Category: Private Client

Dixcart Expertise in Family Wealth Planning

The Dixcart Group has over fifty years’ family wealth planning experience and assists clients in running and managing Family Offices.

We are very familiar with the issues facing families in this ever-changing international world and have extensive experience in providing trustee services in a number of jurisdictions.

We take time to establish and develop close relationships with the relevant family and with the other professionals advising them. As well as providing technical expertise in terms of structuring we also understand family dynamics and frequently assist in offering advice as to how to improve communication and how to avoid potential conflict, before it happens.

Recent Changes

Recent changes in terms of global tax regulations and increasing international tax transparency are vital to take into consideration in relation to the implementation of strategies to preserve family wealth and family business ownership structures.

Relatively new global regulations include: Common Reporting Standard (‘CRS’), the US Foreign Accounting Tax Compliance Act (‘FATCA’), and numerous ultimate beneficial ownership registers, which have been implemented across a variety of jurisdictions.

What are the Key Considerations to Achieve Effective Wealth Management?

Please see below the key areas that need consideration in relation to the management of wealth and succession planning, and the type of reviews that need to take place on a regular basis.

Succession and Inheritance Planning

• Set up or review policies and procedures to ensure the adequate preservation and transfer of wealth to the next generation.
• Review the ownership structure of any family businesses and other relevant assets.
• Understand how relevant local laws would apply, in relation to inheritance (for example; Civil Law, Shari’a Rules etc.).

Structuring and Tax Advice

• Consider where all relevant family members are resident and also tax resident.
• Consider or review structuring options (e.g. use of holding companies and/or family wealth protection vehicles such as family investment companies, foundations, trusts, etc.
• Review international investment structures, including the holding of real estate, from a tax and asset protection perspective, in particular in relation to ‘BEPS’. 

Confidentiality Management

A procedure needs to be developed to deal with relevant confidential information requests from financial institutions and third parties.

Family Governance

• Successors need to be identified and their role discussed with them.
• Develop open communication amongst family members regarding decision making strategies and processes.
• A ‘Family Constitution’ is a useful way to formalise family governance and to prevent potential future conflict.
• Create or identify education and training programmes to groom the next generation.

Contingency Planning

Rules and procedures (such as shareholder agreements or trust documentation forming a ‘Family Constitution’)  should be in place to protect the family business in the case of unexpected events:

• Policies and procedures to underwrite business continuity.
• Use of appropriate legal structures to provide as much asset and wealth protection as possible.
• Consider residency programmes in reputable jurisdictions, to provide opportunities for the tax residence of family members to potentially be diversified.

Family Office Advisory Services

• Consider the segregation of the family’s wealth from the family business(es).
• Develop a strategy regarding the use of the profits derived from the family business and investments, that is not going to be re-invested.
• Create a team to manage the wealth (a Family Office).

Additional Information

If you would like further information regarding a well-considered and comprehensive approach towards succession planning, please speak to your usual Dixcart contact or to a member of the professional team at the Dixcart office in the UK: advice.uk@dixcart.com.

Please also see our Private Client page.

The Dixcart office in Switzerland is a member of the Swiss Association of Trust Companies (SATC) and is registered with the Association Romande des Intermediaires Financiers in Switzerland (ARIF). We advise on how to structure wealth in Switzerland, the use of Swiss Trustees, Trusts and Private Trust Companies, and matters relating to family governance, donation and succession.

Switzerland and the Use of Trusts

Switzerland does not have specific Trust Law, but recognised trusts with the ratification of The Hague Convention on the Law Applicable to Trusts (1985) on 1 July 2007.

Whilst there is no domestic law governing trusts in Switzerland, trusts from other jurisdictions, and their specific rules, are recognised and can be administered in Switzerland.

In Switzerland the Settlor (the individual who settles assets into the trust for the benefit of the Beneficiaries) can choose the law of any specified trust jurisdiction to govern the trust. For example a Guernsey trust can be established with a Swiss Trustee. The Trustee holds and manages the assets in the trust on behalf of the Beneficiaries.

Why Use a Trust?

A trust is a very flexible instrument and is particularly useful for estate planning, wealth management and asset protection.

At a basic level, the concept of a trust is relatively simple: the Settlor places assets in the legal custody of another (Trustee), who holds the assets for the benefit of a third party (Beneficiary). The trust is not a separate legal entity, but more of a legal obligation agreed between two parties: the Settlor and the Trustee.

Trustees owe a fiduciary duty to both the Settlor and the Beneficiaries, as well as to the trust itself. Depending on the jurisdiction under whose laws the trust is constituted, the trust can either have a pre-determined life span or be indefinite. Trusts are intrinsically very flexible.

Why use a Swiss Trustee?

There are a number of reasons why use of a Swiss Trustee can be advantageous:

• Swiss economic, political and legal stability provides a solid base for the provision of local administration services.
• Switzerland has a number of favourable and well developed banking laws, and has been a popular international private banking centre for many years. It is a jurisdiction with a good reputation and offers a high quality of knowledgeable professionals working within asset management, tax planning and private banking.
• Switzerland has a well deserved reputation for discreet professional support when managing the affairs of wealthy private individuals.
• Switzerland is located in the centre of Europe where many affluent individuals are based. Swiss Trustees therefore offer the advantage of being able to provide frequent and high quality support as they can regularly meet appropriate clients in Switzerland.

Taxation of Trusts in Switzerland

The Hague Convention (Article. 19) stipulates that the Convention does not prejudice the powers of sovereign states in fiscal matters. Consequently Switzerland has maintained its sovereignty in relation to the tax treatment of trusts.

The tax advantages available in using a trust with a Swiss Trustee essentially depend on the tax residence of the Settlor and the Beneficiaries.

In terms of Swiss Law:

• A Swiss resident Trustee is not liable to Swiss income tax or capital gains tax on the assets held under management in a trust.
• Settlors and Beneficiaries are exempt from Swiss taxation as long as they are not considered to be Swiss residents.

Regulation of Swiss Trustees

Swiss Trustees have to be registered as financial intermediaries in accordance with Swiss Anti Money Laundering Law. They can be registered with the Central Regulatory Authority or with a self-regulatory organisation (SRO), which must be recognised by the Swiss Federal State.

Annual Accounts

The Swiss Association of Trust Companies (SATC) provides in its Code of Ethics and Business Conduct that: “A Member must keep adequate, suitably detailed and orderly records for each trust. A Member must ensure that records are maintained for an appropriate number of years.”

Protection

Under Common Law the Trustee is the owner of the assets and is required to administer the trust assets separately from his own assets. In the event of death or bankruptcy of the Trustee, the assets are not considered as belonging to the Trustee but are submitted to the trust’s protection and held separately for the Beneficiaries. The trust’s assets are therefore segregated from the Trustee’s estate.

Confidentiality in Switzerland

Switzerland is well known for its commitment to banking services, professional confidentiality and commercial competence.

SATC provides that: “Any and all information related to a trusteeship and acquired by a Member must be kept strictly confidential by the Member, its directors, officers and other employees.”

A breach of confidentiality, whether professional or commercial, would only be permitted by law in the event of criminal liability.

Summary

An English, Guernsey, Isle of Man or Maltese Law based trust with Swiss Trustees can offer a number of tax efficiencies as well as advantages in terms of wealth preservation and confidentiality. Dixcart can establish and manage such trust structures.

Additional Information

If you would like more information on this subject please speak to Christine Breitler at the Dixcart office in Geneva: advice.switzerland@dixcart.com or to your usual Dixcart contact.

Please also see our Trusts and Foundations page for further information.

Dixcart Trustees (Switzerland) SA is a member of SATC and registered with ARIF Switzerland

As families become increasingly international the importance of having a will is increased further. With family members located in different countries, it is vital that appropriate wills are drafted and, subsequently, regularly reviewed and amended to reflect any variation in circumstances. Often the jurisdictions where assets are located and/or where family members reside will be subject to change.

1. Are wills only applicable to wealthy individuals?

This is a common misconception. You do not have to be wealthy to have a will. Everyone over the age of 18 should have a will.

If you draw up a personal balance sheet and take into account your current property, business and investment values, you may be surprised at exactly how much you have to dispose of.

Often, forgotten “hidden” assets include intellectual property rights, pension rights, insurance policies and all of your electronic data, which should form part of your estate planning (these assets may not necessarily form part of your estate for will-writing purposes).

Do not forget to take into account assets you may inherit in the future, as well as capital distributions from a trust. If you have multiple assets and multiple heirs, you have assets in more than one country, or you would like to leave specific items to specific people or to a charity of your choice, then you must make a will.

2. An individual already has a will. Why should they make a new one?

Your will must be tailor-made to fit your current personal and financial circumstances and wishes.

If you already have a will, you should review it regularly (at least on an annual basis), as it is surprising how quickly a will becomes outdated. Your financial position will almost certainly change and births, marriages, divorces or deaths in the family, or a move to another country, can all impact on the validity and efficacy of your will. Tax laws, tax residency status, and other legal and financial matters change frequently and each can have a significant impact on the legitimacy of your will.

3. If an individual does not have a will, do his/her assets automatically go to his/her spouse/civil partner and children in some sort of equal formula?

Failing to draft a will, or having a will declared invalid on your death, will mean that you die intestate and this may have the following results:

• The applicable law usually provides a fixed, arbitrary and potentially impractical formula for the division of your estate, which may not accord with your actual wishes.
• Distant relatives or even the state may benefit from your estate and your spouse/civil partner may not receive the full share of their inheritance.
• Your heirs may be left with a legal battle or have to share indivisible or illiquid assets with your blood relatives.
• An executor/administrator/trustee not known to you or your family may be appointed. ‘Third party’ executors and trustees usually charge the maximum allowable professional fees and are unlikely to deal with the realisation of assets and the administration of your estate in a sympathetic manner.
• There could be no guardian of your choice for your minor children, which could have a huge detrimental effect on them.
• Bank accounts could be ‘frozen’ for a lengthy period of time, resulting in cash flow problems and could potentially cause creditors to take a firmer, more aggressive approach with regard to the repayment of claims.
• Business bank accounts may be ‘frozen’ if monies owing by the deceased are payable to third parties and are unable to be repaid in a timely manner by the estate, leaving the business in a vulnerable position.
• Before an executor is appointed or if a will is being challenged, assets are at risk and insurance policies may not be able to be claimed, even if they fall outside of the estate.
• Intestacy, a court case, or other challenges to a will can generally result in embarrassment, stress and complications for your family, and a financial mess to clear up, and with potentially little time to sort it out, this only exacerbates the problems.
• The cost of winding up your estate will increase, often significantly, as additional legal and other costs will be incurred.

4. If someone has lived in different jurisdictions and has acquired assets, including fixed property, does he/she need more than one will to cover these?

You can have one “worldwide” will to cover your assets in all jurisdictions, but it is not advisable.

If you have significant assets in multiple jurisdictions, you should have separate wills to cater for each jurisdiction and below are a few reasons why:

• Where fixed (immovable) property is concerned in certain jurisdictions a property transfer may only be legally effected by way of a valid (local) will.
• There are significant differences in the inheritance laws and practices between Common Law and Civil Law countries. In addition, if you have assets in the UAE or other countries with a Muslim majority, you will also have to consider Sharia Law, which will dictate strictly who gets what and also dictates the appointment of temporary guardians. It is essential for an expatriate living in such a country to ensure that a will is drafted (and properly registered) for them according to their particular national laws, to cover their assets within that jurisdiction and the appointment of resident guardians. This will effectively alter the way inheritance and guardianship laws and practices could be applied by the courts in that country. If they do not do this, then normal Sharia Law will apply. Local authorities will apply their local laws and protocols strictly and are not usually sympathetic to a particular family’s needs, concerns or wishes.
• Preparing a separate valid will per jurisdiction will assist you and your executors in separating your assets, subject to inheritance tax and death duties in the various jurisdictions, and potentially avoid paying double tax on the same assets. This is particularly important in jurisdictions which do not have inheritance taxes/death duties, so that those assets do not fall into your estate where death duties are to be paid.
• It makes the appointment of a locally qualified and court-recognised executor easier, and significantly reduces time, costs and complications across jurisdictions, particularly where one professional company is dealing with the entire international estate.
• Wills need to be “ring-fenced” per jurisdiction, and it is therefore preferable to get professional advice per jurisdiction.For example, if you have multiple wills that are specifically limited to UK, South African, US and Australian assets, but you also have assets in the Isle of Man, you would die intestate in the Isle of Man if you do not have a Manx will (with the added probate costs associated with winding up an intestate estate in an offshore jurisdiction). Probate may not be avoidable by Manx laws, but having a separate Manx will to cover Isle of Man assets will create certainty, avoid delays and a potential court application.

It is vital that each jurisdictional will caters for local laws and taxes, and does not revoke or cancel any other will, or create ambiguity.

What Would Dixcart Recommend?

International families should consider the use of universal executors and trustees (usually one multi-jurisdictional international firm or trust company) who know them and their family personally, have been involved in planning their estate around the world, and who have a working knowledge of their businesses and properties. This would help to ensure that their entire estate and all of their assets are protected, and can be dealt with “under one roof” promptly, confidentially, seamlessly and at a reduced cost.

A final point: make sure that your chosen executors and trustees have the legal and fiduciary capacity to be appointed as such in all of the jurisdictions where you have a will. In most countries, the relevant probate authorities follow strict processes and ‘screening’ procedures to appoint executors and trustees, to ensure that the estate and heirs are protected. Make sure that your nominated executor and trustee will not be disqualified or have to provide a bond of security, which will cause confusion and delays, and may result in having to appoint another person in their place.

Additional Information

If you require further information regarding wills or multi-jurisdictional wills, or have any questions regarding estate planning, inheritance tax planning, or probate in the countries where you own assets, please speak to Peter Robertson at the Dixcart office in the UK: advice.uk@dixcart.com, or your usual Dixcart contact.

Please see our Private Client information.

Updated: January 2020

Why are Swiss Holding Companies so Popular?

There are many reasons why Switzerland is a favoured location for international business. These include:

• Political, financial, social and economic stability.
• A favourable fiscal environment.
• Geneva and Zug are major centres for commodity trading.
• Excellent business support structures and a wide variety of professionals including: lawyers, bankers, accountants, insurance companies, inspection companies and corporate service providers such as Dixcart.
• A high quality and multilingual local workforce.
• Location in the centre of Europe, enabling real time communication with Europe and within the same working day as the US and Asia.

Tax Efficiencies

Various tax exemptions or concessions exist for holding companies in relation to federal and cantonal taxes when specific criteria are met. These advantages are described below.

Geneva

There are 26 cantons in Switzerland, with Geneva being one of the most important financially. This information note considers the tax advantages that are available to holding companies located in Geneva, Switzerland.

• CANTONAL TAX EXEMPTION

The Swiss tax system grants holding companies privileged tax status at the cantonal level when the following three conditions are met:

1. The company articles must state that the main activity of the company is the long-term management of equity investments.
2. The company must not have any operating business activity in Switzerland. Certain activities are accepted. These include: management of the company and its investments, providing services on behalf of a consolidated group, debt financing of subsidiaries and/or the holding and exploitation of intellectual property.
3. In the long term, either the company’s participations must represent 2/3 of the assets in its balance sheet, or the income derived from such participations (dividends/capital gains) must represent at least 2/3 of its total income. The shares of corporations, limited liability companies and cooperatives are considered to be participations, as well as certificates of participation.

When the above conditions are met, no income tax is levied at the cantonal level. This also means that income from dividends, interest, royalties, commissions and management fees are exempt from cantonal income tax.

• CONCESSIONS RELATING TO FEDERAL TAX

At the federal level income is subject to an effective tax rate of 7.83%.

However, dividend income derived from, and capital gains made on, the disposal of qualifying participations are subject to a participation deduction, which generally results in a complete tax exemption.

Dividends

• Company tax on dividends received

A participation deduction provides relief from taxation on dividends received from qualifying participations.

Qualifying participations are:

1. a participation of at least 10% of the equity (capital stock), OR
2. a participation with a market value of at least CHF 1 million.

For dividend income purposes, there is no holding period requirement.

• Withholding tax on distributed dividends

A Swiss holding company is generally required to withhold 35% tax on dividends paid to its shareholders.

Tax treaties, however, can reduce or eliminate the withholding tax on distributed dividends and Switzerland has an extensive double tax treaty network of more than 100 double tax treaties.

Switzerland also has a bilateral agreement with the EU, giving access to the EU Parent/Subsidiary and Interest/Royalties Directives.

In addition, withholding tax is reduced to zero on dividend distributions when the following conditions are met:

1. The parent company holds at least 25% of the Swiss subsidiary and has held this minimum percent for at least two years.
2. The shareholder company is based in the EU.
3. Both companies are subject to corporate tax and both are limited company structures.

Capital Gains

The participation deduction detailed above for dividends is also valid for capital gains on the sale of qualifying participations.

The participation sold has to represent at least 10% of the company’s equity (capital stock) and has to have been held for a least one year prior to the sale.

International Pressure and the Future

Switzerland is reviewing its corporate taxation system in response to growing international pressure.

It is anticipated that certain regimes, for example the special cantonal tax regime for holding companies, may be abolished.  However, many cantons such as Lucerne, Schwyz and Zug already have business-friendly low corporate income tax rates.

Geneva has announced that it will reduce cantonal tax rates to retain its attractiveness to companies.

Changes are scheduled to come into force on 1 January 2018.

Additional Information

If you require any additional information relating to Swiss holding companies, please speak to your usual Dixcart contact or the Dixcart office in Switzerland: advice.switzerland@dixcart.com.

Guernsey is one of the leading tax-free jurisdictions for the administration of international private wealth. Although a Crown Dependency and represented internationally by the UK Government, it is autonomous and has its own Parliament and its own tax regime. The island uses the British pound but also issues its own banknotes.

Guernsey’s finance industry benefits from a firm foundation of political and economic stability and the island boasts a sophisticated and comprehensive legislative and regulatory infrastructure. Guernsey is highly regarded by Governments and Regulators worldwide for rigorous compliance with international standards and its quality of regulation. Thanks to a long track record of fiscal prudence, Guernsey has an enviable AA+ credit rating and tight management of public spending ensures that Guernsey can remain a leading tax-free jurisdiction for international private wealth.

Guernsey’s Relationship with South Africa

For decades Guernsey has been establishing and managing private structures for individuals and families across the African Continent. Professionals on the Island have been advising clients on transactions with a wide ranging focus, from corporate work in the natural resources, mining and energy sectors, through to funds and infrastructure projects, as well as private wealth management and personal relocation.

Many well known South African firms have established a presence in Guernsey including banks such as FirstRand Bank and Investec and insurance companies such as Momentum and Old Mutual. Guernsey’s proven stability, proximity to London and access to all the major markets have been key factors in attracting organisations to establish a presence on the island.

Services Available in Guernsey

The services available, include:

• Private wealth management through discreet structures for individuals of African origin who are resident as expats elsewhere in the world.
• Hedging of private wealth value by holding assets in a strong currency (£, $, € etc).
• Establishment of robust vehicles for the preservation of family wealth.
• Establishment of trading and/or holding companies for business outside of South Africa as part of an international business operation.
• Establishment of corporate vehicles for investment into the development of natural resources in Africa.
• Through the Channel Islands Securities Exchange (CISE) the opportunity to raise capital from international investors and in addition easy access to the London financial markets.
• Many South African residents use Guernsey as the destination for their annual foreign investment allowance of R 10,000,000. This enables them to hedge against the fluctuations of the Rand and to manage a proportion of their family wealth outside of South Africa.
• Guernsey is regarded as an immigration destination for individuals seeking to move to Europe and to establish international businesses.

Structures Available in Guernsey and Popular with South African Clients

• Guernsey Companies

Guernsey excels in offering traditional services to private clients and being at the forefront of new developments. With modern Company Law and a cutting edge Registry, Guernsey is a leading jurisdiction for company formation.

Standard limited liability companies remain the most popular choice; however some families now prefer the ‘cellular’ approach, using either a protected cell company or an incorporated cell company. Such companies have been used to divide assets and liabilities between family members, or to provide for different assets to be held separately – for example, real estate, a traditional portfolio, trading assets (with potentially significant liabilities).

Companies have also been structured to separate control from economic ownership, allowing younger members or a wider family group to benefit, while control is retained by selected individuals. A company limited by guarantee is particularly appropriate for this purpose, as it recognises a class of member who may have no interest in the capital of the company, while at the same time allowing for the issue of shares.

South African clients have also found open-ended companies attractive, particularly for holding family businesses, allowing family members to add to or withdraw from the capital of the company, usually subject to the directors’ consent. Such companies are frequently used in conjunction with a trust at shareholder level.

• Trusts

The concept of a trust originated in medieval times, under Anglo-Saxon law, but their usage has now spread worldwide, particularly to those countries such as South Africa, which have Common Law as a basis for their legislation.

The principal reasons to use an international trust remain; the protection of assets and passing wealth across generations in a controlled and effective manner. However, consideration must be given to the tax liabilities of the settlor, including Donations Tax in South Africa.

• Private Trust Companies

A particularly interesting way of providing involvement for the family, or certain members, at trustee level, is the establishment of a private trust company (PTC) to act as trustee of the family trust.

These structures have become the vehicles of choice for owning and administering the assets of wealthy families. The PTC might be owned by one or more family members or by another trust. In principle it allows involvement in the management of one or more trusts by way of board membership, thus giving the family a greater element of control over the disposition of the family wealth.

• Private Limited Partnerships

Private limited partnerships have proved particularly popular as a means of one generation retaining control, via the General Partner, and another generation gradually receiving benefit through the transfer of limited partnership interests. The responsibilities and role as General Partner may be passed over at an appropriate time in the future.

• Foundations

Many of the above concepts will be easily recognisable in South Africa with its Common Law heritage.

In 2013 Guernsey introduced legislation allowing for the creation of foundations, which are a Civil Law concept. Foundations have some characteristics that are similar to those of a company, with a separate legal personality and a management board known as a Council. The foundation model allows flexibility in drafting to confer corporate status and to provide maximum confidentiality. Foundations are entirely independent and have no shares and no members, nor any concept of share capital. This gives the governing body, the Council, very wide power to manage the assets of the foundation.

Zero Taxation

All of the structures above are,  in principle, not subject to Guernsey taxation. This is provided that the income generated arises outside of Guernsey and those who benefit also reside outside of Guernsey.

Why Choose the Dixcart Group in Guernsey?

Dixcart is an independent group that has been in existence for over forty years assisting a large proportion of individuals and businesses from Eastern and Southern Africa. We have an office in Johannesburg, South Africa, and several senior members of staff of South African origin throughout the Group.

In considering structures for South African clients it is essential to ensure that the use of such structures does not trigger unintentional tax consequences in South Africa. We therefore work very closely with our clients’ advisers to ensure that any structure put in place is appropriate and that each client clearly understands his/her South African reporting obligations.

Dixcart has the experience and expertise to manage every aspect of international private wealth, including:

• Cost effective creation of Guernsey based structures to assist with international trade, investments and estate planning.
• Maintenance of assets in a politically stable, professional environment and in a hard currency.
• Supporting individuals moving overseas through various residences schemes, some of which offer the additional advantage of a passport.
• Aircraft, ship and yacht ownership services, such as registration and tax advice.
• Unquestionable integrity and discretion.
• An established presence in several jurisdictions to provide exponential opportunities for private wealth management and export business solutions.

For additional information regarding the Dixcart Group or to find out more about the benefits that the jurisdiction of Guernsey has to offer please contact John Nelson john.nelson@dixcart.com or Steven de Jersey steven.dejersey@dixcart.com at our Guernsey office.

Dixcart Trust Company Limited Guernsey: Full Fiduciary Licence granted by the Guernsey Financial Services Commission

Guernsey registered company number: 6512.