The deadline for EU member states for adoption of the legislation for implementation of 4th Directive was June 26, 2017, but the debate about how 4th Directive should be implemented, who should have the access to the mentioned above registries and how the implementation of 4th Directive could improve the transparency in practice is still ongoing.
Our experts of the tax planning practice with this article have begun a collection of analytical materials regarding the requirements for disclosure of UBOs in European countries that are popular for tax planning purposes.
In this article we are considering Cyprus – the conclusive leader among jurisdictions used by Ukrainian business, and the Netherlands.
This country completed the implementation of 4th Directive on April 3, 2018. At this point, the current legislation in Cyprus is the “Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2018” (hereinafter – the Law).
The Law defines the UBO as follows: any individual who ultimately owns or controls the relevant legal entity and / or individual on whose behalf the transaction is being conducted, provided that:
- in the case of legal entities, an individual who ultimately owns or controls, directly or indirectly, a sufficient percentage of the shares or voting rights or ownership interest in such legal entity, including control through bearer shares or through other means, provided that such ownership of shares must be 25% plus one share or ownership interest of more than 25%, except for companies whose shares are traded on a regulated market that is subject to disclosure requirements in accordance with European Union legislation or in accordance with equivalent international standards that ensure adequate transparency of information on the ownership structure;
- in the case of trust (a) the settlor; (b) trustee or commissioner; (c) the protector, if any; (d) the beneficiary; (e) any other individual exercising ultimate control over the trust through direct or indirect ownership, or by other means.
The administration of legal entities must ensure the registration of an UBO.
Article 61 of the Law provides the establishment for the creation of a central registry of UBOs of legal entities, access to which will have: (a) specially authorized authorities (in different cases this may be the Central Bank of Cyprus (for financial companies), the Cyprus Securities and Exchange Commission) Cyprus market (for example, for investment companies, etc.) tax and custom authorities, the police and a specially created body to combat money laundering - without restrictions; (b) persons responsible for carrying out client's due diligence checks - as part of implementation of such check measures; and (c) an individual or legal entity who exhibits a so-called “legitimate interest” - may have access to the name, month and year of birth, nationality and country of residence of the relevant UBO, as well as the nature and extent of control.
At current time, the register of UBOs in Cyprus is not yet operational, but its implementation is expected in the near future.
On 6 April 2018, the draft decree was published in the Netherlands, amending the country's legislation for the purposes of implementation of 4th Directive. The draft decree includes the concept of UBO. It should be also stressed that in the Netherlands there will be no separate registry of UBOs, information on UBOs will be the part of the data in the Dutch Commercial Register (Handelsregister). Mandatory registration applies, among other things, to companies, foundations, associations, shipping companies, partnerships, cooperatives and European companies.
UBO is determined for different types of legal entities in different ways. We, in turn, decided to focus on the most common situations: a public limited company and a private limited company.
For such companies, a UBO is a person who is the direct / indirect owner of such a company or controls this company through:
- direct or indirect ownership of more than 25% of shares, voting rights or ownership interest in a company, including the ownership of bearer shares;
- other means, including consolidation terms, specified in section 2: 406 of the Dutch Civil Code, and, for example, shareholder agreements.
The registry of the UBO for legal entities will become publicly available, including for persons without a "legitimate interest" which is not in Cyprus. At the moment it is known that the following information will be open: names, month and year of birth, citizenship, state of residence, as well as the share of participation of the relevant UBO.
Currently, the register of UBO in the Netherlands is not yet operational, however, its implementation is expected this year.