Company owners go public
The EU wants full publicity of the beneficial owners of companies and asset managers
According to effective regulations, EU member states as of 2017 are required to comply with the EU's anti-money laundering directive. The directive requires member states to create a central database in which practically anyone can crosscheck the so called beneficial owners of companies and various legal entities.
A number of measures and international treaties have been implemented over the past years to enable the authorities to step up more efficiently against tax abuse and aggressive tax planning. The directive concerned is not expressly a tax law, still it fits into the series of the above measures.
The new EU regulation will apply also to individuals who, for business or other considerations, legitimately wish to keep a part of their assets separate from their person, even abroad if necessary, through an asset manager.
“It is not a novelty in itself that banks and particular providers are required to audit the client companies and identify their beneficial owners as part of the audit. It is, however, a radical change that while providers are currently documenting the data acquired through the audit only in their own records—which they would only disclose during targeted authority inspections—such information will in the future be stored in a public database accessible to every EU citizen” – said dr. Gábor Kóka, Hungarian tax partner of Deloitte Private, the group that provides advisory services to individuals, family-owned and other private enterprises.
The identity of the beneficial owner must be confirmed before establishing a business relationship with the provider. The central database will store the beneficial owner's name, date of birth, nationality, country of residence, as well as the type and size of the beneficial ownership.
Compared to the currently effective text of the relevant directive, the wording of the draft endorsed in February 2017 wishes to introduce a fully transparent version of the database, which would ensure EU citizens unlimited access to the data of beneficial owners of EU resident companies and asset manager organisations. The full transparency rejected in former EU parliamentary debates regained wide support due to the tax scandals of the recent past and was extended to most organisations and intermediary individuals.
Member states have to incorporate the currently effective anti-money laundering directive passed back in 2015 in their legislation until June 2017. The bill setting out the details of incorporating the EU directive into the Hungarian legislation has not been passed.
“The Hungarian law was expected in the first half of 2017 but the planned modification of the EU law will probably affect its introduction timeline. The measures are likely to become the centre of attention both in Hungary and in the EU because in addition to the treaties concerning the exchange of tax information, the regulation requiring public accessibility to data on beneficial owners will give the authorities another efficient tool for a more intensive adoption of the provisions punishing abusive tax practices. Besides, the new rule will also narrow down the possibilities for a discreet management of private wealth” – as dr. Gábor Baranyi, Deloitte Private's tax expert specialized in international tax law added reminding us of the significance of the changes.