Wealth Management Workshop: Prospects for Tax Legislation Impacting Wealth Management June 21, 2021
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Wealth Management Workshop:
Prospects for Tax Legislation Impacting Wealth Management
June 21, 2021
Co-Chairs
Percy Castle Sean J. Tevel
Partner, Casahierro Abogados Partner, Holland & Knight LLP
Lima, Perú Miami, Florida
pcastle@dscasahierro.pe sean.tevel@hklaw.com
2
The Panel
Graduated in Law School from Universidad Gabriela Mistral, and Master in
taxation from Universidad Adolfo Ibáñez.
Director of Casa Moneda (Chile), Member of the Board of the Expert Female
Lawyers Commission of the Chilean Bar Association.
Previous partner at Barros & Errázuriz, and tax lawyer in Ernst & Young.
With over 20 years of tax experience, Maria Teresa has specialized in M&A
and business restructuring, as well as high net worth individuals and family
offices, including cross-border estate planning, international restructurings,
tax domiciliation, among others.
MARIA TERESA CREMASCHI M.
cremaschit@mbabogados.com
Partner – Leader Tax Department
MBC – Menichetti, Bolelli & Cremaschi Abogados
3
The Panel
Holds a Master’s Degree in Tax Law from the Argentine Catholic University
and participated in the International Tax Law Course at Leiden University (The
Netherlands). Certified International Compliance and Ethics Officer by the
Asociación Argentina de Ética y Compliance and the Universidad del CEMA.
For the last 16 years, she has been deeply involved within her areas of
expertise. She first worked at the Taxation Department of the largest law firm
in Argentina. Then she became a partner of a top-tier tax & legal firm and
headed its Tax Law and Wealth Planning Area. She currently also advises and
collaborates -as an of counsel- to highly renamed Argentinean and
international firms. Previously to all that, she worked at the Legal Division of
the United Nations in Vienna (Austria).
Professor in various postgraduate courses at the Argentine Catholic
VALERIA D’ALESSANDRO University and Universidad de Belgrano (Argentina). Invited professor at the
vd@dalessandrotax.com University of Miami School of Law (USA).
Founding Member- D’Alessandro Tax Awarded as “Woman in Tax Leader in Argentina”, by International Tax Review
for four consecutive years (2016-2019). Ranked by Chambers & Partners since
2009 (both editions, “Global” and “Latin America”), Legal 500 and World Tax
as leading professional in her area of expertise.
4
The Panel
Monica Reyes Rodríguez is the founder partner in Reyes Abogados Asociados S.A. She
has ample expertise in International Fiscal Planning, including aspects related to taxes,
exchange control and foreign trade, labor and environmental regulations.
She obtained a major in law from Universidad del Rosario and specialized in taxes in the
same university. She attended LLM courses in economic law in London School of
Economics and obtained a diploma on International Tax Law at the Kennedy University in
Switzerland.
Ms. Reyes has participated in the most representative M&A international transactions, in
the design of efficient structures for international investment, and in the most important
tax controversies that have taken place in Colombia.
MÓNICA REYES RODRÍGUEZ
mreyes@reyesaa.com Ms. Reyes worked at the Colombian National Tax Administration. In Occidental Petroleum
Inc. she was the tax planning supervisor for Colombia.
Founding Partner -Reyes Abogados Asociados S.A. As a partner in the law firm Brigard & Urrutia Abogados for the last ten years, she was in
charge of the fiscal practice of the firm.
Ms. Reyes has taught law in the Tax Law diploma and Master’s Degree courses in El
Rosario, Externado de Colombia and Los Andes universities in Bogotá, Colombia.
5
The Panel
Graduated in Law School from Universidade Mackenzie in 2004, and post
graduation in taxation of financial and capital markets from Fundação Getúlio
Vargas (GV Law).
Former Tax Law Teacher at post graduation course at GV Law.
Former foreign Associate at a NY Law Firm and head of tax consulting team at
an important investment bank.
Partner responsible for Wealth Planning practice and works on tax consulting
for high net worth clients including multijurisdiction families and estate
planning for local or offshore estate, redomiciliation processes, etc.
+55 (11) 3145-0954
JOANNA OLIVEIRA REZENDE BARBOSA +55 (11) 982220222
E-MAIL
Partner - Wealth Planning joanna.rezende@velloza.com.br
Velloza Law Firm
6
Objectives
• This program will involve a discussion of the current tax reform landscape in
Argentina, Brazil, Colombia, and Chile, in light of pandemic related economic
issues and the political climate in Latin America.
• Through this program, attendees will be able to identify issues that are
relevant to high net worth clients in each jurisdiction, while also
understanding how the potential for tax reform in Latin America will affect tax
and wealth planning for investment into the United States.
7
ARGENTINA
VALERIA D’ALESSANDRO
JUNE 2021
8
ARGENTINA – CURRENT CONCERNS
9
ARGENTINA – PRIVATE CLIENTS’ MENU
10ARGENTINA – RESIDENCY ISSUES
11ARGENTINA – RESIDENCY ISSUES
12ARGENTINA – RESIDENCY ISSUES
13ARGENTINA – RESIDENCY ISSUES
14ARGENTINA – RESIDENCY + WEALTH TAX ISSUES
2% - 5.25%
15ARGENTINA – TRUSTS + WEALTH TAX ISSUES
¿TAX ELUSION?
¿SETTLOR’S SITUATION?
¿TRANSPARENCY?
¿BENEFICIARIES’ SITUATION?
¿STATUTE OF LIMITATIONS?
16ARGENTINA – WEALTH TAX ISSUES & LITIGATION
17ARGENTINA – EXCHANGE OF INFORMATION
18ARGENTINA – SPECIAL CONSIDERATIONS
19ARGENTINA - ¿WHAT TO EXPECT?
20PROSPECTS FOR TAX LEGISLATION IMPACTING WEALTH
MANAGEMENT IN BRAZIL
Changes
on Estate
Tax
(“ITCMD”)
Taxation of Institution of
Dividends Wealth Tax
(“IGF”)
WHAT TO
EXPECT
FOR THE
Changes
FUTURE
Institution of
on Complementary
Taxation of Law regulating the
Closed- Estate Tax on
End Funds donation and
inheritance of
offshore assets
Trust
regulations
21PROSPECTS FOR TAX LEGISLATION IMPACTING WEALTH
MANAGEMENT IN BRAZIL
NUMBER OF BILLS:
COMPULSORY LOAN 5
STATE BILL - ESTATE TAX ("ITCMD") 3
FEDERAL BILL - ESTATE TAX ("ITCMD") 2
CLOSED-END FUNDS ("IR FUNDOS
5
INVESTIMENTOS")
TRUST 1
TAXATION OF DIVIDENDS ("IR DIVIDENDOS") 8
WEALTH TAX ("IGF") 23
0 5 10 15 20 25RELEVANT STATE BILLS – ESTATE TAX (“ITCMD”)
CHANGES
STATE OF SÃO PAULO
Legislative Bill Last Proceedings
PL 1.315/2019 of 14/12/2019 On 04/09/2020 – Rapporteur Gilmaci Santos presented a favorable
vote for the passing of the Bill.
Throughout May and June of 2021 several City Counsils manifested
PL 250/2020, of 17/04/2020 their contrary opinion to the passing of the Bill to the State’s
Legislative Council
HOW IT IS TODAY: HOW IT WILL BE IF THE BILLS PASS:
• Changes on rates:
• 3%- up to BRL 259.534 (9.400 “UFESP”)
Death Transfer and Gifts (“ITCMD”) current tax rate in the State of
• 4% up to BRL 1.297.670 (47.000 “UFESP”)
São Paulo: 4%
• 5% up to BRL 1.949.266 (70.600 “UFESP”)
• 6% up to BRL 2.595.340 (94.000 “UFESP”)
• VGBL (redeemable life insurance plan ): general rules for no
• 7% up to BRL 3.893.010 (141.000 “UFESP”)
taxation
• 8% above BRL 3.893.010,01
• Some States Exceptions – requiring ITCMD on VGBL
VGBL: Estate Tax (“ITCMD”) levy
Applicability: Only applicable for the next tax year and after 90 days from the date of
publicationRELEVANT FEDERAL BILLS – ESTATE TAX (“ITCMD”)
CHANGES
Legislative Bill Author Proposed Changes
Regulates the authority of the States legislation to institute
PL n. 432, 2017 of Senator Fernando the Death Transfer and Gifts (“ITCMD”) when: the donor is
17/11/2017 Bezerra Coelho domiciled abroad; the deceased was domiciled abroad
(MDB/PE) or the probate processed abroad (item III § 1 article 155 of
the Federal Constitution).
Constitutional
Author Proposed Changes
Amendment
Changes on “ITCMD”: to be called Tax on Large Inheritances and
Senator Fernando
Donations, in order to tax the transmission causa mortis and donation of
PEC n. 96, of Bezerra Coelho
high value goods and rights. Progressive rates depending on the tax
2015 (PSB/PE) and
base, and its maximum rate may not be higher than the highest tax
others
rate of the individual - Max. 27,5%.
Applicability: Only applicable for the next tax year and after 90 days from the date of publicationCLOSED-ENDED INVESTMENT
FUNDS CHANGES
Legislative Bill Author Proposed Changes
Institution of semiannual taxation (“come-cotas”) - May and November of each year
on the income of Closed Funds - currently, only imposed upon redemption of
shares or at the end of the duration of the Closed Fund.
Institution of taxation of Legal Entities in Private Equity Investment Fund (“FIPs”) that
are not considered as investment entities – Income Tax and Social Contribution
(“CSLL”) – and accumulated gains up to January 2, 2019 will be subject to the 15%
Income Tax rate - currently, 15% Income Tax is levied only on the redemption of shares
Federal
PL 10.638/2018 or at the end of the duration of the Fund.
Executive
of 30/07/2018
Branch Institution of taxation on positive exchange variation results of the portion of the
value of the investment made by financial institutions and others in a subsidiary
abroad, with hedge of foreign exchange risk – Income Tax and Social Contribution
(CSLL)
- Currently, foreign exchange gains are not taxed.
For Investment Funds whose shares have economic usufruct, the Bill proposes that
the WITHHOLDING INCOME TAX must be retained from the income beneficiary, even
if the latter is not the holder of the fund's shares.
Annual Applicability – Only applicable for the next tax yearWEALTH TAX (“IGF”) - CREATION?
Legislative
Author Proposed Changes
Bill
Tax due due by Individuals domiciled in Brazil; Individuals and Legal
Entities domiciled abroad holding assets in Brazil; Estate of those
deceased persons
Rates, depending on the net worth:
Congressman
0,5% - BRL 5.000.000,00 to BRL 10.000.000,00;
PLP 924 from Assis
1%- BRL 10.000.000,01 to BRL 20.000.000,00;
24/03/2020 Carvalho (PT-
2% - BRL 20.000.000,01 to 30.000.000,00;
PI)
3% - BRL 30.000.000,01 to 40.000.000,00
5% - above BRL 40.000.000,01.
Does not apply to small value assets; Homestead not over BRL 2 million
and vehicles not over BRL 100.000,00
Individuals domiciled in Brazil; Individuals and Legal Entities domiciled
PLC abroad holding assets in Brazil; Estate of those deceased persons
Senator Plínio
183/2019
Valério 0,5%, of net worth from BRL 22.847.760,00 to BRL 38.079.600,00;
from
(PSDB-AM) 0,75%, of net worth from BRL 38.079.600,01 to BRL 133.278.600;
06/08/2019
1%, of net woth over BRL 133.278.600,01;
Duration of 2 years, according to the proposed amendment
Annual Applicability – Only applicable for the next tax year (Complementary Law necessary)WEALTH TAX (“IGF”) CREATION?
Legislative Bill Author Proposed Changes
Tax due by Individuals domiciled in Brazil; Individuals and Legal Entities
domiciled abroad who hold assets in Brazil; Estate of those deceased persons
Rates, depending on the net worth:
1,0%, BRL 20.000.000,01 to BRL 50.000.000,00;
2,0%, BRL 50.000.000,01 to BRL 100.000.000,00;
3%, over BRL 100.000.000,00
Example:
PLP 88/2020 Congressman
from Celso Sabino Net Worth Rate Wealth Tax due
09/04/2020 (PSDB/PA) BRL 50.000.000 1% BRL 500.000
BRL 100.000.000 2% BRL 2.000.000
BRL 150.000.000 3% BRL 4.500.000
Tax is based on the Net Worth in 31/12 and charged per Income Tax Return,
due on the month of April of the subsequent tax year
Payment until last day of April
Congresswoman
Tax due by Individuals domiciled in Brazil; Individuals and Legal Entities domiciled abroad
PLP 123/2020 Erika Kokay
who hold assets in Brazil; Estate of those deceased persons
from 11/05/2020 (PT/DF) and
Others Fixed Tax Rate of 2% to net woth exceeding BLR 50.000.000
Annual Applicability – Only applicable for the next tax year (Complementary Law necessary)BRAZILIAN IRS OPINION AGAINST
WEALTH TAX CREATION
The Brazilian IRS was asked to issue a statement regarding the institution of the Wealth
Tax. The federal agency was opposed to the creation of the Tax for the following main
reasons:
High risk of assets concealment, especially offshore
Difficulty of inspection
Low tax revenue in countries that have already
implemented the tax in a similar wayTAXATION OF PROFITS AND
DIVIDENDS
Legislative Bill Author Proposed Changes
∙ WITHHOLDING INCOME TAX: 20% OR
25% in the case of a beneficiary residing in a
∙ CORPORATE INCOME TAX from 25% to
tax haven.
18% (Reduction of rate from 15% to 10% /
∙ Anticipation of amount due on Income
Congressman Additional rate from 10% to 8%) ∙
PL 3129/2019 from Tax Return. Utilization of the Withholding
Luís Miranda The social contribution rate (“CSLL”) remains
28/05/2019 Income Tax by the partners / shareholders of
(DEM-DF) at 9%
the Legal Entity "receiving" profits or
Revokes Interest on equity (article 9º Law
dividends, in the distribution of revenues of the
9249/1995)
same nature ∙ incorporation of profits or
reserves is not subject to taxation
WITHHOLDING INCOME TAX 15% For the Legal Entity taxed on the basis of
Anticipation of amount due on the taxable profit, the discounted amount will be
Senator Otto
PL 2015/2019 from beneficiary’s Income Tax Return / definitive in considered as a prepayment that is offset
Alencar
03/04/2019 other cases. against the income tax that is due regarding
(PSD-BA)
25% in the case of a beneficiary residing in a the distribution of profits and dividends. In
tax haven. other cases, taxation will be final
WITHHOLDING INCOME TAX 4% for the 1º CORPORATE INCOME TAX ∙ Reduction
and 2º years equivalent to the estimate of WITHHOLDING
Congressman increase of 4 percentage points per year INCOME TAX collection on profits (1st and
PEC 128/2019 from
Luís Miranda (3rd to 6th year) 2nd years).
16/08/2019
(DEM-DF) ∙ 20% from the 6th year∙ Calculated in order to offset the estimated
definitive / exclusive incidence of source of reduction in for
Annual Applicability – Only applicable thefrom
revenue next tax
other year
taxes (3rd to
the WITHHOLDING INCOME TAX 6th year).
Annual Applicability – Only applicable for the next tax yearCHANGES ON INCOME TAX RATES FOR INDIVIDUALS AND LEGAL ENTITIES
AND REVOCATION OF EXEMPTIONS
Legislative Bill Author Proposed Changes
Changes the progressive rate for the monthly income tax, which
was capped at 27.5%, from 0% to the max. rate of 37,5%, which is
applicable when the monthly income surpasses BRL 45.000,01
Reduces the corporate income tax rate to 12.5% and the additional
rate to 7.5%.
Senator Revokes the exemption on dividends received from legal entities,
PL 1952/2019 Eduardo including micro-enterprises, creating a 15% rate.
from 02/04/2019 Braga
(MDB/AM) Revokes exemptions from Income Tax on income from real estate
funds, investments in securities such as “LCI”s and “CRI”s and
on the sale of shares on the stock market up to the limit of BRL
20.000 per month
It revokes the corporate income tax deduction for the interest paid
to company partner, as remuneration on equity.
Annual Applicability – Only applicable for the next tax yearPOTENTIAL TRUST REGULATION
Legislative
Author Proposed Changes
Bill
Introduces in Brazilian law the “fiduciary contract”, a regime for the
administration of third-party (beneficiary) assets, inspired by the
figure of the Trust
PL The main objective of the project is to determine the separation
Enrico
4758/2020 between the assets of the settlor and the trustee, who cannot use
Misasi
from them for their own benefit. This shielding prevents legal problems
(PV-SP)
29/09/2020 faced by the trustee (such as pledge) from reaching the settlor's
assets.
The Bill does not deal with the taxation on the transfer of
assets to the beneficiary.CHILE- A bit of context
32A bit of context
• Last changes in Chilean legislation impacting Wealth management
Tax Amnesty in 2015
CFC Rules introduced in 2016
Last big tax reform took place in February 2020 (Law N°21.210)
• Social Crisis in October 2019, worsened by the Coronavirus social effects
Social, politic and economic polarization.
New Constitution process, elections, and presidential elections year.
Legislative Populism.
33Wealth Tax currently in discussion
• Origin: Emergency universal income
• Status of the Wealth Tax Bill
Bill was not approved by the Chilean House of
Representatives (obtained 79/155 votes).
The bill will be revisited in the Senate.
Unpredictable future of the bill (several elections
coming ahead).
34Wealth Tax currently in discussion
• Main dispositions of the Wealth Tax Bill
Taxpayers who as of December 31st, 2020, own a net equity
exceeding USD 22 million
Tax Rate: 2,5%
Tax is to be paid within 60 days from the publication of the
Law
Penalty taxes of up to 30% for non-compliance. Mischievous
infractions are even subject to imprisonment.
35Wealth Tax currently in discussion
• Expected tax collections effects
Congress: USD 6.500 million (5.840 taxpayers)
Chilean IRS: 1.500 million (1.409 taxpayers)
• Main critics to the bill
Poor legislative technique
Double (or even triple) taxation
36Other relevant changes contained in the Tax Bill
• Corporate tax increase for Large Companies (“temporally”) from 27% to
30% for 2021-2022.
• Elimination of the tax incentive on sale of shares of public companies in the
stock market (capital gains subject to general taxes).
• Elimination of tax incentives for private investment funds (dividends subject
to Corporate Tax).
37Consequences of the Tax Bill
• Expatriation of financial investments.
Investment vehicles located mostly in Canada, New Zealand,
Luxembourg, UK.
The current trend among Chilean high net worth individuals is
choosing jurisdictions that offer a more robust political protection
(bilateral investments treaties in force with Chile, tax treaties, etc.)
Investments are dully informed to the tax authorities, but investment
is made directly by the individuals abroad, in order to better isolate
the political risk.
Preferred structure: Canadian LP – American GP
38Consequences of the Tax Bill
• Expatriation of real estate investment
Resentment of the local real estate industry, due to an increase of
investment in real estate in the US.
39Potential future proposals of tax reforms
• Elimination of benefits for individuals regarding Real Estate investments
DFL-2
Exemption UF 8.000 (USD 330,000 app.) on capital gains.
Reduced flat tax rate of 10% over the excess of the USD 330,000.
• More stringent CFC rules
Currently, individuals and family members are not deemed related for CFC
purposes.
40Current Rules: Colombian Tax Residency
Whose spouse and children
qualify as Colombian fiscal
residents.
50% or more of the net
assets are possesed
Residence within Colombian nationals who within the country.
Colombian territory for more have left the country but
than 183 days. 50% or more revenues are
Colombian source income.
50% or more of the assets
are managed from
Colombia.
Reside in a Non-
cooperative jurisdiction.Individuals required to file an income tax return under current rules.
Gross income exceeding 1.400 Purchases and consumption Purchases through credit cards
Tax Value Units TVU ( 14.000 exceeding 1.400 TVU ( 14.000 exceeding 1.400 TVU (14.000
USD approx.) or Gross Assets USD approx.), anually. USD approx.)
exceeding 4.500 TVU (45.000
USD).
Minimum Monthly $908.527
Bank deposits exceeding Salary
1.400 TVU ( 14.000 USD Minimum Monthly 248 USD
aporox.) Salary in USD
TVU 2021 $36.308
Estimated USD1=
Exchange Rate COP$3.665
* Law 2010 de 2019 DUR 1.6.1.13.2.7Current Rules
Schedular Income Tax System in Colombia
General Schedule Dividend Schedule Pension Schedule
Labor Earnings
Capital Income
Non Labor EarningsCURRENT RULES Pension Schedule Annual exemption 12.000 TVU (119.000 USD aprox.)
Current Rules
Colombian Tax Rates Applying to Resident Individuals.
Ranges in Tax Value Units
Marginal Rate Tax
From To
0 1090 0% 0
(Taxable basis in TVU less 1090 TVU) X
>1090 1700 19%
19%
(Taxable basis in TVU less 1700 TVU) X
>1700 4100 28%
28%+116 TVU
(Taxable basis in TVU less 4100 TVU) X
>4100 8670 33%
33% + 788 TVU
(Taxable basis in TVU less 8670 TVU) X
>8670 18970 35%
35% + 2296 TVU
(Taxable basis in TVU less 18970 TVU) X
>18970 31000 37%
37% + 5901 TVU
(Taxable basis in TVU less 31000 TVU) X
>3100 onwards 39%
39% + 10352 TVUCurrent Rules.Capital Gains Tax
Sale of fixed assets held for more than 2 years
10%
Earnings from the Liquidation of Companies
Succesions , Legacies and Donations
Insurance Indemnities
Loteries, Rifles and Games Prizes 20%Current Rules.Equity Tax
Exceptional Tax for 2020 y 2021
Net Equity for COP 5000 million
(USD 1.366.120) or more, held on 31/12 of the
prior year.
1% RateCurrent Rules.Equity Tax Individuals and successions subject to income tax. Non-resident individuals regarding assets held directly in Colombia. Foreign entities excluded from filing income tax returns in Colombia, which own goods different from shares, account receivables and portfolio investments within the country, with the exception of companies executing financial lease agreements with local residents, inaslong as the exempted assets comply with exchange control rules.
First Tax Bill filed before Congress. Government Bill still
pending.
Measures to reduce Poverty.
To guaranty education and the implementation of virtual systems for students in
social strata numbers 1, 2, and 3.
To extend duration of the Program to Support Formal Employment (Programa de
Apoyo al Empleo Formal –PAEF-) until December 2021.
Creation by the National Government of 500.000 new formal jobs for individuals
younger than 30 years..Tax Bill. Measures to reduce Poverty. To extend the Solidarity Subsidy (“Ingreso Solidario”) to avoid extreme poverty. To limit expenditures at the national level by reducing the General Budget in 10% for the following three fiscal years. To give extraordinary faculties to the President to issue legal dispositions with the purpose of reducing burocratic expenditure.
Proposal for a Tax Reform by the
National Financial Institutions Association, ANIF
To mantain current marginal rates and thresholds for income tax .
To establish a 15% temporary surcharge on income tax.
To limit all income tax exemptions to 25% gross income for taxpayers
declaring more than COP100.000.000 (27.300 USD approx.).Proposal for a Tax Reform by the
National Financial Institutions Association, ANIF
PENSIONS
To tax monthly pensions exceeding COP 6Millions (1.637 USD) at a 10%
rate.
DIVIDENDS
To increase marginal rates on dividends received by individuals to 12,5%. In
case dividends perceived by an individual exceed 75% earnings, dividends
should be taxed at income tax progressive rates.Proposal for a Tax Reform by the
National Financial Institutions Association, ANIF
NET EQUITY RATE
COP 0 - $1.500 million (409.000 USD) 0%
COP1.500 million (409.000 USD) - $2.000 million 0,75%
(546.000 TVU)
$2.000 (546.000 TVU) a $2.500 million (682.000 1%
USD)
$2.500 (682.000) a $4.000 million (1.091.000 1,25%
approx.)
$ 4.000 million (1.091.000 approx. onwards) 1,5%
Temporary tax for the next 4 years.Tax Reform Proposal by the National Businessmen
Association. ANDI
To avoid Tax Credits for Industry and Commerce Tax. (ICA).
To impose a Temporary Equity Tax for the next 2 years, on
Taxpayers holding net assets exceeding COP 5.000 million ( USD
1.365.000 aprox) at a 1% rate.Other Proposals Increase Tax on Inheritances. Restrictions to exemptions and tax credits. Equity Tax.
Questions?
Attendees can submit questions via the Q&A
feature on the virtual meeting interface.
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