IN204 - The Future Control of International Family Wealth

1. IN204 - The Future Control of International Family Wealth
International financial regulation continues to be subject to significant change. Terrorism has obviously played a part and, more
recently, volatile money markets and the credit crunch have changed the taxation expectations of Governments and the
requirements that they now specify for monetary reporting.
These trends have contributed to an increased need for structures that provide certainty and clarity in relation to commercial
activities.
Transparency and Tax Compliance
Appropriate ownership structures have been in place for many family positions for a considerable time. These are often of great
value in preserving a family’s wealth and well being for the future.
In recent years the heightened Government reporting expectations around the world have increased the need for transparency
and the flow of information from jurisdictions.
This is largely as a result of the openness of information required under tax information exchange agreements, double tax
agreements and the EU Savings Tax Directive, as well as the increased reporting obligations demanded from qualified
intermediaries.
The historic acceptance by some that banking secrecy and a less than complete regard for tax compliance in the home country
of an individual were acceptable in achieving tax savings has rapidly been brought to an end.
Future Models for International Business
The changes and pressures that remain are generating an increasing need for international tax structuring advice. An element
of tax competition between countries will always exist to secure national investment and local taxable activity from both
corporations and individuals.
Opportunities to enhance tax efficiencies will therefore remain available.
Further changes in the approach to international business will need to develop as a result of the following factors:
Business is now much more mobile as a result of the internet and the ability to sub-contract various aspects of
business support. International trading activities can be located in many jurisdictions around the world and can be
moved to take advantage of lower taxes on profits.
The increase in multi jurisdictional activity (where business activity is conducted in more than one jurisdiction) creates
other tax issues which influence the location of a business:
It is vital to consider the location of the management and control of a business and the issue of “substance” in
relation to the organisation of business affairs through a connected company located elsewhere.
Transfer pricing and controlled foreign corporation laws may be relevant to international organisations. These
can significantly affect the tax “acceptability” of a situation.
The country where the business activity takes place does not need to be, and increasingly will not necessarily be, the
country of residence of the individuals owning the business.
The critical factor is the ultimate personal tax position of the individual or individuals owning the structures.
Individual Tax Liability
Personal taxation is normally applied relative to the country of residence of the individuals. Joint ventures by families with
individuals resident in lower tax jurisdictions can provide the opportunity for some tax sheltering. There is also the potential for
families working internationally to develop an ownership structure in a low tax jurisdiction for the protection of the family as a
whole.

2. The United States of America (USA) is one of the few countries in the world which taxes its citizens on the basis of citizenship
and not of residence. Wherever its citizens are living, they remain subject to US taxation. The “new world” may well create an
increased impetus to achieve a change of citizenship, particularly by US citizens living outside the US who may have very little
connection to the USA.
In countries such as the United Kingdom (UK) there is an advantage in being a foreign born resident. Tax liabilities may then be
restricted to remittances and earnings in the UK. Planning to take advantage of this provision requires expert tax advice and on-
going vigilance.
National tax exemptions, like those applicable in the UK, are relevant and present opportunities, in varying degrees, in a number
of countries.
Motivational Factors
Family holding structures may not solely be established for tax purposes, and often the issue of income tax in particular is not
the major motivational factor.
Various considerations should be taken into account when planning for business and wealth succession:
How the wealth will pass down the future generations and whether it should be held in such a way that it will benefit
more than just the next generation.
Structures will be required which protect families from internal events and individuals, such as divorce and spendthrifts.
Account needs to be taken of political risk and the risk of extortion should the full extent of a family’s wealth be widely
known.
Structures are required to ensure that wealth managers have sufficient independence to take necessary action to protect
wealth from economic problems, such as the recent turmoil in the banking industry.
Location, Location, Location
The key for the future is where the entrepreneur lives or, more importantly, where he does not live and who he does business
with.
Control over the assets owned, in conjunction with trusted partners or family members, will often be very important in developing
wealth and maintaining its value.
It is not just low tax jurisdictions that will appeal to wealthy individuals. They may re-locate to jurisdictions which provide a base
for the management of funds for the benefit of the family and business partners, in conjunction with other professionals.
Increased review and reporting requirements may only serve to further exacerbate this flow of wealth, and people with wealth, to
new centres.
Future Capital Holding Arrangements
The importance in planning for the future is to structure and develop transparent business ventures and investment holdings,
recognising the base of residence of the participating individuals. These individuals may include family members resident in
different countries, and also trusted custodians and business partners.
Tax obligations for annual reporting can be structured to fall on individuals resident in preferred locations, with the long term
position being protected by commercial agreements or ownership holding arrangements.
Conclusion
Wealthy families need to plan carefully how to hold family wealth. These plans need to be based on a family’s real needs, not
just on taxation issues. The legal and taxation rules in the home jurisdiction of the family must be taken into account.
The most efficient tax structures will be achieved where families can take advantage of greater mobility and the increasingly
international character of families. As a result, families will require expertise and advice relating to many countries.
Additional Information
If you would like further information on this topic, or to discuss which tax jurisdiction might be most appropriate to achieve
specific objectives, please speak to Laurence Binge at our office in the UK or alternatively contact us.

4. DIXCART GROUP OFFICE LOCATIONS
Website: www.dixcart.com
Dixcart Guernsey Dixcart Trust Corporation Limited
Contact: Alan Corlett or John Nelson
Address: PO Box 161, Dixcart House, Sir William Place,
St Peter Port, Guernsey, CI, GY1 4EZ
Tel: +44 (0)1481 723996 Fax: +44 (0)1481 727417
Email: advice@dixcart.co.gg
Full Fiduciary Licence granted by the Guernsey Financial Services Commission
Dixcart Isle of Man Dixcart Management (IOM) Limited
Contact: Simon Kelly
Address: 69 Athol Street, Douglas,
Isle of Man, IM1 1JE
Tel: +44 (0) 1624 649250 Fax: +44 (0) 1624 615603
Email: advice@dixcart.co.im
Licensed by the Isle of Man Financial Supervision Commission
Dixcart Madeira Dixcart Management (Madeira) Lda
Contact: John Dias or Carlos Lourenco
Address: Avenida do Infante 50, 9004-521,
Funchal, Madeira, Portugal
Tel: +351 291 225019 Fax: +351 291 226418
Email: advice@dixcart.pt
Dixcart Malta Dixcart Management Malta Limited
Contact: Sean Dowden
Address: Level 15, The Business Tower, Portomaso,
St Julians, STJ 4011, Malta
Tel: +356 2248 4000 Fax: +356 2248 4050
Email: advice@dixcart.com.mt
Dixcart Nevis Dixcart Management Nevis Limited
Contact: John Terry
Address: PO Box 598, Dixcart House, Fort Charles, Charlestown, Nevis,
St. Kitts and Nevis, West Indies
Tel: +1 869 469 2829 Fax: +1 869 469 6509
Email: advice@dixcartnevis.com
Dixcart Sark Dixcart Management Limited
Contact: Alex Magell
Address: Le Grand Dixcart
Sark, Channel Islands, GY9 0SD
Tel: +44 (0)1481 832444 Fax: +44 (0)1481 832394
Email: advice@dixcartsark.gg
Full Fiduciary Licence granted by the Guernsey Financial Services Commission
Dixcart Switzerland Dixcart Corporate Services Sàrl
Contact: Christine Breitler
Address: 3, rue du Port, PO Box 3083,
1211 Geneva 3, Switzerland
Tel: +41 22 320 37 65 Fax: +41 22 800 32 05
Email: advice@dixcart.ch
Dixcart UK Dixcart International Limited
Contact: Laurence Binge or Joe Dunne
Address: Hillbrow House, Hillbrow Road, Esher,
Surrey, KT10 9NW, UK
Tel: +44 (0) 1372 461400 Fax: +44 (0) 1372 461401
Email: advice@dixcart.co.uk