As you may already know, OneLife organised in March an IBERIA/LATAM roadshow in Zürich, Geneva and Luxembourg to showcase our solutions for these regions with great success! As described in our communication on March 16, 2018 and also shared on LinkedIn, OneLife was privileged to partner with some of the best lawyers from Mexico, Peru, Colombia, Portugal, Spain and Brazil.

For Iberia, the most reputed lawyers specialised in tax, legal and regulatory matters involving life assurance in their respective jurisdictions duly represented Spain and Portugal in the different panels.

Spain: Political & fiscal context

On the Spanish panel, Javier Seijo from EY started by introducing to the audience the political and fiscal context in Spain, focusing notably on the potential political measures which could if adopted modify the Spanish Wealth and Inheritance/Gift taxation landscape. Indeed, it was mentioned how some Spanish Autonomous regions had recently implemented different changes in their taxation and others were planning to do so in the near future.

Benefits of using life assurance for wealth planning purposes

In the second part of the panel, Enrique Lopez de Ceballos from Eversheds, Carlos Ferrer from CuatreCasas and Fabricio González from Anaford spoke about the different benefits and advantages of estate and wealth planning through the use of unit-linked life assurance products in the Spanish market. Amongst other points, it was highlighted that life assurance could be used as a flexible succession-planning tool, that it preserves the confidentiality of the policyholder and the beneficiaries and that it enables the policyholder to protect his wealth in case of unforeseen circumstances (insolvency, divorce…).

On the fiscal side, the tax treatment of life assurance for Spanish resident policyholders was duly described in terms of Income Tax, Wealth Tax and Inheritance and Gift Tax. In this context, special reference was made to the recent rulings issued by the Spanish tax authorities on Wealth Tax applied to unit-linked life insurance products and which could open interesting planning opportunities.

Non-traditional use of unit-linked life assurance

In the third part of the panel, the speakers gave a brief overview of how unit-linked life assurance could be used in non-traditional ways. For instance, life assurance could be used as an instrument to vehicle remunerations to key managers or sportsmen or pensions to a given group of a firms’ employees.

Spain: Cross-border

On a final note, the speakers discussed the different planning opportunities for multi-jurisdictional and cross-border cases using life assurance and gave some examples of successful cases where they had acted as advisers.

Should you wish to obtain additional technical information on any of the above, we invite you to get in contact with Javier Seijo, Enrique Lopez de Ceballos, Carlos Ferrer or Fabricio González who will be happy to provide you with legal and tax assistance.

Portugal: Fiscal context

On the Portuguese panel, Joao Espanha from Espanha Associados and Filipe Romao from Uría Menéndez started by providing the audience with an overview of the fiscal context in Portugal, which for the moment remains rather attractive for HNWIs, compared to other European countries. Besides, the likelihood of new taxation measures approved by the Portuguese government and involving Wealth or Inheritance/Succession was deemed to be low in the short term as not present in the political agenda.

Benefits of using life assurance for wealth planning purposes

In the second part of the panel, Joao and Filipe commented on the different benefits of life assurance for Portuguese resident policyholders, for instance, flexible and efficient succession planning and protection of the financial assets from a financial and regulatory perspective (i.e. Luxembourg “Triangle of Security”). The fiscal treatment of life assurance unit-linked products was thoroughly discussed as well. Indeed, life assurance in Portugal benefits from an advantageous tax treatment (i.e. decreasing effective taxation when the policy is held over 5/8 years and no application of Portuguese Stamp Duty tax when the benefit of the policy is paid to the appointed beneficiaries).

Portugal: latest news & developments

The last section of the panel was dedicated to several “hot topics” such as (i) the recent regulatory changes which could affect the contribution in kind to life insurance products in the Portuguese market, (ii) the possibility to offer “self-management” to Portuguese resident policyholders and, last but not least, (iii) the tax treatment on redemptions from life assurance policies made by Portuguese resident policyholders. On all these topics, Joao and Filipe made clear that not all the local legal/tax practitioners had concurring views and that, possibly, the outcome could vary depending on the advisor, the policyholder as such and the insurance company offering the product.

Should you wish to obtain additional technical information on any of the above, we invite you to get in contact with Joao Espanha and Filipe Romao, who will be happy to provide you with legal and tax assistance.

Gonzalo Garcia-Perez, Wealth Planner Manager for Iberia and Latam markets, at OneLife

This topic, which is complex for many wealth managers, is more current today than ever. The challenges to be met – a unique family model for each of our clients (recomposed families, etc.) with an international dimension – are many.

One only has to look at recent news (such as the Jarre or Hallyday affairs) to realise how many problems these two components of a unique family model and an international dimension can cause. Not to mention the lengthy judicial proceedings initiated by the heirs to determine the law applicable to the inheritance.

Is life assurance an ideal solution for passing on an estate?

The advantage of an investment within a life assurance product from a Luxembourg insurance company is that it enables your assets to be managed and passed on totally serenely and in a highly flexible way.

Why Luxembourg?

For its international expertise and a “tailor-made” solution allying clients’ personal and financial situation.

Also for its fiscal neutrality, in particular in respect of inheritance tax.

Our experts will accompany you to enable you to draw up your inheritance solution.

Inheritance rules and practical application: how does this work?

Let us take the example of a French couple married under the regime of wholly shared assets and close to retirement with an integral attribution clause and a capital of €2 million in assets.

They wish to plan their inheritance for their three children – Jean, who lives in Sweden, Paul, who lives in Portugal, and Jeanne, who lives in Belgium.

As a Luxembourg life insurance company, the couple will be advised to take out a joint life assurance policy governed by French law to be redeemed upon the death of the second party.

After the death of the first insurance policyholder in France, the surviving spouse, who in the meantime has moved to the south of France, will regain control over the life insurance policy until their death and when the policy is redeemed each of the children will then receive equal shares of the insurance proceeds.

What tax will their children pay?

As the premiums were paid before the couple turned 70, when they die all the beneficiaries will be subject to a sui generis tax (article 990 I of the General Tax Code, GTC). They will benefit from a tax allowance that may be as high as €152,200 per beneficiary.

It should also be noted that for deaths occurring after 31 July 2011, the 20% levy will be due if:

At the time of death the beneficiary is resident for tax purposes in France within the meaning of article 4B of the GTC and that this was true for at least six of the ten years preceding death.
Or if the policyholder, at the time of their death, is resident for tax purposes in France within the meaning of the same article 4B, which is true in our case.

• For Jean, who lives in Sweden and is 30 years old

According to Swedish regulations no inheritance tax applies, Jean simply has to pay the tax due in France.

• For Paul who lives in Portugal and is 25 years old

According to Portuguese law, no taxation will be applied to Paul who will have to pay only the French tax.

• For Jeanne who lives in Belgium and is 20 years old

According to Belgian legislation, insurance policies may or may not be liable for inheritance tax; it all depends on the construction of the policy.

For Jeanne, inheritance tax will apply, the rate of which varies depending on the region in which she lives (article 8 of the Inheritance Code).

Apart from the degree of kinship, the value of the estate and the residence for tax purposes of the deceased will also play a role.

Onelife can provide you with tailor-made solutions adapted to your personal situation and your requirements to enable you to plan for the passing on of your estate or simply manage your assets.

Article by   Nora Belarbi, Legal Advisor at OneLife