I mentioned share options very briefly, but because of the foreign trust regime, if you have a foreign company overseas, that's access that law and its employees are employees of the business. There's no reason why you can't have share options running out of the New Zealand, New Zealand foreign trust. I think I mentioned earlier, your set laws, beneficiaries can be con can be corporates that don't always have to be natural persons, which is different to some laws around the world, but you can certainly see you end up with a nice, you can certainly mix and match a lot of these things up. So those sort of talking quite a bit about the New Zealand side, you know, we've got some time at the end for questions, but I think this is probably the end of my short little flash so that the New Zealand side of it, I think there's another, I've got the slides for Sebastian. So, Sebastian I can just control your slide if you like, or you have them separately on your machine and I'm happy to control it from here, or you can control it.
SEBASTIEN HAY OZ:
Yeah. I'm happy for you to continue controlling no problem at all. But I think they'll be all to question. Maybe we can address that now. So, question about, they are even more quickly, we looked at the chats can be set to Australian or French or any citizen and how the underlying entities wanting to go trust dividend. So maybe we address these two first.
The Australian is a good one. We used to be a case of, because the close proximity to Australia, as far as trust is still a farm with Australian resident with Australian set settler in it. But there is, there are particular close ties with Australia. So, if you, you can certainly have your trust here if it was an Australian, but you'd be wanting to get pretty good advice from Australia for that because of the nature of how the ATO are and their rules around trust. It used to be in the old days, we'd have a form that you'd fill out. The first thing they wanted to know was there, is there an Australian set law? It was the first question on the, on the form when you're filling these things out. So, the answer is this, you probably can, it's just a matter of what the tax, what the tax situation is going to be for them and that, and in their home country. The other, the other question, I think it was a French one in there was that I think it was a Frank question or French settled. Yeah. Look, I mean, France seems to be changing a lot of the rules and, you know, before that they didn't recognize the trust at all. There seems to be some maybe softening of that, but that that tax regime is if you're a tax resident in France, you have a, there is a particular form from memory that you have to complete.
There's a quite a bit of regulation that you have to do to disclose it all. And because the taxing, you would, I don't know, 99% or whatever it is, crazy thing other there it's something that you've got to be very, very careful. So, it's not a case of I'll set my trust up as far as I possibly can away from France. And there'll be fine. Well, no, because you've got a whole lot of regulation you need to do. And with, and with CRS as well, these days, all that stuff's going to be reported more, more likely because of the financial, the way this is going to be treated as a financial, as an FYI. So, you can, again, it's subject to advice in France, but it might not be the most efficient if a non re I think even if you're a, non-resident, you'd have to be a little bit careful about how the rules affect you.
So that those certainly the certain individuals it's like, it's like a, I guess it's like being a us person setting up a trust and you got a whole lot of responsibilities, no matter where you are. So, what, what was the other question?
The next question was from Dicky, how do the underlying entities move money into the trust? Is it through dividend interest royalties?
Yes, so if you've got the asset, if you've got the mandolin company set as contributed to your trust at the beginning, and then how does it flow? There are different ways of doing it. Some of the companies will have a bit more flexibility in terms of how they can return capital. So, its owner, it could be a reserve, it could be buybacks. It could be just then if it's income, it could be dividends. You could help preference shares. You could redeem preferences, the whole lot of different ways of doing it. It just depends on the nature of what that underlying vehicle happens to be the time. So that's how you would possibly do it. It just depends on the nature of your vehicle or you could have loan funding. So, you might've funded that company by maybe there's a line arrangement in place, financial arrangement place that you have done and work it's efficient. And then in the future, it's generating profits and it's repaying the repaying, a debt back the trust may or may not. If you're going to do it that way, then the trust would probably quite often we have a lot of trust with no bank accounts, right? Because quite often the funds are held at the underlying structure level and that accumulating and the generating it. So, you have another bank account is perfectly fine. You can do it to refeed funds and pay funds that all you can do it at a, at the underlying company level, from efficiency point of view, just that some tanoaks some regimes prefer that you flow that all the way to the trust and the trust pays that out. Especially if it's distribution, if you don't do that, it can be treated a different way, be very harmful from a tax perspective.
Okay. And the last question was canvas set low, and I think you answered it, but can the settler be any citizen?
Yeah. More or less just subject to subject to their local advice for early. That's what I would say. We would always be on when we're looking at trusts and ascent laws where they're coming from, we often say, you know, are you taking proper legal or tax advice? And before you, before you started doing this and there's other reasons obviously, but obviously it's still a part of the, if you're doing it for security estate planning, that's great. But you still need to think about, is it going to really cause me an issue from a tax perspective?
Okay. We're good to go, Sebastian.
SEBASTIEN HAY OZ:
Yeah. Thank you. So, it's Singapore trust business in Singapore is that the trust is around for a long, long time. Now, since 2005, they trustee business to see activity is regulated by the MAs on subject to licensing, very strict licensing regime. So, Singapore has gained credibility over the, over the years and having very, very strong regulate or being in very, very strong regulated environments. So, the trustee activity, or mainly subject to two, two main regulation, which is the trustee companies act and the trustee company regulation. So, they, they see as being the framework under which we have to operate as trustees. So as, as everyone knows, the DMS is not joking around with the, with the regulation on the activity. So, on the warm hands. So, employers may complain about the regulation on how we have to, to feel business. And, but on the other end, it really keeps the, the credibility and credibility as well in their own country when there is any reporting Dawn about why they would use Singapore as, as the, as the jurisdiction for holding their offshore assets in terms of the trust low or the very, the features of Singapore, Singapore trust low, but can do the main one that's everyone goes on, which is very popular and, and very appropriate in Asia considering how Asian con wants to retain control.
So David talked about the PTC previously that's of course one option, but one of the most popular feature on the item in Singapore is we, the reserve power of investment for the set floor, which mean that also on the trustee being the owner of the assets and having the authority and any discretion to, to, to manage them and be nice to trust founds of course, old ways for the benefit of the beneficiaries, the settle, and retain the power to make investment decisions, whether it's on bankable assets, whether it's on operating companies, I need to apply this to the assets that are in the trust already, or have been contributed to the trust, but it also applies to any new investments that the central will want to make.
So, I told him to settle mate, and then to fall simply would have brought to the trustee that he wants to invest in X, Y sets company eons on for that amount. So, he will, he will instruct trustee rather than we'll request the trustee to considered the trustee already, almost under the geisha to, to do it’s the all forces, exception, where the trustee can say no, but still very, very few and barely very limited fraud from that point of view. So, the Sentinel kind of the investment power. So of course, he can also instruct the trustees dedicate this investment power to whether it can be an investment manager interested in buys or diaries again, no authority for the trustee to say no. They they all, basically I know that they all, a lot of talk about, about this investment reserve here in Asia, here in Singapore, a couple of advisors say yes, but the trustees still remain responsible and for the investment of me. So, they have to at least monitor or see what's going on and how it is going and et cetera, et cetera. But there have been two recent cases where actually investment where went very bad, both of them was, was feeling really bad. And the courts say that because of this reserve power, the trustee or not, and will not be alive for the, for the performance. Really that's a very strong that's, that's very, very, very strong in the legislation. There is nothing for the trustee to do. So basically, also the, the, the good things about is when the law of countries now, though, jurisdiction, or looking at the control and management design and looking at what's the set or what's the, basically the, of fiduciary services industry are doing and how they retain their control. Because most in the past, they always saying, well, I gave everything to the trustee, no control. I don't know what's going on. They already get older. They do whatever it was the founder, but actually they were, they were continuously in contact with the trustee, almost giving you instructions. So, I placed with the investment reserve power, they all comfortable with that. And basically, they claim that they have no control except to make investment. And that's come back to possibly the jurisdiction of where the settlor is, or the question about whether central can be any citizen. Yes, he can. As long as of course, it's not breaching the main leader of the full stereo ship rules he needs in this country, but Singapore has forced its low well anti force in a provision, which basically any foreign forced airships though, are not enforceable. And Singapore trusts, again, provided that the sec will have capacity to transfer the property.
So again, any citizen can do that, but it must be careful about not reaching any relation needs country of residence. If that's the case, then there is not a can't do in Singapore because of this provision, the teaching period in Singapore for maximum of a hundred years, which from time to time creates some issues, not, not necessarily when we set up, when you set up a new trust, but more when you want, when maybe you had a very old trust set up by or grandfather or grand grandfather. And basically, he wants to transfer, set up a new trustee can be what he's called, decanting the assets. So, moving the assets, distributing the assets from the old trust to the new trust, so that that baby could create some issues in terms of the periods from a tax point of view, I suppose, without giving tax advice, the regime in Singapore is, is what is called quite fine for trusts way. That's basically means that trustees, the central or the beneficiary are not Singapore residents, Singapore citizen. So basically, if that's the case, the trust and the income, these exams from the Singapore tax system. And interesting the point is that the tax exemption as well, the drawings to the underlying company. So, it's not only the trust, which is tax exempt, but also any income generated at the underlying company level also provided that the underlying company is not incorporated in Singapore. So that's basically, what the Singapore, the main feature of the Singapore or interests are. It’s, not very, very different from New Zealand, from any other jurisdiction in terms of how the trusts operate in terms of all the parties. There are no specific things to mention from that point of view. I think, again, we do have a couple of questions maybe that we can address before moving to the next slides. Basically, one of the questions? What is the minimum size that are require for trust setup?
I think the it's not necessarily the size and David happy for you to not to comments as well. From my point of view, it's not necessarily of size, its more the type of assets that's going to be contributed to the trust. Of course, if you're talking about a hundred thousand times, I don't think a trust is appropriate, but more from a fee or ratio, but it's, it's more the type of assets I'm where the assets are.
If you, if you look at it, if you are in Singapore, you can easily cover your assets with a will if they are not significant amounts, or if you have no concern about the capacity and capability of your heirs to, to, to manage the assets, if they all sizeable, of course, there are, there is, there is a lot of merits to consider setting of trust, even if you're, if you're in Singapore, but the trust is really appropriate to get into from a pure international succession planning point of view. So, if you have assets in London, in Switzerland investments, anywhere else, the, the trust vape, or no matter what the amounts of the assets is, is again appropriate here, because you prevent the grant of probate in each of these jurisdictions.
So sometimes the clients say well, but my assets are not sizeable enough to harbor trust at this moment. And I will have to pay a certain amount as annual fee. But actually, when you compare the amounts that you pay as annual fee during the time, your trust versus the amount and the inconvenience cost, the amount that you have to pay and being inconvenienced cost by the body probates in each of these jurisdictions, and you really read it all. And that’s even in trust, even if you have to beat the other thing for trusts, that's very appropriate in terms of the yearly fee to maintain a trust structure. I would say it's really depending on what, especially as an independent we are always looking at what is the responsibility of the trustee to all the assets. So, the fees would vary depending on the type of assets. And of course, the amount of the assets. If we talk about basically bankable assets with, we said this question, or in mandates, the responsibility is, is relatively limited from that point of view, especially if you have the investment reserve power in pace. So probably you can look at something like an annual fee of six to seven thousand in Singapore.
Then if we start talking about, again, a property in the UK and operating companies, operating companies and investment in product equity, etcetera, etcetera, then the fees will increase commensurately with still with the responsibility in terms of the Singapore residents. So, for the Singapore residents, Singapore residential cannot set up the foreign trusts, the trust will not be foreign. The trust will be what is called the LAT or a Locally Administer Trust. They basically, it still makes sense to set up the control trusts for Singapore residents. If the assets are in Singapore, if the assets are maybe somewhere else, well, you can still have a Singapore trust because as long as the armies overseas is not taxable is just a question of when you will bring back this income to Singapore, what's going to happen. And now we will be taxed, but I would say that having a trust in Singapore for Singapore residents would still make sense. And there are a lot of advantage of Singapore residents to have the trustee in their jurisdiction.
Perfect. So, it's appears as if those are all the questions for now, do we move on to Hong Kong?
SEBASTIEN HAY OZ:
I just wanted to quickly cover the scenario where David, if you can move to the next slide, that would be great. So, it was just something that came up couple of, well, it came out recently and especially because of the pandemic, a lot of people have suddenly really law and stats when they have their assets, when they own all their assets directly because of the pandemic, they might be at one point incapacitated or capable of managing their assets. Then creates your currency issue. Typical example, if you stop in the hospital and basically, you're the sole owner and sole authorize signatories on your bank accounts or sole director of your operating companies, basically nothing could happen and everything is basically stock. So, we've seen a lot of interest over the past few months where people suddenly realize that they can be the one and only in control of the assets. And that's where they data. The trustees are again appropriate.
See if we can move to the next slide, David please. You can see how that's slide that David commented before. Basically, it was the trust. You still have a legal entity or someone accompany the trustee legal entity acting as trustee of the trust. Trust is not beginning to take them. Basically, they can continue to control the assets. They can function, continue to have access to the assets, have access to the bank accounts, make distributions to the beneficiary. If they, if they need some money, if they need funds to cover their expenses or their maintenance, et cetera, et cetera, you can still continue to deal with.
So, the trustee can continue to deal with the real estate agents or the property. You can, you can continue to manage the operating companies. It's simply basically as shareholder, you can appoint a representative on the board of the operating companies to face whatever needs to be replaced at one, or we tend to basically continue operating operation running. So again, that's the registration and trust is not only to address or basically cover the case where the settle or the client passes away or it's basically facilitated that also when they are situation not, we are now in where they cannot deal with the management of their assets.
Okay. Thank you very much for that. And Would you be continuing with Hong Kong as well? Joe, is it going to, be you?
In the discussion in Singapore? It was mentioned that there's no Singapore tax, if the law and the trustee Singapore resident, the trustee is suitable resident. I mean, it would seem that the trustee would have to be Singapore for it to be as Singapore Trust. Trust is resident with the trustee, the settlor and the beneficiary. Sorry I didn't pick that up. Okay. That's fine. Yes.
SEBASTIEN HAY OZ:
The trustee must indeed be a trustee in Singapore.
Just one other question. And that is, I have some clients who are running operations through Singapore companies. We're working with Moores Rowland to try and open bank accounts. And unless you have large sums of money and you have a business that is actually operating in Singapore, it is very, very hard to open a bank account. Now, if you're promoting Singapore trusts, how do you get on with opening a bank account for the Singapore trust in Hong Kong? I mean, we've tried, we're using DBS in Hong Kong. We've tried DBS and got nowhere, we've tried UOB. We've tried OCB. It was just a total frustration in trying to open a bank account in Singapore. Can you enlighten us? You might have some special intro with I don’t know, Standard Chartered or HSBC or somebody.
SEBASTIEN HAY OZ:
Yes, I certainly share your frustration because that's what we've seen. We've asked you months, it's getting more and more difficult to open bank accounts in Singapore. I think what happened, it was the, it was the Panama papers as basically that the banks all are reluctant now to look at this fiduciary services business on to basically open account for companies or for trust. It very much depends what the assets will be. Because as with any banks, they would be interested to see money. So, if you have the trust on non-online company, it was bankable assets and based assets. I would say all of now between suite to 5 million, then, then the banks will. So, to me, open the door and be apt to come see you. If you come with some operating companies, operating companies should be okay, because again, the resident, there must be a resident director or here in Singapore, if we can demonstrate, if you can demonstrate some operation and some trading and what companies doing and all that, should be okay. The problem really is a Singapore investment holding company. That really starts to be difficult. Now they want to understand the purpose of the company. They won't understand the purpose of structure, and unfortunately some are not open or, or really understand the why someone. In Thailand, for example, will Singapore investment or the company, why this person would not want to have not bank accounts in Hong Kong. So, we can, of course, try to justify that well, wants to have this money outside of the country. For the reason that's basically secure and strong currency, very stable environments on all that. But again, you need to come up with a substantial amount for them to consider it because that will fall under the private banking segments of the bank.
Sorry, on that topic. David's question. I was just wondering, I know we probably don't want to compare like Singapore to New Zealand, but perhaps it's not one of the, I don't want to say benefits, but one of the attractive aspects of a New Zealand trust and that the bank tends to be less complex. Is that a fair statement?
In New Zealand? Well, not difficult and New Zealand for the foreign trust to have a vacation account provider you're open. In other words, that goes through all the KYC stuff and everybody as usual, but the banks here welcome that sort of business.
The banks are they're going to set it as well. Well, the banking system in New Zealand is certainly not terribly sophisticated in the sense of it. It's if you have foreign individuals who aren't resident here, it is actually, it is quite problematic to try and opening up a bank account in New Zealand. Whereas if we try and open a bank account for our trust somewhere else, it's, for some reason, it's a lot easier. I don't, I never really understood why that is, but it tends to be that's the way I'll have stuff. I go down the road and I've got a client. I go, look, they look at you sideways and they ask you why. And, and it's, it's yeah, it's a, it's a very unusual experience. So, whereas you go to a, and obviously a private bank or Institute and you give them all the due diligence and as long as there are no nasty compliance hits on anybody. It's a lot easier, but everybody, obviously, nowadays they want to verify source of wealth funds. If you don't do that in any shape or form, you haven't got a chance of doing anything. And if the same goes with really with professional license providers now as well, we're all subject to the OACD sort of rule or more or less the OCD rules on, on AML. And you villains no different to say Singapore would be on that front. It's just for some reason, I don't know why, but we have a lot more success in opening up bank accounts and other flashes than we do here.
Okay. I know that we've been behind on time, but Hong Kong, which one of you doing Hong Kong?
And then not me, we did talk about Hong Kong, but we done, I personally I see stuff around the group, but in both Sebastien, you, I like to have some experience in Hong Kong, but we don't, we actually don't do our trust services out of Hong Kong. We use our Hong Kong fund base. So, we don't sort of push that out. I think the laws are, I lived there for a little while when you feel like a long time ago and that trust laws are not too dissimilar, you know, you have reserved powers and things like that. But in terms of the expertise that we have there is where I certainly wouldn't be comfortable telling you anything about that from a tax point of view anyway.
I was doing Hong Kong trust in the eighties and nineties when it was the librarian we had, you know, we had thousands of trusts with things changing in the PRC in the early nineties, we were putting in fleet clauses into all of our trusts. Such that of the PLA came across the border, the trucks medically moved to the isle man or something like that.
Yeah. And I was with Deloitte up there in Hong Kong and we were certainly, there was I think every single trustee had those things in them and hopefully no one would ever have to use them.
But yeah, at the moment it seems a little bit uncertain with what's going on. I love being in New Zealand. I haven't heard anything recently from my colleagues up there, but certainly for a while there, there was a lot of, I'm pretty sure. I'm sure it's not, it's still not right. A little bit about what the uncertainty that's happening, but I mean, we, we certainly are focused up there as well in our fund world rather than our trustworthy finds, looking at trust structures. We, we tend to sort of look at them either Singapore or New Zealand, funny enough, and developing it offshore. They, they look at sort of Cayman or BVI for the structures is quite often, they'll probably have a BVI company already in place. It's not to say you couldn't have a trust in New Zealand or Singapore with that, but sometimes depending on how sophisticated they want to be, they might want to have a thing of BVI Vista trust, which is obviously quite special. And it works quite well for them in terms of what that BVI company is doing, as opposed to say a more traditional structure, which might stay in Singapore or stay in New Zealand.
Yeah. With the sensitivities around Hong Kong right now. But if we step back and look at the three jurisdictions, I know one jurisdiction isn't better than the other, but can you, from your experience, of course, identify who will be the ideal type of client for New Zealand versus the ideal for Singapore and perhaps Hong Kong.
Yeah. I think, I think from my perspective, we've talked about this, not, not too long ago. I actually was sort of wondering about that. And I think with New Zealand being almost the family office, I hate to say it, but you probably will be a family office type of client. The reason for that is we, can we talk? You mentioned, someone mentioned earlier a little bit about the fee levels and, and Sebastian hit the nail on the head with what type of assets. I mean, if someone asks me, I'll say, well, your assets important, but also, you've got to weigh up the economies in terms of phase and things like that. So, if you've got less than 5 million and it's not, maybe it's not making much of a return, you're going to find your trust, cost financial statement costs, your reporting costs no matter what's your restriction. You're not going to be throwing that away. So, you need to bear that in mind. So, but then again, the bigger picture, if you hold them directly and you go through a probate process, so you have a dispute, you might have a whole world of hurt. That's better if it's sitting in the trust. So, I mean, I think from New Zealand, we do have a lot of, we have mix of clients from all over the world, certainly yes, high net worth clients. There's nothing, there's nothing small in our client base. And we're quite open and honest about that. When we're talking about setting up structures there, do you have any long-term structures? These are the costs. These are the advantages, as opposed to say, let's put a $500,000 in a trust for a rainy day. That's probably not going to be the best type of client only because it's going to cost you too much. You'd be better off maybe you have an insurance policy or something like that. Then again, you might have BVI company that's set up already and you can play around with the shareholding of that company quite nicely under the laws over there. But because we're focusing here on trust, I'd say from my perspective, it's certainly more the high-net-worth clients, sort of 5 million, anything below 5 million years. I think you'd find might not be economical, we're quite flexible with those sorts of arrangements. So, if it depends on what they do, what if they're going to do transactions all the time and they want regular distributions and don't become costly. So, I certainly think it would be probably more sophisticated, maybe fine. And then you can choose whether or not you have a PTC cover arrangement, or you have a professional trustee for my side, for mine, this bond, the New Zealand side anyway.
Someone has asked below when you say 5 million, do you mean 5 million US?
Would agree, I've got several clients and I would agree with him and I have actually set up to people, you know, unless you're in that bracket 5 million plus and you know, earning revenues of if their underlying operating assets, earning revenues have an excess of a million us, you've got to look, is it worth their while? But I just mentioned one thing to you guys, you may be aware of this, but the Cayman's at the end of 2019, the Cayman's was mentioned. They signed up, you know, under the OACD to information sharing. And so, this is something we all have to be aware of. And the reason why I raised it is because I personally, that has me personally, I had a letter from the New Zealand inland revenue department a month ago because I act for some Cayman companies for clients. They actually said they set up that the New Zealand ID is now part of the information sharing arrangements with the Cayman Islands. And that the Cayman on the authority said advise the New Zealand inland revenue department that I was associated with certain bank accounts. And they brought the name of the client and the bank account number. And had I reported that in my personal tax return, that is my fees are that I've charged the client. All of that was yes. And I agreed with them on the name of the client and the bank account numbers and set it all out. Anyway, I've got a letter yesterday saying from the ID, say, thank you into the master, everything you say compliant, but the level of information sharing that's now going on out of the Caribbean that, you know, we have never experienced is clearly. And it was a say personal experience of that just,
Yeah, that's a real thing. I mean, I think that are fighting with the but the so-called you've already registered. So, you see a lot of jurisdictions now sort of introducing those sorts of things, which is, it gives some people a problem. It's just the privacy aspects. It's not like they've got nothing to hide from the tax authorities. They just don't want bad people to know what they're doing. And then them disappear or the families disappear and get ransomed. Those companies, those sorts of things are a real concern. The information sharing is being flipped off again, especially with the introduction of the, you've got your theorist now for a while, you've got the changes that you can sometimes hear about as well as the was not that long ago, you'd have your information would come through the tax authorities professional in their profession. We'll take advice and then maybe argue it for a while to try and justify whether or not their foreign tax authority has actually a legitimate reason for requesting the information in the first place. So yeah, a lot of that information seems to be moving around without that anymore.
Okay. I guess we've come to the end of our session. Thank you very much. I mean for sharing your time. And of course, your expertise, if any member of the team, if anyone wants to reach you guys, what's the best way to reach you.
Email's pretty easy from my perspective. We're all fairly reachable on email, you've got our email addresses and you feel free to circulate them and then we can reply back then we can speak to them on WhatsApp or Skype or whatever.
Well, I can certainly send you. Yes, I can certainly do that slides right now. So, you can just flash it. But doesn't got my email address on it. I'm thinking about it. I don't think it does the sending me all up. I'll just go to the beginning. Hang on a second. I'll just share. I think it's because we're going to make this recording available.
So, if anyone sees it after the fact, they can pay an email David or whatever.
Yeah. Sorry. It doesn't have that on there actually.
Okay. So, anyone watching, you can just reach out to me directly and I'll introduce you accordingly. That's no problem. Okay. Thanks a lot, gentlemen. Have a great day ahead. Thanks very much. Bye.
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