EFFECTIVE USE OF PRIVATE FOUNDATION AND INTERNATIONAL BUSINESS - - PowerPoint PPT Presentation

EFFECTIVE USE OF PRIVATE FOUNDATION AND INTERNATIONAL BUSINESS COMPANIES FOR ASSET PROTECTION AND WEALTH MANAGEMENT

14 May 2019 Ho Chi Minh City

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The Context of Wealth Management in Vietnam

Speaker: Lim Chor Ghee

CPA(Aust), CA(M’sia), MBA(HW,UK), MIntS(Syd), MIBP(UNISA), BComm(Melb)

General Director, Tricor Vietnam

HCMC, 14 May 2019

P5

• The surge of Vietnamese high net worth individuals and

the rise of outbound investment from Vietnam

• Classes of outbound investment / assets preferred by

Vietnamese companies and individuals

• Holding Vietnamese business through offshore entities and

funds

• Tax planning? Avoidance or evasion?
• Legal and regulatory framework for outbound investment

P6

Source: GSO

2017 FDI: US$35b Registered US$17b disbursed

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https://seekingalpha.com/article/4188271-growth-emerging-asean

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Classes of outbound investment / assets preferred by Vietnamese companies and individuals?

P11

Tax: Resident vs Non-resident

Resident Habitual Residence Having a registered place of permanent residence under the law on residence Having a house lease contract of 183 days or more in Vietnam within a tax year and cannot demonstrate tax residence of another country Number of residing days Physically present in Vietnam for a period of 183 days or more within one calendar year or for 12 consecutive months from arrival date Non-resident Individuals who do not meet either of the above criteria

P12

Tax treatment – Employment Income

RESIDENT

• PIT on worldwide income
• A number of allowable

deductions

• Progressive tax rate from 5%

to 35%

• PIT paid overseas may be

creditable (fully/partly)

NON- RESIDENT

• PIT on Vietnam-sourced

income

• Deductions are not permitted
• Flat tax rate of 20%
• PIT exemption under DTA

may be applied

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Tax treatment - non employment income

Taxable income Tax rate Resident Non-resident Business (e.g. house rental) From 0.5% to 5% From 1% to 5% Dividend 5% 5% Capital/shares transfer 20% on gains OR 0.1% on sale proceeds 0.1% on sale proceeds Real property disposal 2% on sale proceeds 2% on sale proceeds Royalties/franchising 5% on amount exceeding VND10 million Winnings/Prizes Inheritance/Gifts 10% on amount exceeding VND10 million

P a g e 1 3

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Avoid change of IRC

VN

Capital Gains Mitigation?

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https://www.ogier.com/publications/utilising-bvi-and-cayman-islands- entities-for-private-equity-investment-into-china

Is this do-able in Vietnam?

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• The Vietnamese businesses invested in 16 countries and territories in the reviewed time, with

Laos leading the list by accounting for 53.5 percent of total investment, followed by Cambodia, 17.3 percent, Cuba, 13.3 percent, and Australia 8 percent, reported the Foreign Investment Agency.

• Vietnamese firms invested almost $21.4 billion into 1,188 projects across 70 countries and

territories as of January 2017, FIA reported.

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Outbound Investment from Vietnam

• Company - requires outbound investment license.
• By individuals? Upon obtaining residence status
• verseas
• Tied to foreign exchange regulations
• In reality?

– Regulations lacks clarity / details. Opaque implementation / administrative procedures – Strict foreign exchange control and inconsistent laws – Concern over tax implications

P18

• New Investment Law (late 2019 / 2020?)

– an IRC for outbound investment by Vietnamese investors is no longer required; it is proposed that outbound investment will be controlled through foreign exchange regulations on the transfer of capital overseas

• Circular No.36/2018/TT-NHNN / 15 Feb 2019

– The lending rates should be agreed between lenders and customers (investors) but shall not exceed 70% of the customers' offshore investment capital

Outbound Investment – Recent Updates

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HCMC Tricor CBD: Level 1, IMM Group Building, 99 Nguyen Dinh Chieu Street, Ward 06, District 3, HCMC Tricor Center: No 16, Yen The Street, Ward 02, Tan Binh District, HCMC Hanoi Client Service Office: Room 909, 5S office, Level 9, Sky City Tower A, 88 Lang Ha Street, Lang Ha Ward, Dong Da District, Hanoi Key contacts Lim Chor Ghee

General Director HP: +(84) 83 8686 288 Email: chorghee.lim@vn.tricorglobal.com

Brian Nguyen

Manager – Business Development HP: +(84) 93 321 32 73 Email: anhbinh.nguyen@vn.tricorglobal.com

INTRODUCTION TO LABUAN INTERNATIONAL BUSINESS AND FINANCIAL CENTRE: THE BENEFITS AND OPPORTUNITIES AS A MIDSHORE JURISDICTION

Farah Jaafar-Crossby CEO, Labuan IBFC Inc.

Where is Labuan?

• Off the coast of Sabah, East Malaysia
• Federal Territory
• About 100,000 population
• Common time zone with major cities
• Where business meets leisure

What is Labuan IBFC?

• International business and financial centre since 1990
• A tax-efficient substance enabling jurisdiction to facilitate businesses,

trading, investments through financial services and legal structures

• Well-balanced legal and regulatory framework

Our Vision

To be Asia Pacific’s leading midshore international business and financial centre

Striking an ideal balance between client confidentiality and international best standards

Connecting Asia’s Economies

73% of Labuan Companies are Asian-based

(as at 2018)

Internationally Recognised

Labuan IBFC is firmly committed to adhering to OECD’s International Standards and Best Practices. In this regard, we continue to update

• ur domestic legislative framework accordingly.

Comprehensive Legislation

Labuan Financial Services and Securities Act 2010 Labuan Islamic Financial Services and Securities Act 2010 Labuan Foundations Act 2010 Labuan Limited Partnerships and Limited Liability Partnerships Act 2010 Labuan Business Activity Tax Act 1990 Labuan Financial Services Authority Act 1996 Labuan Trusts Act 1996 Labuan Companies Act 1990

An Ecosystem of Solutions

Available in conventional and Shariah-compliant forms Marketing offices may be located anywhere in Malaysia

Services Structures

• Banking
• Insurance – risk management
• Corporate secretarial and

business administration

• Legal advisory
• Administrative activities
• Trusteeship
• Accounting
• Audit Services
• Holding company
• Trading company
• Leasing structures
• Protected cell companies
• Trust companies
• Company limited by shares and

guarantee

• Limited partnership
• Limited liability partnership
• Trusts
• Foundations
• Captives
• Insurance and

Re-insurance

• Banking
• Money broking
• Credit Token
• Capital Market
• Financial

Exchange

Business Activities

Banking

(55)

• Wholesale banking
• Investment banking
• Loans/deposit
• Financial guarantees
• Trade finance

Leasing

(371)

Companies

(15,260)

• Investment

holding

• Trading
• Life/general
• Broking
• Captives
• Re-insurance

Insurance

(216)

• Company

incorporation

• Company

administration

• Corporate

secretarial

• Trustee services

Trust Cos.

(58)

• Aviation
• Shipping
• Heavy

machinery

Wealth Management (162) Commodity Trading (48)

• Business succession
• Estate management
• Legacy planning
• Oil and gas

SOURCE: LABUAN IBFC’S MARKET REPORT 2018

Innovative Financial Services (IFS) (40)

• Money Broking
• Credit Token
• Payment System

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Branded Names

Fiscal Regime

Trading income

License entities are required to meet substance creation, requirements and

• peration

expenditure, which can include license fee.

0%

• Investment

holding

3%

• Trading

Income

Election for Income Tax Act 1967

• Irrevocable

election

Flexibility

Access to Wide Double Taxation Agreements Network

ALBANIA ARGENTINA AUSTRALIA AUSTRIA BAHRAIN BANGLADESH BELGIUM CROATIA IRAN IRELAND ITALY JAPAN JORDAN KAZAKHSTAN KOREA KUWAIT KYRGYZ LAOS LEBANON LUXEMBOURG MALTA MAURITIUS MONGOLIA MOROCCO MYANMAR NAMIBIA NETHERLANDS POLAND QATAR ROMANIA RUSSIA BOSNIA HERZEGOVINA BRUNEI CANADA CHILE CHINA DENMARK EGYPT FIJI FINLAND FRANCE GERMANY HONG KONG HUNGARY INDIA INDONESIA CZECH REPUBLIC NEW ZEALAND NORWAY PAKISTAN PAPUA NEW GUINEA PHILIPPINES SAN MARINO SAUDI ARABIA SEYCHELLES SINGAPORE SOUTH AFRICA SPAIN SRI LANKA SUDAN SWEDEN SWITZERLAND SYRIA THAILAND TURKEY TURKMENISTAN UAE UK USA UZBEKISTAN VENEZUELA VIETNAM

Why Labuan IBFC?

• Developed and updated legal framework
• Wide array of services and solutions
• Professional expertise and services available from Labuan, Kuala Lumpur and Singapore
• Tax efficiency, flexibility and access to Malaysia’s DTA
• Cost effective, substance enabling jurisdiction
• Ease of accessibility
• Similar time zone and centrally located in Asia
• English speaking
• Common law jurisdiction
• Allowable to be co – located in Kuala Lumpur and Iskandar for certain structures upon approval by Labuan

FSA

• Labuan Companies accepted for listing on:
• National Stock Exchange of Australia
• Hong Kong Stock Exchange
• Singapore Exchange
• NASDAQ Dubai

LABUAN PRIVATE FOUNDATION: A PERFECT SOLUTION FOR WEALTH MANAGEMENT

Mari-Len Ngu Director, Head of Division Tricor Trustco (Labuan) Ltd.

Wealth Management Vehicles in Labuan IBFC

TRUST FOUNDATION COMPANY Settlor Reserved power Distribution Trustee Trust Deed Property Beneficiaries Founder Reserved rights Council of Officers Charter and Articles of Charter and Articles of Registration Assets and Property Beneficiaries Distribution Subscribers Memorandum Dividend Board of Directors Articles of Association Assets Shareholders

Why Set Up a Foundation?

Benefits of a Trust Certainties

• f a

Company

Foundation

Structure of a Labuan Foundation

Advantages of a Foundation for Wealth Management

• A foundation is a registered entity. Hence, foundations are able to enter into contracts.
• Avoid delays in obtaining probate (both in Malaysia and overseas) or in the registration of fractional interests

in property. Labuan Foundation for Wealth Acquisition

• Fully protected against creditors after the fraud disposition period of two (2) years from the date of

registration.

• Unenforceability of foreign claim or judgment, i.e. succession rights, divorce, heirship, personal law, etc.
• Confidentiality provided by the Labuan Foundation Act. (Rights to who may have access to information

clearly explained).

• Allows more control to the founder than a trust. (For example: the Founder can appoint himself/herself as the

sole Council member, hence controlling the whole foundation)

• Safeguard the founder's interest, enabling legacy planning, succession, control and protection thereby,

avoiding the break-up of family assets and ensuring the continuity of the family wealth over generations. Labuan Foundation for Wealth Preservation

• Labuan IBFC’s tax system is simple and straightforward.
• A beneficiary can be added and removed by the founder and Council seamlessly.
• Founder may appoint himself to be the sole beneficiary of the foundation.

Labuan Foundation for Wealth Distribution

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Importance of Wealth Planning

Labuan Foundation:

• Governed by the Labuan Foundation Act 2010
• Is a Legal Entity (similar to a company)
• No shareholder – “ownerless structure”
• It can be administered and managed solely by the clients – with minimal

supervision (no trustee)

• Can be used a distribution mechanism / vehicle
• Acts just like a Company with all the benefits of a Trust

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Importance of Wealth Planning

What These Structures Provide:

• Wealth Preservation – helps preserve wealth in a tax efficient manner
• Confidentiality / Anonymity – ownership is held under the name of the Foundation
• Flexibility – changes / update / amendments can be made with minimal interruption
• Protection – foreign claims, insolvency claims, marriage claims
• Control – Founder will have the ability to dictate terms
• Consolidation – able to structuralise their total asset worth and place it into a

consolidated asset holding (minimise complication / parties)

• Certainty – able to decide based on one holistic structure

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Importance of Wealth Planning

Which Structure Suits Best – would depend on:

• Each client’s specific needs and ambition
• Long term plans – business / personal
• Short term objectives – what to achieve now (planning / protection vs

investment / diversification)

• Their needs now vs family/children’s needs in the future
• No one size fits all solutions

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Market Report 2018 – Foundations

Tricor Worldwide Locations

> Hong Kong (Head Office) > Cayman Islands > Japan > Malaysia > Australia > Dubai UAE > Korea > Singapore > Barbados > India > Labuan > Thailand > British Virgin Islands > Indonesia > Macau > United Kingdom > Brunei > Ireland > Cayman Islands > Vietnam

Tricor has a network of offices in 37 cities across 20 countries / territories:

THANK YOU

Please contact: Mari-Len Ngu

marilen.ngu@my.tricorglobal.com

LABUAN COMPANIES: INTERNATIONAL TAX PLANNING AND EFFICIENCY

Bee Wong Commercial Director Tricor Trustco (Labuan) Ltd.

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Get Your Business Started in Labuan

Two Vehicles for Trading Activities

Trading Activities: 3% Tax Rate Labuan Company - min. one Director and one Shareholder (can be of the same person)

• no license required for normal trading activities such as e-commerce,

import, export, trading, advisory and consultancy Labuan Private Foundation - min. 3 persons- founder, officer, council member and beneficiaries

• perfect for special deal to preserve wealth
• risk of law suit, not advisable to use for trading activities

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Get Your Business Started in Labuan

Two Vehicles for Non-Trading Activities

Investment Holding: 0% Tax Rate except for Intellectual Properties Labuan Company - min. one Director and one Shareholder (can be of the same person)

• investment holding for subsidiaries or investment company for assets

Labuan Private Foundation - min. 3 persons- founder, officer, council member and beneficiaries

• perfect for wealth preservation and succession
• 0% tax on beneficiaries on distribution payments

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Typical Structure of Labuan Company

SINGAPORE COMPANY as Investment Holding Labuan Company for Trading Activities

3% Tax

SINGAPORE COMPANY as Investment Holding License Entities

 Crypto Exchange  Credit Token-ICO  Payment System-EWallet  Robot Advisors  Fund Raising For Blockchain Businesses and Investments  Importer  Exporter  Traders  Ecommerce  Advisory  Consultancy

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Commercial Substance

Labuan IBFC’s Latest Guidelines On Commercial Substance To Enjoy Labuan Tax. Trading Activities: Tax Rate 3% and Investment Holding: 0%

For License Entities Substance Requirements: Banking, Insurance, Money Broker, Fund Manager, Securities, ICO, CryptoExchange, Factoring, Leasing, etc

• Operational Office in Labuan
• Employed 2 to 4 staffs
• Minimum Spending Year: USD

12,500 to USD 45,000

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CRS Compliant Jurisdiction

 Affordable operation costs with infrastructure support to meet substance requirements  Strategic location, accessible and convenient to conduct AGMs for key decisions  Similar time zone for ease of operations  Tax certificates of your Company and Personal are available

Why is Labuan a Better Choice as a Substance Enabling Jurisdiction for Asia Pacific Businesses?

FOUR (4) KEY FACTORS:

Other Advantages of Labuan

• 100% foreign owned, no need local Malaysian partners
• No Withholding Tax
• Director’s fee is tax exempt until 2020
• Flexibility and access to more than 70 of Malaysia’s DTA
• Dividends back to shareholders are tax exempt
• Permitted to set up Marketing Office anywhere in Malaysia
• Bank account can be in Ringgit and all majors foreign currencies of your choice
• Company can apply for two (2) year multiple entry work permit for expertise to manage

their company with 50% tax rebate until 2020

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License Application Processing

Step 1: Pre Qualifying on Eligibility of the Applicants Step 2: License Application for Approval-In-Principal Step 3: Set Up Labuan Company, Bank Account and Office @ Labuan

All in within 90 days!

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4 Simple Steps to Set Up a Labuan Company with Expatriate Work Permit

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Bank Account Opening

All Directors and cheque signatories are required to fly to Kuala Lumpur or Labuan to meet bankers for KYC. All bankers will be able to provide these services of your choice:

• All major foreign currencies
• Internet banking
• Private banking
• International remittance
• Local transfers

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Q&A Session

Feel free to ask me any questions! Thank you!

Bee Wong +603 2783 7928 bee.wong@my.tricorglobal.com www.TricorGlobal.com

Disclaimer

This presentation should not be regarded as offering a complete explanation of the matters referred to and is subject to changes in law. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Labuan IBFC cannot accept any responsibility for loss occasional to any person acting or refraining from action as a result of any material in this

• presentation. The republication, reproduction or commercial use of any part of this presentation

in any manner whatsoever, including electronically, without the prior written permission from Labuan IBFC Inc. is strictly prohibited. This presentation should not be regarded as offering a complete explanation of the matters referred to and is subject to changes in law. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Labuan IBFC cannot accept any responsibility for loss occasional to any person acting or refraining from action as a result of any material in this

• presentation. The republication, reproduction or commercial use of any part of this presentation

in any manner whatsoever, including electronically, without the prior written permission from Labuan IBFC Inc. is strictly prohibited.

LABUAN IBFC INC SDN BHD IS THE OFFICIAL AGENCY ESTABLISHED BY GOVERNMENT OF MALAYSIA TO POSITION LABUAN IBFC AS THE PREFERRED INTERNATIONAL BUSINESS AND FINANCIAL CENTRE IN ASIA PACIFIC

Thank You Thank You