The complementary combination of human and digital

After a 2017 which saw growth and development of its in-house talent, the OneLife teams are starting 2018 in the best of ways, with a fresh impetus, innovative projects and exclusive partnerships. Wim Dieryck, Chief Commercial Officer, comments on the digital ambitions of the Luxembourg life assurance company by announcing, in particular, a partnership with a 100% digital fintech company, redefining life assurance standards.

Following the launch of the OneLife mobile application at the end of 2016, data exchange through aggregation, 2017 was highlighted in particular by “social selling”. “With an SSI – Social Selling Index – of more than 50%, we are progressing faster than the life assurance industry in the Grand Duchy. Then, when you see that 30% of the commercial business originates through social media, we owe it to ourselves to invest in these new ways of selling” the CCO explains, specifying that social selling need not be in opposition to other ways of working. “On the contrary, they must all be knitted together and integrated to go in one and the same direction. At OneLife, digital gives everyone new marketing and prospecting possibilities”. More traditional events like roadshows, which aim to promote OneLife’s differentiating products on the Spanish, Portuguese and Latin American markets, will therefore also be in the diaries of Wim Dieryck’s teams..

By combining all these activities and with the arrival of new digital tools, the idea is to offer end customers and partners this opportunity to choose their favourite communication and interaction channel, thus making “human-digital-human” interchangeability possible. For the Chief Commercial Officer, “many topics still require human contact, a meeting, but digital provides real added value and enables the various customer and partner needs to be met.”

New digital announcements

Over the next few weeks a digital sign-up test phase, incorporating an electronic signature and providing the opportunity to carry out operations on clients’ life assurance policies, will be launched in Belgium. “Market demand is strong: everyone – end customers and partners – is looking to make their life easier and to use tools via a smartphone” Wim Dieryck explains.

In line with this initiative, the life assurance company is announcing its partnership with Advize, an online savings management platform. “OneLife’s “Ma Sentinelle Lux “will thus be the first Luxembourg product distributed on the French market via a 100% digital channel. Advize proposes distribution through several partners, making a totally integrated tool available” the CCO explains. As soon as it is launched, which is scheduled for the first quarter of 2018, several configurations will be available: the definition of the customer’s profile with an investment in a combination of limited funds based on ETFs, or the definition of the client’s project, based on the timeframe and amount. As for the selection of the funds, it is combined with a robo-advisor. As Mr. Dieryck underlines “We are thus aligning ourselves with developments in ETF trackers with much more innovative management – a highly attractive combination”.

OneLife is thus proving its ability to digitalise many of its processes, possible thanks to the commitment of staff and their desire to take an active part in the (digital) transformation of the life assurance sector.

“We are investing hugely in the training of our people. And if we are now delivering on these topics, it’s because we have set the entire organisation on the path to digitalisation. E-learning, for example, is contributing to the success of these strategic developments and is bringing a new dynamic with it. I’m convinced of one thing: #Digital, it’s ALL about people!” the Chief Commercial Officer adds.

OneLife, non-traditional assets’ expertise in life insurance

The current demand of our partners for non-traditional investments has enabled them to revitalise their portfolio, with growing interest in internal dedicated funds (IDF) or Specialised Insurance Funds (SIF).

The Luxembourg insurance regulator [Commissariat Aux Assurances] allows a very competitive and flexible range of options in terms of the types of underlying investments within a contract, while providing a protective framework for policyholders.

Putting financial market developments in perspective, together with the significant demand for regulated or unregulated non-traditional investments, require new keys skills for OneLife, which has chosen to surround itself with top-level experts.

According to Wim Dieryck, Chief Commercial Officer at OneLife:

“These experts are highly appreciated by our partners (asset managers, Family Offices, brokers, international private banks, etc.) who are able to receive specific and technical answers to all their questions. The ultimate goal is to best serve their clients’ needs”.

According to Anthony Lorrain, Director Unquoted & Traditional Assets at OneLife:

“It is essential to be surrounded by these new key skills from specific areas to represent the industries of private equity, real estate or securitisation. Each customer is different, so we aim to meet their needs in the best way possible by forming a team of specialists who support our sales representatives throughout the life cycle of the contract (wealth engineers specialising in taxation and local contract law, experts in smart investments, etc.)”. He went on to add: “For example, OneLife is a member of the LPEA (Luxembourg Private Equity Association) and wishes to show its commitment to other sectors of business that are complementary to the world of life insurance.”

OneLife is an innovator in life insurance and offers its clients sophisticated, tailor-made solutions. Against a backdrop of low – or even negative – interest rates, non-traditional assets are proving to be a strategic element that insurers must now be able to offer their customers within a controlled and secure framework for all parties.

Non-traditional assets are a real trend in wealth management. As a partner of wealth managers, we have decided to invest – voluntarily and strategically – in our abilities to provide qualitative support in these areas. The world of non-traditional assets is too specialised not to bring in expert services in the field.

What you should expect for 2018 regarding Flat Tax, IFI, CSG ?

After a rocky legislative process, Emmanuel Macron’s campaign promise comes with a series of reforms affecting the taxation of movable assets. This is an overview of the new tax landscape in France, including the life assurance regime:

Objectives and legislative path

Tabled on 27 September 2017 the Finance bill for 2018 presents the far-reaching reforms required by the new president Emmanuel Macron to:

boost the French economy,
direct savings towards the financing of the real economy
simplify and make the tax regime for moveable assets more readable

The bill was discussed at the National Assembly from 17 October to 21 November 2017, and finally adopted at first reading on 21 November 2017. The amended text was submitted to the Senate. As OneLife announced in its article on the subject dated 15 November 2017, the text was met withthe strong opposition of the Senate and was largely amended then submitted to a Joint Commission consisting of National Assembly and Senate members.

Faced with wide dissension within the Joint Committee, the text went back and forth between both chambers. It finally went to the National Assembly, which has the last word for this type of text and which adopted it on 21 December 2017 (subject to the approval of the Constitutional Council after right- and left-wing deputies and senators referred the matte).

The Constitutional Council finally rendered a decision approving the text, which was thus definitively adopted on 28 December 2017 and published in the Official Journal of 30 December 2017.

Main provisions

The law of 30 December 2017 on the Finance Law for 2018 includes three provisions of particular interest to savers:

An increase of the CSG rate by 1.7% resulting in an overall increase in social contributions from 15.5% to 17.2%
The introduction of a 30% flat tax (or PFU – Prélèvement Forfaitaire Unique – in France) on savings income (including social security contributions)
Replacement of the Solidarity Tax on Wealth (ISF) by the Tax on Real Estate Assets (IFI)

The PFU: a cure-all for the saver?

PFU is the French term for what is widely known in Great Britain and the United States as a “flat tax”. In France, the PFU is an innovative taxation method by which a uniform rate is applied to a broad category of different situations and sources of income.

The French system usually customises taxation to the individual situation and according to the type of income. This is, therefore, a significant change in the tax approach in Emmanuel Macron’s presidential programme.

The basic idea is to simplify the taxation of the capital of French residents by applying a single rate applicable to a full range of savings accounts, investments and income:

by applying a single rate to all financial income
to avoid the complicated application of the income tax for different categories of financial income (life assurance income, interest, dividends, capital gains…)

This apparent simplification actually makes the taxation of financial income more complex, especially as concerns life assurance.

a. Affected policies

The PFU applies to all financial investments held by French residents as at 1 January 2018 and, for life assurance, retroactively from 27 September 2017.

This includes fixed-income investment products, bond coupons and dividends which now see the 40% tax allowance removed unless one opts for dividend taxation by the progressive scale of the French Income Tax (IR).

However, the PFU does not affect:

Regulated savings accounts (Livret A, Livret de Développement Durable et Solidaire) as well as savings products exempt from income tax (company savings scheme, retirement savings scheme…)
Investments heavily weighted towards equities such as the equity savings plan (PEA). An exception consistent with one of the government’s goals of promoting investment in the real economy
Property income, which is nevertheless affected by the proposed wealth tax reform as a real estate tax

Thus, neither life assurance nor bank savings accounts (including the Home Savings Scheme [Plan Epargne Logement] and the Home Savings Account [Compte Epargne Logement], but only those opened as from 1 January 2018) are exempt from the PFU.

b. PFU or the fixed-fee scale of the IR?

The PFU rate is set at 30%, i.e.:

2% of social contributions and
8% of income tax

In principle, therefore, savings income will be taxed at the rate of 30%, but the investor may want to consider the option of having the progressive scale of the French income tax applied instead!

The option must then be chosen in writing, and the choice is irrevocable and general, i.e. it covers all the income from movable assets of the investor for one year.

As from 1 January 2018, the Prélèvement Forfaitaire Obligatoire (a fixed levy at source equivalent to the rates the PFU, i.e. 17.2% of social contributions and 12.8% of income tax) isdebited from all income from movable assets received by investors. This deduction does not entail full discharge.

If the option to apply the IR scale is not available, the PFO will entail full discharge. In other words, PFO = PFU.
If the investor chooses to apply the IR scale, the PFO will be credited to the amount of IR to be paid, with the investor being entitled to a refund in the event there is a surplus.

Low-income individuals in France may want to opt for the application of the IR scale.

PFU and life assurance

Is the PFU more advantageous than the old applicable taxation anyway?

The government’s initial intention was to limit the application of the PFU to policies taken out on or after 27 September 2017, and to policies taken out before that date but with premiums over €150,000 and €300,000 for a couple, and only for the premiums paid as at 27 September 2017.

Analysts logically deduced that the new regime would be less advantageous than the old one for policies over 8 years old. An amendment has corrected this issue:

The PFU (30%) applies to all products attached to premiums paid as from 27 September 2017 for policies under 8 years;
For policies of more than 8 years,
- the rate of 24.7% remains applicable if the amount of the premiums paid on the policyholder’s life assurance policies do not exceed €150,000.
- If the amount of the premiums paid on the policyholder’s life assurance policies exceeds €150,000,
  - the rate of the PFU is applicable for the products corresponding to the portion of premiums paid after 27 September 2017,
  - The rate of 24.7% is applicable for products corresponding to the portion of premiums paid before 27 September 2017

This share is determined according to the following calculation: Sum of products * ((150,000 – premiums paid before 27 September 2017) / (premium paid as from 27 September 2017)).

This proportional calculation has not, unfortunately, been drafted in the simplest terms for investors. Similarly, while the original bill provided that the threshold to be used was €150,000 for a single person and €300,000 for a couple, the threshold of €300,000 finally disappeared from the law as it was passed.

The €150,000 threshold must, therefore, be taken into account at an individual level only.

However, and fortunately, the allowances of €4,800 and €9,200 for a couple have been preserved for policies held for more than 8 years. Similarly, the option for IR taxation at the progressive rate has been maintained.

The situation has, therefore, become infinitely more complex and less clear for investors and insurers. This can be summarised as follows:

Click on the table to enlarge it

The IFI – a gift for the rich?

As from 1 January 2018, the Solidarity Tax on Wealth (ISF) has been transformed into a Tax on Real Estate Assets (IFI).

a. The principle

The ISF traditionally taxed assets of more than €1.3 million by a progressive rate linked to wealth. The principle of the IFI is the same as that of the ISF with the (major) difference that the IFI only taxes real estate assets. Simplification or hoax?

For French residents, the IFI applies to all real estate assets or rights, units or shares of real estate companies held in France and abroad by the persons making up the tax household.

For foreign residents with real estate assets in France, the taxable base for the IFI is as follows:

The value of real estate assets or rights in held in France by the tax household residing abroad (secondary residence for example)
Units or shares of real estate companies holding real estate in France
Units or shares of real estate companies holding real estate in France and abroad, for the respective share of the value of real estate located in France

b. Scope of application

In fact, if your assets are solely composed of real estate assets (principal residence, secondary residence, OPCIs, investment properties, rentals…) and the value of your assets exceeds the €1.3m threshold, the reform will change nothing in your case.

On the other hand, if you hold diversified assets, the IFI will force you to make scholarly calculations between assets within and without the scope. Below is a non-exhaustive list of assets and rights within the IFI scope:

value of principal residence (however, the 30% allowance has been kept)
value of secondary residence(s)
buildings under construction
undeveloped property (such as land and farmland)
buildings and fractions of buildings represented by shares of real estate condominium companies
The usufruct of real estate assets and rights for the total value of the real estate asset or right (except in case of succession, where both the usufructuary and the bare owner may be taxed up to their respective share)
Shares in companies holding real estate in France, for their value representing the properties held in France directly or indirectly by the company.

It is also possible, in case of doubt about the value of a property, to use the “Patrim” online service made available by the Ministry of Finance: [https://cfspart.impots.gouv.fr/LoginMDP]

Certain real estate assets and rights are not included in the definition of the IFI’s taxable wealth base, and partial or total deductions are available for:

buildings used for professional activity,
woods and forests set aside for exploitation or professional use,
rural properties leased for the long term or for professional use (farmland, buildings and farm equipment),
furnished housing rented under the loueur en meublé professionnel (professional landlord for furnished accommodation) tax regime.
the bare ownership of a property that is totally exempt

For foreign residents, the law has also removed the notion of société à prépondérance immobilière française (a predominantly French real estate company) to avoid artificial adaptations (and thus all real estate assets, regardless of how they are held, are included in the tax base of the IFI).

c. Deductions

The IFI is applied to the net taxable assets, i.e. assets net of existing debt as at 1 January of the tax year.

Regrettably, however, many ISF-specific deductions have been done away with (such as family loans and housing tax), and legislators have eliminated the possibility of reducing the tax base via debt.

At least the 30% allowance on the principal residence is still there.

The following expenses, among others, are deductible, provided that one produces the receipts:

expenses for the acquisition of real estate assets or rights,
improvement, construction or expansion expenses,
expenses for the acquisition of units or shares in proportion to the value of real estate assets and rights,
taxes due on the property concerned (such as property tax).

d. Conclusion

Overall, this tax reform is a step in the right direction as it simplifies, for the future, the applicable rules.

In the short term, however, the new rules add a layer of complexity to the taxation of movable assets by stacking the applicable norms, especially regarding the taxation of dividends and life assurance.

These adjustments render Luxembourg life assurance an even more attractive choice for French residents, and OneLife stands with its clients and partners to guide them through these changes.

Author: Jean-Nicolas Grandhaye

Unit-linked life insurance as a wealth planning solution for Peruvian investors

What is a unit-linked insurance contract?

A “unit-linked” product is an insurance contract under which the policyholder bears the full investment risk of the underlying financial assets of the policy. Therefore, under “unit-linked” products, the performance of the investments is not guaranteed by the insurance company in the short-, medium- or long-term.

What are the relevant components of a unit-linked insurance contract?

The main components of a unit-linked insurance contract are the following:

Policyholder(s): investor who subscribes, signs and pays the insurance premium. Could be an individual or a company.
Insured person(s): risk element covered under the insurance contract. Could be one or several persons.
Beneficiary(ies): person or entity that will receive the insurance indemnity upon the occurrence of the insured event.
Asset manager: professional entity duly licenced in its home jurisdiction to perform portfolio management activities. The asset manager may be entrusted by the insurer to manage the financial assets on a discretionary basis under the insurance contract based on the investment strategy chosen by the policyholder at inception.
Custodian bank: financial institution which provides custodial services in relation to the financial assets held under the policy(ies).

What are the main benefits of subscribing a unit-linked product with a Luxembourg insurer?

The main advantages of unit-linked insurance policies issued by Luxembourg insurers are the following:

Asset protection: The Luxembourg authorities, and more specifically the Luxembourg Insurance Regulator, the CAA (Commissariat aux Assurances), have designed a unique scheme under which the assets of the policyholders are segregated off-balance sheet from the insurer’s and custodian bank’s balance sheet. As a result, in case of insolvency or bankruptcy of the insurer or the custodian bank, the assets of the policyholder remain fully protected from any ordinary creditors’ claims.
Confidentiality: Luxembourg insurers and its professionals are fully bound by strict professional secrecy rules which ensure full confidentiality for the policyholders and any possible beneficiaries.
Investment flexibility: Luxembourg investment rules allow for great flexibility as to the type of financial assets in which the premium contributed by the policyholder can be invested. It is not uncommon to observe how investment managers invest in alternative or hedge funds and private equity through Luxembourg life insurance policies in order to obtain higher yields.

What is the tax treatment of unit-linked products for Peruvian investors?

At inception, income tax applies to an effective rate of 2,1% on the risk premiums when the latter are paid to cover risks located within the Peruvian territory, are referred to Peruvian residents at the time the contract is signed or, are referred to goods or real estate located in Peru.

In case of partial or total surrender, any capital gain derived from the policy is currently exempted from Income Tax in Peru.

There is no Wealth or Equity Tax in Peru, thus, the value of the policy will not be taxed as such if held directly by a Peruvian tax resident.

In relation to life proceeds paid to a Peruvian resident beneficiary, please note that, in principle, insurance benefits triggered as a consequence of the death of the insured, shall be tax exempt. Should the beneficiary be resident outside of Peru, please note that different taxations may apply on the receipt of the insurance indemnity depending on the jurisdiction.

Other points to consider?

Yes, in order to avoid any requalification risk in Peru, it is highly recommended to embed substantial death cover in the product.

Should you need additional information in relation to unit-linked products for Peruvian resident investors, do not hesitate to contact our Sales representatives:

José Manuel Tara, Regional Director Iberia & Latam, at OneLife

Luis De La Infiesta, Regional Sales Director Iberia & Latam, at OneLife at OneLife

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

Author: Gonzalo Garcia-Perez

Unit-linked life insurance as a wealth planning solution for Spanish investors

The “unit-linked” product allows policyholders to combine in an efficient manner, financial, succession and tax planning in a single contract which complies by default with the tax and legal framework of the jurisdiction in which the policyholder is resident in order to avoid any legal or tax requalification risk.In the case of Spain, “unit-linked” products are mainly regulated by Spanish Insurance Law 50/1980 and, from a tax perspective, by Spanish Tax regulations such as Spanish Personal Income, Wealth and Inheritance and Gift Tax laws.

What are the relevant components of a unit-linked insurance contract?

The main components of a Spanish unit-linked insurance contract are the following:

Policyholder(s): investor who subscribes, signs and pays the insurance premium. Could be an individual or a company.
Insured person(s): risk element covered under the insurance contract. Could be one or several persons.
Beneficiary(ies): person or entity that will receive the insurance indemnity upon the occurrence of the insured event.
Asset manager: professional entity duly licenced in its home jurisdiction to perform portfolio management activities. The asset manager may be entrusted by the insurer to manage the financial assets on a discretionary basis under the insurance contract based on the investment strategy chosen by the policyholder at inception.
Custodian bank: financial institution which provides custodial services in relation to the financial assets held under the policy(ies).

What are the main benefits of subscribing a unit-linked product with a Luxembourg insurer?

The main advantages of unit-linked insurance policies issued by Luxembourg insurers are the following:

Asset protection: The Luxembourg authorities, and more specifically the Luxembourg Insurance Regulator, the CAA (Commissariat aux Assurances), have designed a unique scheme under which the assets of the policyholders are segregated off-balance sheet from the insurer’s and custodian bank’s balance sheet. As a result, in case of insolvency or bankruptcy of the insurer or the custodian bank, the assets of the policyholder remain fully protected from any ordinary creditors’ claims.
Confidentiality: Luxembourg insurers and its professionals are fully bound by strict professional secrecy rules which ensure full confidentiality for the policyholders and any possible beneficiaries.
Investment flexibility: Luxembourg investment rules allow for great flexibility as to the type of financial assets in which the premium contributed by the policyholder can be invested. It is not uncommon to observe how investment managers invest in alternative or hedge funds and private equity through Luxembourg life insurance policies in order to obtain higher yields.

What is the tax treatment of unit-linked products for Spanish investors?

For income tax purposes, Spanish resident policyholders are subject to Spanish Income Tax (i.e. Savings Income Tax at a marginal rate of 23%) on any gains realised in case of partial or total surrender of the policy. Only the gain element (if any) will be taxable, not the full surrender amount.

For Wealth Tax purposes, the Spanish resident policyholder has to pay Spanish Wealth Tax on the surrender value of his/her policy as of year-end. It is worth bearing in mind that the final tax liability could vary significantly depending on the region of Spain where the policyholder is resident. Indeed, some regions do apply significant tax exemptions and deductions for Wealth Tax purposes. For those investors willing to optimise Wealth Tax, it is important to mention that “unit-linked” insurance policies may offer different compliant solutions to reach this objective.

In relation to Inheritance and Gift tax, the Spanish panorama is rather complex as each Spanish region has a broad remit to exercise legislative powers in this field. That being said and broadly speaking, unit-linked insurance policies will not be subject to particular Inheritance and Gift tax rates in comparison with other financial products or assets. However, the flexibility of insurance policies as a succession planning tool allows, if correctly implemented, to plan or postpone the tax liability in full compliance with Spanish tax regulations.

Should you need additional information in relation to unit-linked products for Spanish resident investors, do not hesitate to contact our Sales representatives:

José Manuel Tara, Regional Director Iberia & Latam, at OneLife

Luis De La Infiesta, Regional Sales Director Iberia & Latam, at OneLife at OneLife

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

Latin America’s sleeping giant

When it comes to Latin America, Brazil is the giant of the region. Its prominence is the result of a combination of factors such as continental dimensions, diversified natural resources, a huge consumer market and the list goes on. In the 2000’s, the economy profited from global growth and high demand for its commodities. Such prosperity came under threat in 2008 due to the global financial crisis, although the country was able to partially contain its effects. Unfortunately, Brazil did not take this commodities boom as an opportunity to tackle important issues that have been challenging sustainable economic growth for decades. Instead, it kept the same mediocre policies. It did not push forward with the necessary fiscal and political reforms, nor did it make essential investments in infrastructure.

Furthermore, the country has been gripped since the beginning of 2015 by an endemic corruption scandal that took over international headlines and reached people at the highest levels of business and politics, including former Presidents Lula and Dilma. This spreading corruption scandal has been testing Brazil’s institutional and democratic limits. As a result, many have claimed that the country underwent its worst recession. Despite hints of a recovery underway, the quality of life is not improving for Brazilians. The jobless rate is high and violent crime is on the rise due to drug-related activities and widespread police corruption. Access to quality public services such as education and health care is still a tremendous challenge. Despite its potential and greatness, Brazil is a sleeping giant intoxicated by its socioeconomic challenges and corruption affairs.

Portugal as a safe harbour for Brazilians HNWIs

Amidst the political and economic uncertainty, a Brazilian diaspora has been spreading in the past years and one of the favourite destinations so far has been Portugal. Among the attractions are great quality of life, no language barrier, cultural proximity and low cost of living. In addition, Portugal is very much in vogue nowadays and even Madonna has been extolling the delights of living in the sunshine capital of Europe! Moreover, the government has stimulated inbound mobility by creating the Golden Visa programme and the Non-habitual resident regime that have particularly attracted Brazilian HNWIs.

Once they relocate to Portugal, Brazilian HNWIs have been assessing which is the best tool to structure their wealth usually under custody in Switzerland, Luxembourg, Panama and Caribbean countries. Frequently, the main objectives of this niche of clients revolve around investment flexibility, tax optimisation and cross-border inheritance planning. Hence, quite a lot of hype has surrounded life assurance as the most popular structure to achieve such goals.

Main advantages of foreign unit-linked life insurance to beneficiaries resident in Brazil

Life assurance is a structure fully recognised and compliant in Portugal, offering great investment flexibility and a very attractive tax regime to policyholders and beneficiaries resident in the Portuguese territory. Nonetheless, as Brazilian HNWIs usually leave family members in their home country once they relocate to Portugal, it is important to highlight the advantages that life assurance might offer from a cross-border succession angle. Frequently, this type of client needs a solution that consolidates investments and simplifies international succession procedures often connected to multiple jurisdictions, which could be quite expensive and time-consuming. Given their international status, they have to have a structure that is not only efficient and compliant for family members living in Portugal but also in Brazil.

From a legal perspective, the Brazilian Civil Code foresees that death benefits arising from a life insurance contract are not considered as part of the deceased’s estate. For this reason, Brazilian beneficiaries would be able to receive the referred proceeds shortly after the life assured’s death, without initiating an international inheritance procedure. The settlement period should not exceed one month from the date of receipt by the insurance company of all the documents necessary for payment.

From a tax perspective, such proceeds would not be subject to inheritance/gift tax as the triggering event for such is the transfer of property or right resulting from succession or donation but not life insurance indemnification. Moreover, the Brazilian Income Tax Code sets out that the stipulated capital of a life insurance policy paid to a Brazilian resident as beneficiary is exempt from income tax. The Brazilian tax authorities have already recognised that such exemption also covers life insurance policies contracted abroad, as long as the Brazilian insurance mandatory characteristics regarding the regulatory aspects are duly observed. Hence, if properly designed, proceeds paid to Brazilian beneficiaries as a result of the death of a life insured in Portugal could be exempt both from income and inheritance/gift tax.

However, we must stress that a robust structure must be designed in order to avoid a tax requalification of the policy in Brazil as a typical foreign financial investment. To qualify as life insurance, the solution must guarantee an indemnification payment for future and unpredictable events and contain a reasonable death risk coverage. OneLife has experience in helping our Brazilian HNWI clients on their relocation journey to Portugal, providing them with a strong tailor-made solution that meets their personal needs and objectives. Do not hesitate to contact us in case you need help with yours.

Article by Taiza Ferreira, Senior Wealth Planner at OneLife

≠Success in ≠Relocation: great expectations of a HNW relocator

Did you know that HNWs under 35 are those most likely to expect Life Assurance to be available through an international wealth management proposition?

Life assurance is one of the core services European investors expect to be available through an international wealth management proposition.

Online banking tops the wish list for relocators wanting to manage their wealth from multiple locations tax advice is also important to internationally mobile HNWs who may find themselves subject to confusing and often conflicting tax requirements in different locations. Wealth managers must offer advice which reconciles jurisdictional differences and their clients’ tax priorities.

Click through to find out more: here.

Spanish Citizens have the world’s second most powerful passport for Residing and Investing Abroad

According to the 2017 Global Passport Ranking recently issued by Arton Capital – a recognised global financial advisory and world ranking firm – Spain has the world’s second most powerful passport for Residing and Investing Abroad – just behind Singapore and ahead of the United Kingdom.

https://www.passportindex.org/byIndividualRank.php

Developed by international residence and citizenship advisory firm Arton Capital, the Passport Index is a free online interactive tool that sorts and ranks the world’s passports by their cross-border access; it shows how many countries a passport holder can visit either visa-free or by obtaining a visa on arrival.

Combining that visa criteria with two other relevant parameters:

-the United Nations Development Programme Human Development Index which measures the average achievement in human development, such as living a long and healthy life, being knowledgeable and having a decent standard of living

– Residency by investment is the process of obtaining a Permanent Residency card in another country by investing in the economy of that country. Permanent Residency status is then conferred at an accelerated rate compared to traditional applications
shows that Spain grants to its citizens the world’s second most powerful passport for acquiring a Permanent Residency by Investment status abroad which in turns can allow the access to best local education institutions or optimised local taxation status. It can also increase their global mobility by granting access to additional visa-free programs.

At OneLife, for over 25 years, we offer a personalised service with portable solutions designed to achieve our clients’ objectives, wherever they live in the world. With our private equity solutions, we can assist our clients who may invest and live abroad.

Article by Antonio Corpas, Head of Wealth Structuring and Private Equity at OneLife

≠Success in ≠Relocation: the road to relocation reality

The road to relocation reality can be a long and bumpy ride but future relocators often feel prepared ahead of their cross-border adventures.

Their expectations are evenly matched to the actual experience of their predecessors whom have already experienced the relocation journey.

Forty-nine percent of future relocators expect that they would learn about different cultures and in fact, 45% of relocators confirm that their move has indeed opened their eyes to a new realm of cultural experiences!

The harmony between the expectations and reality of HNWIs who have moved illustrates that the relocation journey can be particularly rewarding for personal development and overall quality of life.

To read more about how HNWs are faring on their relocation journey (or how they think they will fare!), click here to get the relocation e-book.

Independentism in Europe and protection of savers; the interesting answers of life insurance under freedom of services (FOS)

Scotland and Northern Ireland (United Kingdom), Catalonia and the Basque Country (Spain), Padania and South Tyrol (Italy), Flanders (Belgium), Faeroe Islands (Denmark) (1), Corsica (France) are experiencing independence movements of varying degrees of intensity.

While Scotland has implemented a popular consultation process in a constitutional framework and with the consent of the historic member state, other movements such as those in Catalonia concentrate on initiatives of a political nature outside a constitutional framework, against national and European positions with exacerbated legal uncertainty and financial instability.

The historical context, the legal framework and the state of progress of each of its movements are very different; it is virtually impossible to predict what scenarios might apply to these politically-fictional situations. At this stage, it seems unlikely that the current independence movements can be viable outside a constitutional process endorsed by the European Union and above all a negotiated solution with the historic member state, which would involve accession to the European Union in the wake of independence.

It is nevertheless interesting to see what would be the applicable standards and what mechanisms could be enforced to reduce the instability and legal uncertainty generated by these independence phenomena.

It can be noted that while supposedly the European Union does not have a role to play in these independentism processes, all aggregate European rules will remain applicable even after the possible secession(s); moreover, some existing principles and mechanisms under the applicable European rules can help to protect savers caught up in the uncertainty of secession. This is illustrated by existing rules of life insurance under the freedom to provide services of which Luxembourg has become the undisputed specialist in the European Union.

European rules expected to continue to apply despite the possible exits

(a) Given its neutrality principle (2), if these independences were to thrive at the heart of the European Union, it is not however intended to intervene and has to:

(i) maintain complete neutrality on matters concerning the internal political relations of each Member State,

(ii) ensure respect for the Rule of Law – the cardinal value of the Union and therefore not to endorse or give no effect to initiatives contrary to the constitutional order of any Member State.

(b) Another paradox is that the effective independence of a territory would not entail the automatic accession of the new State to the European Union (all Member States must unanimously vote to integrate the new state entity into the Union). However, some European Members States (and therefore the possible secessionist regions) have almost 85% of their regulations of European origin.

Consequently, even though they have become independent, these new entities would undoubtedly continue to apply this legislation by choice or by necessity, whereas there is no guarantee that they will be part of the European Union (or the European Economic Area), especially for those who would choose secession. Joining the European Free Trade Association EFTA whose members also apply European legislation (for the four main freedoms) could be an option – again, with no guarantee.

The protective mechanisms for savers resulting from the contracts taken out under the freedom to provide services

It is interesting to note that European law contains relevant principles and mechanisms addressing the financial destabilisation and the legal uncertainty triggered by these independences, particularly with regard to the protection of investors-savers.

This is particularly true for savers who have opted for life insurance under the freedom to provide services, of which Luxembourg has become the undisputed specialist in the European Union.

While these mechanisms have been created with other objectives than addressing the instability associated with the effects of independence, they remain relevant in the configuration of independence-related instability and legal uncertainty that will undoubtedly affect not only the secessionist region but also the Historic State(s) and may be even a wider surrounding geographical area.

The risks faced by investor-savers residing in the secessionist regions are essentially twofold:

(i) the risk of financial destabilisation of banking institutions located in the independent region or in the Historic State(s) resulting in restrictive measures – more or less perennial – of access to their savings; called “corralito” in reference to the severe restrictive measures of access to liquidity enacted by the Argentine authorities in 2002, a similar set of measures was applied in Greece in 2015. This risk is accompanied by a risk of a forced conversion into a devalued currency of assets whose value would undoubtedly be greatly reduced.

In this respect, the protective answers provided by life insurance under the freedom of services are remarkable:

One of the basic assets of life insurance contracts in this respect is that these life insurance investments are less likely to be subject to restrictive access measures if compared to deposits on current or securities accounts of banking institutions.

Moreover, in the case of contracts under the freedom to provide services, these assets are not located in the country taking such measures and have become the property of insurers established outside the independent region or the historic member state. A double screen that reduces the exposure of contracts to such restrictive measures.

Additionally, the payment of partial surrenders of life insurance contracts can be envisaged on policyholder’s deposit accounts located in the European Union but outside the geographical area impacted by the secession (and preferably with banks that are not conducting business or are not licensed in the secessionist region).

In addition, the more specific assets of the Luxembourg life insurance are:

benefiting from the stability and reliability of insurers based in Luxembourg
designating a custodian bank located in a country distinct from that of the policyholder’s residence (or the country of origin or surrounding geographical area that could be destabilised) offering guarantees of stability and robustness
benefitting from the segregation/cantonment of assets that are recorded off-balance sheet of the bank
benefitting from protection of assets which cannot in principle be subject of seizures, forced pledges…

(ii) The serious legal uncertainty arising from a secession insofar as the newly applicable normative framework should either be constructed from scratch or more likely derived from a hybrid creation based on European rules and new measures put in place by the new independent entity.

Here as well the life insurance under the freedom of services offers reliable solutions:

In the case of life insurance contracts taken out under the freedom to provide services, this insecurity could be countered by the option open by European law of choosing as applicable law the law of the policyholder’s nationality; originally created to protect migrant European workers, exercising this option (at inception or in case of secession) would undoubtedly allow the nationals of the Member State remaining resident in the new independent entity to have applied a set of familiar standards (the option exercise during the life of the contract should be possible as long as third party’s rights are not challenged which should not be the case with a return to the originally applicable law or similar).

In addition, the life insurer acting under the freedom to provide services remains subject to the supervision of its local regulator and to the rules governing the eligibility of assets according to the insurer’s law. This also removes a significant part of the legal uncertainty created by independence.

It is of course possible for the independent entity to invoke the protection of its public policy (ordre public) in order to take more restrictive measures (asset freezes, seizures, etc.) that may affect the assets, contracts or accounts of savers: but because there would be no international recognition, such a public policy is unlikely to materialise; moreover it would undoubtedly result in litigation especially if measures are in the long term and contrary to the savers’ interest protection.

As noted in the introduction, the secession movements are very unlikely to succeed if they are not taking place in a constitutional process backed by the local state authorities and the European Union; however, when subscribing a life insurance policy, it’s worth thinking about the benefits that the existing European regulation and mechanisms can bring to the policyholder as a saver in terms of financial stability and legal security; the life insurance contract subscribed under freedom of services – of which Luxembourg is the undisputed leader – can address most of the risks triggered by separatist activism and more generally by local financial turmoil, political instability and related legal uncertainty.

Article by Antonio Corpas, Head of Wealth Structuring and Private Equity at OneLife

(1) The Danish Faroe Islands are not part of the European Union

(2.) Article 4 para. 2 European Union Treaty: The Union respects the equality of the Member States before the Treaties and their national identity, inherent in their fundamental political and constitutional structures, including local and regional self-government. It respects the essential functions of the State, in particular those whose purpose is to ensure its territorial integrity, to maintain public order and to safeguard national security. In particular, national security remains the sole responsibility of each Member State.