Welcome to Herbert Smith Freehills’ new monthly private wealth industry updates in Asia.
Every month we survey ten Asian jurisdictions for legal developments concerning trust and estate planning which are of interest to the private wealth industry, and provide a succinct summary in a table format. The jurisdictions covered in the update are Hong Kong, Singapore, China, Taiwan, Japan, India, Malaysia, Indonesia, Thailand and the Philippines. We hope that these updates will prove to be a useful resource to keep private clients, business people, and lawyers abreast of legal updates in the region.
1. FATF publishes report on Hong Kong
The much anticipated Mutual Evaluation Report (Report) on Hong Kong was published on 4 September 2019. See our bulletin for further details. In summary, FATF made a number of particularly relevant findings:
- The assessment of money laundering / terrorist financing and misuse of legal persons and arrangements needs to be more comprehensive. The recent introduction of the requirement for companies to disclose beneficial ownership information is due to enhance transparency but FATF was unable to evaluate its effectiveness due to its recent nature;
- That the trust and company service provider (TCSP) is a rather recent addition to the regulatory landscape in Hong Kong and FATF accepted that its effects were yet to be properly visible. It did not, however, underestimate the importance of the sector and among other things:
- The FATF report endorsed the view that TCSPs were exposed to a medium-high risk in the context of money laundering and terrorist financing;
- For TCSPs, the main risks relate to the abuse of shell companies and use of their bank accounts as repositories of crime proceeds, particularly where there is a cross-border element involved. This is particularly important in light of the FATF report’s call for greater focus on foreign non-fraud related crimes (e.g. drug trafficking and corruption), although TCSPs continue to be at threat from fraud related crimes; and
- It was noted that cases of complicit involvement of professionals in money laundering are actually infrequent. In 2015 and 2016 respectively, there were 16 out of 97, and 10 out of 85, money laundering cases leading to convictions which involved the use of TCSP services; and
- The report was generally positive in its feedback in relation to large financial institutions’ AML/CTF processes, their understanding of AML/CTF risks and their preventative methods.
2. FATF reviews Companies Registry’s risk based approach
Further to the above, FATF has also reviewed the Companies Registry’s risk based approach (RBA) for TCSPs. As a result, FATF has published guidance for RBA approach for TCSPs which aims to assist TCSPs in implementing their RBA into their AML/CTF process.
1. Corporation tax rates reduced for domestic companies
The Indian government has announced the decrease of corporation tax from 25-30% to 22%. Companies with a turnover below INR4bn are currently taxed at 25% while companies with turnover above that are taxed at 30%. The 22% tax rate is only available to companies that have not elected to claim tax exemptions or incentives in the same tax year.
1. Tax for high net worth individuals to be increased
Malaysia’s minister of finance has tabled a proposal to increase income tax for high net worth individuals earning RM2 million and upwards from 28% to 30%. The proposal is a bid to address Malaysia’s increasing income inequality.
2. Malaysia to introduce tax identification numbers
The minister of finance has also announced that the government is hoping to implement tax identification numbers to all businesses and individuals above 18 with an income.
The contents of this document are for reference purposes only. Some of the information comes from public sources and this may not be comprehensive, accurate or up to date; where we have relied on third party information and sources, this has not been verified by us. The document does not constitute legal advice, and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication, and any facts in this document should be checked for your specific circumstances at the time you wish to use or refer to them.