Part of the current trend, be it through Community Directives, the OECD’s positions, or even that of the global trend resulting from the current economic climate (the fight against money laundering, terrorist financing etc ), has brought a quest for transparency (in general) and exchange of tax information.
Following the FATCA (Foreign Account Tax Compliance Act) and the CRS (Common Reporting Standard), the automatic exchange of information led to Portugal transposing Directives 2015/849 / EU and 2016/2258 / EU into the domestic legal order resulting in Law 83/2017 of 18 of August, and more specifically, in creating a Central Register of the Effective Beneficiary through Law 89/2017 of August 21, 2017.
The objective is clear, and has been pursued since 2011 with various Community Directives - it is intended to achieve the automatic exchange of information, rather than on request as happens currently.
Arriving at this point, and perhaps not aware that, in the banking world, Law 64/2016 has already set in motion the transparency and automatic exchange of information, we are faced with a true law against money laundering (Law 83/2017 consisting of 191 Articles) and the creation of a central register of effective beneficiaries (“RCBE”).
Now, who is covered by such a system?
Articles 3, 4 and 5 of Law 83/2017 indicate who are the entities obliged to comply and includes Banks in general (credit institutions, financial companies, investment companies, etc.), and professionals who may enter in contact with beneficiaries by way of transactions they undertake such as lawyers, solicitors, notaries, certified accountants, auditors, and including traders who transact goods (or provide services) where payment is made in cash and in addition service providers to companies and other non-incorporated entities.
Such entities must retain information about their clients (Know Your Client rules or KYC), which must be obtained before starting the legal relationship, although some exceptions are foreseen in which the duty of identification and due diligence (articles 23 and 24) may be fulfilled after the start of the business relationship. Within the identification and due diligence process, it is incumbent upon the entity to obtain knowledge of who is the effective beneficial owner in the case of legal entities or the centers of interest of those non incorporated entities (i.e. Trusts).
The effective beneficiary is defined by Article 30, and Article 34 refers to consulting a central registry that is regulated by Law 89/2017 of August 21 2017.
It is of interest, however, to discern who is considered an effective beneficiary under the money laundering law:
The individual person or persons who ultimately own or control, directly or indirectly, a sufficient percentage of shares or the voting rights or equity interest in a incorporated entity;
The individual person or persons exercising control by other means over that incorporated entity;
The individual person or persons holding the top management if, after all possible means have been exhausted and provided there is no reason to suspect:
There has not been identified any person in accordance with the preceding paragraphs; or
There are doubts that the person or persons identified are the beneficial owners. ”
And yet, in a version different to that of the Anglo-Saxon concept of what a trust actually is (read discretionary trust), the law defines as an effective beneficiary:
The Founder (Settlor);
Trustees or trustees of trust funds;
The curator, if applicable;
The beneficiaries or, if they have not yet been determined, the category of persons in whose main interest the trust fund was set up or carries on its business;
Any other individual person who has the ultimate control of the trust through direct or indirect participation or by other means. "
Such effective beneficiaries shall be subject to registration to be carried out in accordance with the Regulation of the Central Registry of Effective Beneficiaries.
The Regulation of the Central Registry of Effective Beneficiary will come into force at the end of November 2017, and includes obligations for a range of agents, including lawyers, banks, notaries, land registry Registrars and others.
The RCBE is intended to be an online platform where registration of an effective beneficiary may be made via an electronic form, accessible online, but free of cost, although any certificates issued would be subject to emoluments. This register may be compulsorily consulted in certain situations, and by certain entities (entities obliged as explained above and in accordance with the provisions of Articles 3 and 4 of Law 83/2017). Failure to comply with such a compulsory obligation shall be subject to sanctions, such as the impossibility of transferring ownership or any rights in property (Article 37 of the RCBE), as well as a misdemeanor punishable by a fine of 1,000 up to 50,000 Euros (Article 6 of Law 89/2017). The registration will be cancelled with the cessation or extinction of the entity that generated the registration.
The first declaration will be made within a term to be defined by an Ordinance that has not yet been published, so we only know for the moment the date of entry into force of Law 89/2017 being 18 November 2017.
With regard to the effective beneficial ownership, the law covers a whole range of legal subjects, including any resident or non-resident company, provided that it has a tax identification number attributed, including representations (branches) of non-resident legal persons, as well as Trusts (here designated as trust funds).
The rules of application are found in Article 3 of the RCBE, which tries to cover the most different types of subjects.
It will be these subjects designated by Article 3 that have the duty to declare the necessary information about the effective beneficiaries, and in the case of Trusts, such a duty falls on the Trustee. It should be noted in Article 5 (2), and in relation to Trusts, that the law is intended to cover both legal and de facto administrators, with a clear intention to increase the scope as much as possible.
In respect of incorporated entities, since they are not individual persons, the obligation falls on the administrators, but the law still makes a legal presumption of representation in respect of lawyers, solicitors and notaries in Article 7.
Thus, the law presumes a mandate of representation without any indication of the extent of such mandate, leaving a dangerous void open to harmful interpretations, establishing in the lawyer, solicitor, notary and certified accountant the possibility of making a declaration on the online platform in respect of the effective beneficiary.
To perform the registration there is certain compulsory information details of which is listed in Article 9 of the said regime. Such details vary from the name, date of birth, nationality, fiscal number, and even the tax representative if the entity is not resident in Portugal and have appointed one. The information to be provided also involves much specific data on the identification of who is declaring the information.
Although the actual timing of the declaration has not yet been established by ordinance, the fact is that the initial declaration is established in Art. 12 of the RCBE and which should happen with the constitution or first registration in the central registry of incorporated (RNPC). In addition to an initial registration, there will also be an annual confirmation of the information up to July 15 regarding the data registered therein on the effective beneficial owner.
The information on the list of beneficiaries will be publicly available on an electronic page (still to be regulated through the Ordinance), and the company's tax identification number NIPC will correlate with the full identification of the beneficial owner, with some exceptions listed in Article 22 of the RCBE. The protection of personal data is ensured in Articles 27 and following of the RCBE.
The access to this information will be relevant to the entities obliged through authentication in the RCBE, presumably similar to other systems of the same kind, that is through electronic certification that are available to lawyers, solicitors, notaries and related professionals.
The judicial, police and tax authorities shall have access, establishing as the ultimate purpose of this legislation international cooperation and the rapid availability of the information obtained by this means.
For the moment the immediate consequence of the legislation in force is to obtain detailed information. From the information obtained the respective entities, be they police, judicial or tax, national or other, can take action in certain legal actions and proceedings. Such actions may be linked to the origin of the funds, terrorist links or tax fraud (tax evasion).
n addition to such legislative creations, Law 89/2017 also creates obligations for both the Notary and the Land Registrar when transferring property. Thus, the form of payment, the identification of the bank entity, the number of the cheque and the value of the cheque must be included in the property transfer document. The Notary and the Land Registrar should consult the RCBE before starting to draft the transmission document (for example) and should refuse to complete the transfer process if the obligation to complete the registration of effective benefial ownership has not been fulfilled.