Malta : Implementing the Beneficial Owners Registry.

Malta’s Minister for Finance, Edward Scicluna, informed delegates to a recent law conference at the Old University in Valletta that beneficial ownership regulations will be published in the coming weeks.

In the new regulation enviroment every company registered in Malta will have to hold full informations on its beneficial owners, and will have to submit these information to the Registrar of Companies.

The new regulation will also provide for the establishment of a beneficial ownership register of companies, which will be directly accessible without any restriction to competent authorities, to obliged persons, and possibly to the general public, depending on the outcome of current negotiations on proposed amendments to the European Union’s 4th Anti-Money Laundering Directive.

Scicluna said the proposed register would further reinforce transparency and was necessary to fully comply with international standards and the 4th Anti-Money Laundering Directive.

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EU’s Fifth Anti Money Laundering Directive. Are you ready?

EU’s Fifth Anti Money Laundering Directive (5AMLD) sets out a series of measures aiming to strengthen the core provisions of 4AMLD (in force since June 26, 2017) in light of the “Papers” revelations of April 2016 and in direct response to recent terrorist attacks in Europe. The 5AMLD seeks to ensure a high level of safeguards for financial flows from high-risk third countries; to enhance the powers of EU Financial Intelligence Units (FIUs) and facilitate their cooperation; to ensure centralised national bank and payment account registers or central data retrieval systems in all Member States; to tackle terrorist financing risks linked to virtual currencies; to tackle risks linked to anonymous pre-paid instruments (e.g. pre-paid cards).

The 5AMLD proposes five main topics that impact financial institutions:

  1. Beneficial Ownership Registers. Following the 4AMLD, businesses have an obligation to hold beneficial ownership records. Under the 5AMLD, EU citizens will be granted access to these beneficial ownership records, even without having to demonstrate a ‘legitimate interest’. Trusts will also now be required to meet the full transparency obligations which incorporate the beneficial ownership requirements. Moreover, it has also been suggested that, in the case of entities that pose a significant money laundering and/or tax evasion risk, the ownership threshold is reduced from 25% to 10%.
  1. Virtual Currencies. According to the 5AMLD the virtual currencies are “A digital representation of value that can be digitally transferred, stored or traded and is accepted by natural or legal persons as a medium of exchange, but does not have legal tender status and which is not funds as defined in points (25) of Article 4 of the Directive 2015/2366/EC nor monetary value stored on instruments exempted as specified in Article 3(k) and 3(l) of that Directive.”

The 5AMLD also brings virtual currency platforms and wallet providers under the scope of the directive and includes them within the definition of ‘obliged entities’. Under 4AMLD, obliged entities are defined as financial institutions, accountants, tax advisors, etc.

  1. Prepaid Cards. The proposed updates in 5AMLD related to use of prepaid cards aim to address the issue of anonymity associated with such payment mechanisms. EU Member States will be required to identify the customer in the case of remote payment transactions where the amount paid exceeds €50. It also suggests this should be lowered to zero after a ‘sufficient transitional period’ to allow adaptation to the new regulatory framework. The threshold of maximum monthly payment transactions has been reduced to €150 and the maximum amount of money stored is not to go above this threshold either.
  1. Information Sharing. In order to enhance and simplify access to information on the identity of holders of bank and payment accounts, the 5AMLD requires Member States to put centralised automated mechanisms in place at the national level to identify payment accounts and bank accounts held by a credit institution, thereby developing a central source to identify all bank accounts for an individual person.
  1. Enhanced Due Diligence. The 5AMLD will require Member States to apply a specific list of enhanced due diligence (EDD) measures for transactions involving entities on a list of high-risk third countries defined by the European Commission. This proposal outlines the minimum EDD measures obliged entities must apply, which will provide for a formalised approach and alignment of such EDD measures with the list of actions drawn up by the FATF. This will ultimately lessen differences in regulatory requirements between Member States, minimising cases where a select number of EU countries commercially benefit relative to others adopting more stringent EDD requirements. Critically, this aims to reduce the ability of terrorists to exploit weaknesses in these measures.

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Cyprus : The New Intellectual Property Tax Regime.

After the approval of the Cypriot Parliament on October 14, 2016, the new Cypriot intellectual property regime (IP) is in force. The provisions of the IP box regime, in line with the latest international developments on the taxation of IP income and recommendations under action 5 of the OECD’s BEPS project, apply retroactively as from July 1, 2016.

The new IP regime follows the modified “nexus approach.” According to this approach, there should be sufficient an essential nexus between the expenses, the IP assets and the related IP income in order to benefit from a patent box regime.  Under the nexus approach, the application of an IP regime should be dependent on the level of Research and Development (R&D) activities carried out by the qualified taxpayer. In other words, 80% of qualifying profits generated from qualifying assets will be deemed to be tax deductible expenses, and in case of losses only 20% of the loss will be carried forward or be surrendered for the purpose of group loss relief.

Qualifying profits (QP) are defined as the proportion of the overall income (OI) derived from the qualifying asset, corresponding to the fraction of the qualifying expenditure (QE) plus the uplift expenditure (UE) over the overall expenditure (OE) incurred for the qualifying intangible asset.

The amount of qualifying profit can be derived through the application of the following formula:

                                QE + UE

              QP = OI x —————


Overall income (OI) derived from qualifying assets is defined as the gross profit from the assets. It includes the following items:

Royalties or any other amounts relating to the use of qualifying assets;

Any amount for the grant of a license for the exploitation of the qualifying assets;

Any amount relating to the insurance or compensation of the qualifying assets;

Trading income from the disposal of the qualifying asset;

Embedded income on qualifying assets, which is derived from the sale of goods, the provision of services or use of any process that are directly related to the qualifying assets.

Qualifying expenditure (QE) relating to a qualifying asset is the sum of all R&D expenditure incurred in any tax year wholly and exclusively for the development, enhancement or creation of a qualifying asset and that is directly related to that asset. Qualifying expenditure includes the following items:

Salary and wages;

Direct costs;

General expenses associated with R&D activities;

Commission expenditure associated with R&D activities;

R&D expenditure outsourced to unrelated parties.


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