CFC rules, Anti elusive legislation and Automatic Exchange of Information are game changers for the wealth planning industry of private clients. This is notorious in Europe already. In Latin America, we are just starting to see the tip of a huge iceberg.
Only 2 years ago, most private bankers in Latin America did not believe that the OECD was serious. The majority claimed that this whole transparency movement was just for the press and that local authorities were not prepared to handle this. All of them have now realized that “something” has changed and are now keen to listening and gathering information. Some go even further and are taking actions (incorporating new platforms, new legal structures, hiring experts, being proactive in speaking to their clients about this, etc.).
What has changed?
Local authorities from Latin America´s most sophisticated countries started to pass comprehensive CFC rules combined with Anti Elusive legislation. To date, all the most
developed countries except Brazil* have abided to these rules (Mexico, Peru, Chile, Colombia, Ecuador Argentina, Venezuela…). Even in Brazil, local lawyers are convinced
that their country will include them soon.
In addition, early this year the OECD announced that in 2017 the world would have automatic exchange of information. Since that announcement, more than 70 countries pledge to this initiative. The OECD already prepared various reports on how this exchange will take place and in October more measures are expected to be implemented. Some claim that 2020 is more realistic than 2017…this could be, but it´s irrelevant. The point here is that it is coming and will be here very soon.
Last, in order to comply with FATCA, Latin American countries have started to sign intergovernmental agreements (IGA) with the EEUU to exchange information automatically.
What do clients need?
First, to become aware, they need to stop believing that nothing has changed. Second, they need quality advice. Many family offices in Latin America are including local and international experts as key players in their business, to provide them with the most adequate tax and succession planning in order to provide the best advice to
their private clients.
Third, act in consequence. Clients need to sit with their Family Office and experts to evaluate if the current legal structure (companies, trusts, foundations, private funds, etc.) that they have in place is still good enough to obtain the objectives they want. “Why do it now if you can do it later…”
As a Latin American I am fully aware that most of us wait until the last minute to solve various issues. All of us do. The truth is that in this particular aspect, the changes have been so big and will continue to be, that the last available moment is already here. Later is now. The good news is that there is good and serious planning available, fully compliant with the new world.
Pedro Vargas Head of Wealth Planning Aiva – A member of the Old Mutual Group