Leveraging on Asia’s Tax Haven

Hong Kong's Occupational Retirement Schemes are a flexible and tax-efficient estate planning solution for high net world individuals to maximise their returns on wealth.

In a world that is becoming increasingly reliant on companies and individuals to provide sufficient resources to cover their own income during retirement, governments around the world are struggling to cope with an ageing population and the money is running out.

What is the Common Reporting Standard?

Many countries practice some form of foreign asset taxation and the process of gaining information on foreign assets has been made easy through the Automatic Exchange of Information. This is an internationally agreed legal standard involving more than 200 jurisdictions with more aspiring OECD members sure to follow. The launch, depending on where you are, will either happen this year or next.

Under the Common Reporting Standard or CRS for short, financial institutions such as banks, insurance companies and even the more ‘traditional’ trust companies must in future report annually your ‘personal information’ to your home tax authority. This will include your full name, date of birth, place of birth, tax identification number, current address, account number, account value and even recent transactions. This will then be automatically shared between different member countries and this may even include accounts that have been closed in that reporting year.

The United States employs a similar offshore asset information exchange system for tracking taxation and that is known as the Foreign Account Tax Compliance Act or FATCA. It has been very successful in identifying and collecting unpaid taxes.

The Common Reporting Standard brings about new problems with its implementation. The risk of your personal information being divulged increases as it is shared from one country to another, digitally and automatically. In addition to this, personal data can be revealed legally to third parties in case of claims. This lack of privacy, in the event of information being hacked or stolen, is a major worry.

If there are suspicions concerning legitimacy of the assets reported then they will be investigated. Individuals may face legal action and even custodial sentences if the ‘numbers’ are not as they should be.

Hong Kong's Occupational Retirement Schemes (ORS) are regulated by the Hong Kong Mandatory Provident Fund Schemes Authority (MPFA) and is fully compliant with the Organisation for Economic Co-operation and Development (OECD) and all global tax offices whilst also allowing for the use of favorable ‘double taxation agreements’ or DTA’s. The ORS also works as an effective tax-planning tool for companies and individuals of any nationality, country of residence and in any occupation. A significant advantage as well is that the Hong Kong ORS also offers legal ways to effectively manage Income Tax and Capital Gains Tax issues.

Hong Kong's ORS is arguably the most efficient tax planning structure available to Hight Net Worth and Ultra High Net Worth individuals in what is a changing world. It can help maximize the returns on your wealth through skilled asset management professionals or it can simply take on board whatever assets you already have. Future tax issues can be avoided when assets are placed under the ORS. It is also flexible in providing you with what you need in the future by way of income or lump sum.

How can I leverage on Hong Kong’s ORS?

One of the leading providers of schemes issued under the Occupational Retirement Schemes Ordinance is the Legacy Trust Company Limited. As a leading pension and trust services provider registered under the Hong Kong Trust Ordinance, Legacy Trust offers bespoke alternative trust and estate planning solutions to all by utilizing the Legacy Superannuation Trust.

The Legacy Superannuation Trust is a pension first and a ‘non-vested’ trust second. It places emphasis on retirement and estate planning and will take care of the beneficiary's assets whilst protecting them from creditors and information leaks. A valuable added benefit is that member’s estates are free from Income Tax, Inheritance Tax and Capital Gains Tax as their assets are protected under Hong Kong's Occupational Retirement Scheme.

Lastly, and as added security, Legacy Trust owns the assets before the member's retirement to assure 100% creditor protection and invests these assets according to the individual member’s risk profile. With tried and tested solutions, Legacy Trust provides the ideal vehicle to not just avoid unfavourable tax situations but also assist in managing investment strategies to a successful conclusion and provide peace of mind to all its members.

For more information on Legacy Trust's customised pension plans, please visit www.legacytrust.com.hk or call +603 2630 6181 to book your free consultation


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