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About this tool(Opens in a new window)
This briefing is designed for financial advisers only and should not be
distributed to or relied upon by individual investors.
QUARTERLY TECHNICAL BRIEFING
AUTUMN 2024
EDITORIAL COMMENT
Aidan Golden
Head of Technical Services
Welcome to the inaugural edition of Utmost Navigator, our brand-new quarterly
technical briefing! At Utmost Wealth Solutions, our technical team boasts
extensive expertise in tax, legal, and regulatory matters. We are dedicated to
providing practical and timely support to our partners, and with Utmost
Navigator, we aim to elevate our technical offerings even further.
Each edition of Utmost Navigator will keep you updated with the latest
developments in tax, regulatory, and legal landscapes within our core life
assurance markets. You’ll also discover the latest enhancements in our products
and services, all designed to support your evolving needs. Get to know our
Technical Services Team better and see how we can assist you.
One of the key themes that we explore in our first edition is portability. Our
clients lead sophisticated, mobile lives, and as their personal circumstances
change, so do their financial planning needs. Life insurance remains a
straightforward and widely recognised financial structure across Europe and
beyond. Our portability solutions are crafted to be a crucial part of planning
for your clients’ financial futures.
Don’t miss out on Pulse – our innovative tool that highlights upcoming
regulatory, tax and compliance changes. Whether at the UK, EU, international or
local level, Pulse will keep you informed and prepared. We will ensure this tool
is updated with every edition to provide you with the most current information.
We are also thrilled to feature an exclusive interview with José Luis
López-Hermida of KPMG Spain. In conversation with Nerea Llona, our Tax and Legal
Counsel for Spain and LatAm, José shares insights on the latest trends in wealth
migration and taxation. He also delves into the benefits and flexibility of
unit-linked life insurance in wealth and succession planning.
We hope you find our first edition both informative and inspiring.
Aidan Golden
IN THIS ISSUE
Pulse The key developments in regulation, tax and compliance by market
Regulatory and Compliance Update on Irish Revenue registration for UK trustees
Technical Spotlight Portability
* The Utmost Continuity Service
* Leveraging life insurance for a transition to Australia
Country Focus Spain: Interview with José Luis López-Hermida of KPMG Spain
France: Transforming dismembered capital efficiently Case Study Insights UK to
Spain - Ensuring Tax-Efficient Investments for Retirement Abroad Upcoming Events
Upcoming webinars and other industry events Ask Our Team Meet our Technical
Services Team and get in touch
Download PDF version
Contents
Pulse Regulatory and Compliance Technical Spotlight Country Focus Case Study
Insights Upcoming Events Ask Our Team Download PDF version
PULSE
KEEP YOUR FINGER ON THE INDUSTRY PULSE WITH OUR QUARTERLY ROUND-UP OF THE MOST
IMPORTANT REGULATORY AND COMPLIANCE DEVELOPMENTS IN THE WEALTH MANAGEMENT
SECTOR.
Select your market:
UK EU Asia/International
Financial Conduct Authority (FCA) Anti-Greenwashing Rules
Sustainability disclosure and investment labelling regime for funds.
31 May 2024
* All sustainability-related claims must be clear, fair, and not misleading.
* From 31 July 2024, sustainable product labels can be used for funds meeting
specific sustainability criteria, with four labels to choose from.
* Naming and marketing rules come into force for fund managers on 2 December
2024.
Consumer Duty
Rules start for closed products/services.
31 July 2024
* Embedded before recent parliamentary changes; deadlines for in-scope firms to
implement have passed.
* The FCA is now monitoring the implementation and effects of the Duty.
Financial Conduct Authority (FCA)
Market study into how Pure Protection Insurance Products are sold.
11 October 2024
* FCA has published proposed terms of reference for the upcoming market study
into the distribution of Pure Protection Products to retail customers.
* Comments on these terms of reference to be received by 11 October 2024.
Financial Conduct Authority (FCA) Anti-Greenwashing Rules
Sustainability disclosure and investment labelling regime for funds.
02 December 2024
* Naming and marketing rules come into force for fund managers.
Solvency II UK Regime
Solvency II regime reforms come into force (with some exceptions).
31 December 2024
* Reforms include certain provisions of the relevant Statutory Instruments
(SIs) and revocation of Solvency II assimilated law.
UK PRIIPs Revocation and Replacement Disclosure Regime
Consultation on new disclosure regime to replace UK PRIIPs (delayed).
2025
* FCA consultation document on a new consumer disclosure regime delayed but is
expected by year-end.
* The new terminology has been released, with the term ‘PRIIP’ being replaced
with ‘consumer composite investments’.
* The existing exemption for UK UCITS Funds in providing a UK PRIIPs document
expires in 2027.
Financial Conduct Authority (FCA) Anti-Greenwashing Rules
Sustainability disclosure and investment labelling regime for funds.
31 May 2024
* All sustainability-related claims must be clear, fair, and not misleading.
* From 31 July 2024, sustainable product labels can be used for funds meeting
specific sustainability criteria, with four labels to choose from.
* Naming and marketing rules come into force for fund managers on 2 December
2024.
Consumer Duty
Rules start for closed products/services.
31 July 2024
* Embedded before recent parliamentary changes; deadlines for in-scope firms to
implement have passed.
* The FCA is now monitoring the implementation and effects of the Duty.
Financial Conduct Authority (FCA)
Market study into how Pure Protection Insurance Products are sold.
11 October 2024
* FCA has published proposed terms of reference for the upcoming market study
into the distribution of Pure Protection Products to retail customers.
* Comments on these terms of reference to be received by 11 October 2024.
Financial Conduct Authority (FCA) Anti-Greenwashing Rules
Sustainability disclosure and investment labelling regime for funds.
02 December 2024
* Naming and marketing rules come into force for fund managers.
Solvency II UK Regime
Solvency II regime reforms come into force (with some exceptions).
31 December 2024
* Reforms include certain provisions of the relevant Statutory Instruments
(SIs) and revocation of Solvency II assimilated law.
UK PRIIPs Revocation and Replacement Disclosure Regime
Consultation on new disclosure regime to replace UK PRIIPs (delayed).
2025
* FCA consultation document on a new consumer disclosure regime delayed but is
expected by year-end.
* The new terminology has been released, with the term ‘PRIIP’ being replaced
with ‘consumer composite investments’.
* The existing exemption for UK UCITS Funds in providing a UK PRIIPs document
expires in 2027.
Sustainable Finance Disclosure Regime (SFDR) Changes
ESAs propose SFDR changes.
31 July 2024
* The European Supervisory Authorities (ESAs) have proposed several changes to
the existing SFDR, including a simplified categorisation system.
* These proposals contribute to the European Commission’s ongoing review of the
SFDR and its effectiveness.
FRANCE
Green Industry Law No. 2023-973 of 23 October 2023
Greater transparency within policies and funds.
Changes to the information provided to customers prior to the purchase and sale
of a fund within a life insurance policy.
24 October 2024
* Greater transparency and clear communication on surrender penalties on life
insurance policies or funds.
* New rules on the pre-contractual information that must be provided to
customers.
FRANCE
Green Industry Law No. 2023-973 of 23 October 2023
Reinforcement of “the duty to advise”.
Creation of a financial profile for the customer, to be updated proactively.
24 October 2024
* Introduction into French law of a range of measures requiring regular
updating of the information collected from policyholders throughout their
investment life.
ITALY
Institute for the Supervision of Insurance (IVASS)
Second Consultation on revised set of rules on permissible assets and investment
restrictions for index and unit-linked products.
December 2024
* Almost two years since the first consultation in 2022, IVASS launched a
second public consultation in March 2024 (closed May 2024) on revised rules
for permissible assets, investment restrictions for index and unit-linked
products, and its views on biometric risk requirements. Once approved, these
will apply to both domestic and EU insurers operating in Italy on a FoS
basis.
* Utmost provided feedback to the Regulator on the revised rules, aiming to
minimise the impact the proposed changes might have on the Italian product
and market.
* In a recent meeting with Insurance Ireland and Financial Services Ireland,
IVASS confirmed its ambition to issue the final regulation by the end of this
year, reaffirming their intention not to adjust the scope of the regulation.
Digital Operational Resilience Act (DORA)
Deadline for compliance.
January 2025
* DORA ensures the resilience of financial services firms during operational
disruptions. It focuses on IT risk and incident reporting, setting technical
standards.
* Firms must comply with these regulations by January 2025.
Corporate Sustainability Reporting Directive (CSRD)
Large companies required to track CSRD data for 2026 reporting.
January 2025
* CSRD requires EU firms, including qualifying EU subsidiaries of non-EU
businesses, to disclose their environmental and social impacts in a
standardised format.
* Additionally, firms must report on how their business is affected by their
environmental, social, and governance (ESG) actions.
* This directive aims to drive transparency and accountability within firms and
increase the focus on sustainability.
* The reporting deadlines for the CSRD depend on the size of the entity. From 1
January 2025, large companies (250+ employees) must track CSRD data for 2026
reporting.
FRANCE
Green Industry Law no. 2023-973 of 23 October 2023
Transaction fees banned for arbitrage mandates.
Introducing a DDA interpretation within French law on life insurance dealing
charges (in arbitration mandates).
1 January 2026
* Transaction costs on traditional private bank accounts managed on a
discretionary basis are still permitted in France.
* Transaction costs will be prohibited on discretionary managed life insurance
policies from 1 January 2026.
Artificial Intelligence (AI) Act
Majority of provisions in the Act to take effect.
02 August 2026
* Published in the EU Official Journal on 12 July 2024, the AI Act classifies
AI systems based on their potential risk, banning those with unacceptable
risk and regulating high-risk systems.
* Applies to all organisations that develop, use, distribute, or import AI
systems in the EU, even if they are not EU-based.
* Legal application to be phased in over the next three years, with most
provisions taking effect on 2 August 2026.
Retail Investment Strategy (RIS)
Retail Investment Strategy PRIIPs and IDD changes.
2027
* RIS aims to boost consumer protection and confidence in the financial sector
through enhanced disclosure requirements and financial promotion rules, for
example, to encourage customers to invest in financial products across the
Union. It has two main components:
* The Omnibus Directive, which significantly amends IDD, MiFID II, UCITS,
AIFMD, and Solvency II.
* Amendments to the PRIIPs Level One Regulation, paving the way for new
technical standards.
* Negotiations on aspects such as inducement rules and value-for-money
benchmarks have been intense. The EU ‘trilogue’ negotiations are expected to
begin in November 2024, following the new Commission’s term commencement.
* Given the complexity of these legal updates, the strategy is not expected to
be in effect until 2027.
EU Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT)
6th AML Directive (AML D6) and new AML Regulatory Package.
2027
* This package includes a directive outlining the mechanisms member states must
implement, a regulation establishing the Authority for AML and CTF, and a
significant regulation to replace the current Fifth AML Directive.
* The new regulation aims to address inconsistencies in the local application
of the directive by introducing directly applicable rules across the EU. This
will be supplemented by sets of yet-to-be-published Regulatory Technical
Standards.
MALAYSIA
Guideline related to Income Tax (Exemption) (No. 6) Order 2022 (Amendment) Order
2024
Clarified tax treatment for foreign income.
June 2024
* Foreign income received in Malaysia by residents will be taxable, with
certain exemptions for foreign dividend income and other specified
conditions.
* Detailed guidelines issued for the tax treatment of foreign income received
in Malaysia, including exemptions and record-keeping requirements.
TAIWAN
CFC Reporting for Offshore Trusts
Tightened tax rules for offshore trusts held by Taiwanese residents.
July 2024
* New ruling issued by the Ministry of Finance supplementing the CFC ruling in
January 2024 that imposes Alternative Minimum Tax (AMT) on the
settlor/beneficiaries of offshore trusts when CFC is involved.
* Offshore trustees must register with Taiwan tax authorities, prepare accounts
and detailed income and distribution statements for all trust assets.
Trustees without a presence in Taiwan must appoint a local agent.
HONG KONG
Proposed Company Re-domiciliation Regime
New regime to allow foreign companies to change their place of incorporation to
Hong Kong.
July 2024
* Streamlined process for businesses to re-domicile to Hong Kong.
* Applies to foreign companies of different types and scales.
* A comprehensive regime follows the fund re-domiciliation regime implemented
in Nov 2021 which established a simplified fund re-domiciliation regime for
Open-Ended Fund Companies and Limited Partnership Funds.
CHINA
Enforcement of Six-Year Rule
Taxation on global income for long-term foreign residents.
December 2024
* Six-Year Rule introduced from January 2019. 2024 marks the first year that
this rule is applicable.
* Foreigners residing in China for more than 183 days per year for six
consecutive years will be taxed on their global income. The six-year period
can be reset by leaving China for more than 30 consecutive days.
SINGAPORE
Family Office Tax Incentives Economic Criteria for Qualifying Funds
Extension and revision of tax schemes.
January 2025
* Changes to economic criteria for sections 13D, 13O, and 13U to take effect
from January 2025.
* Extension of tax incentives for qualifying funds until end of 2029.
* Inclusion of Limited Partnerships under section 13O scheme.
* Revised economic criteria for qualifying funds, including potential
introduction of a minimum fund size and increased business spending
commitments.
HONG KONG
Family Office Policy Further Review and Tax Concessions
Enhanced measures and tax regime for family offices.
May 2025
* Ongoing measurement of the Capital Investment Entrant Scheme (CIES) and
Family-owned Investment Holding Vehicles (FIHVs) introduced in March 2024.
THAILAND
Potential New Law on Foreign Income
Comprehensive taxation on foreign income.
2025 > 2026
* Further revision of foreign income taxation effective from 1 January 2024.
Foreign income brought into Thailand will be taxed in the year it is brought
in, regardless of when earned. This eliminates the previous tax deferral
strategy.
* Proposed amendments may require individuals residing in Thailand for more
than 180 days to pay tax on foreign income, even if not brought into
Thailand. This is still in early legislative stages.
REGULATION AND COMPLIANCE
--------------------------------------------------------------------------------
Simon Martin
Head of UK Technical Services
UPDATE ON IRISH REVENUE REGISTRATION FOR UK TRUSTEES
Under Irish rules, UK Trustees holding an Irish life policy must register on the
Irish Central Register of Beneficial Ownerships of Trusts (CRBOT).
The original registration process was unfit for UK Trustees, as it assumed they
would access the CRBOT through the Revenue’s Online Service (ROS). This proved
cumbersome, leading to the suspension of the registration process for UK
Trustees while an alternative solution was sought. However, this suspension did
not remove the requirement for Irish life companies to check for discrepancies
between the information provided by Trustees and the register.
Read the full update
UPDATE ON IRISH REVENUE REGISTRATION FOR UK TRUSTEES
Simon Martin
Head of UK Technical Services
UNDER IRISH RULES, UK TRUSTEES HOLDING AN IRISH LIFE POLICY MUST REGISTER ON THE
IRISH CENTRAL REGISTER OF BENEFICIAL OWNERSHIPS OF TRUSTS (CRBOT).
The original registration process was unfit for UK Trustees, as it assumed they
would access the CRBOT through the Revenue’s Online Service (ROS). This proved
cumbersome, leading to the suspension of the registration process for UK
Trustees while an alternative solution was sought. However, this suspension did
not remove the requirement for Irish life companies to check for discrepancies
between the information provided by Trustees and the register.
Several members of the Utmost Technical Services team, as active participants in
insurance industry bodies, have been directly involved in discussions with the
Irish Revenue and the CRBOT to resolve the registration issues for both UK
Trustees and life companies.
It is anticipated that by the end of this year, UK and other non-EU trustees
with Irish policies will be able to register on the CRBOT by completing a
downloadable spreadsheet from the CRBOT website. Comprehensive guidance on how
to register will also be provided. Once submitted, UK Trustees will receive a
reference number in a letter, instructing them to contact their life policy
provider for discrepancy checks against the register.
While the availability of the registration process is welcomed, several issues
remain:
* A large number of UK trustees need to register, potentially leading to a
surge in registrations. Life companies will receive an access code (via the
trustee) but currently have only a small window in which to check for
discrepancies.
* If the registration requirement is not effectively communicated to UK
Trustees (many of whom are lay trustees), it may be ignored, resulting in
potential financial penalties.
Utmost Technical Services team will continue to collaborate with the industry
and the Irish Revenue to address these issues.
Close
TECHNICAL SPOTLIGHT
PORTABILITY
INTRODUCING THE UTMOST CONTINUITY SERVICE
Brendan Harper
Head of Asia & HNW Technical Services
As the only company among its peer group with a footprint in Europe, Asia, and
the Middle East, Utmost Wealth Solutions is uniquely positioned to offer
compliant solutions to High-Net-Worth (HNW) individuals and families with
multi-jurisdictional profiles that span continents.
Read the article
LEVERAGING LIFE INSURANCE FOR A SMOOTH AND TAX-EFFICIENT TRANSITION TO AUSTRALIA
Peter Tung
Tax & Legal Counsel - Asia
Imagine a high-net-worth family that has worked tirelessly to accumulate their
wealth, with family members contemplating a move to Australia. They aim to pass
this wealth to the next generation, who will become Australian residents. How
can they ensure this transition is both smooth and tax-efficient? One intriguing
solution lies in leveraging life insurance solutions.
Read the article
INTRODUCING THE UTMOST CONTINUITY SERVICE
Brendan Harper
Head of Asia & HNW Technical Services
As the only company among its peer group with a footprint in Europe, Asia, and
the Middle East, Utmost Wealth Solutions is uniquely positioned to offer
compliant solutions to High-Net-Worth (HNW) individuals and families with
multi-jurisdictional profiles that span continents.
We often encounter individuals who have purchased a Private Placement Life
Insurance (PPLI) solution in Asia or the Middle East and plan to relocate
elsewhere in the future. While a local solution may work well while the
policyholder resides in Asia or the Middle East, or if they repatriate to
certain jurisdictions (e.g., the UK or Australia), they may need a different
solution if they relocate to a European Union country.
A non-EU PPLI may not meet the regulatory and tax qualification requirements of
the target EU destination. This can lead to issues with recognition, denial of
tax advantages, and conflicts of law that may complicate estate planning.
This is where our portability solutions have been extremely valuable to
customers moving around Europe, complemented by our ability to offer
EU-compliant solutions via advisers authorised in the Dubai International
Financial Centre (DIFC).
For our Asia and Middle East-based clients, we have enhanced this valuable
service by introducing our “Continuity Service”.
The Utmost Continuity Service is available to High-Net-Worth individuals who
already hold a policy valued at US$1 million or more, issued by Utmost Wealth
Solutions in one of our regulated markets. If the policyholder decides to
relocate to an EU country where Utmost offers a compliant solution, we can offer
a substitution service if it results in a more favourable client outcome.
The ability to offer our Continuity Service means that our clients continue to
benefit from Utmost’s wealth planning solutions, with the assurance that their
contract is designed specifically to provide tax and estate planning advantages
in their new country of residence. Additional benefits may include seamless
transfer of investments and a rebasing of capital for tax purposes.
For more information, we have produced a detailed guide, which is available from
your Utmost Wealth Solutions sales representative.
Close
LEVERAGING LIFE INSURANCE FOR A SMOOTH AND TAX-EFFICIENT TRANSITION TO AUSTRALIA
Peter Tung
Tax & Legal Counsel - Asia
Imagine a high-net-worth family that has worked tirelessly to accumulate their
wealth, with family members contemplating a move to Australia. They aim to pass
this wealth to the next generation, who will become Australian residents. How
can they ensure this transition is both smooth and tax-efficient? One intriguing
solution lies in leveraging life insurance solutions.
Life insurance solutions from Utmost offer a portable and flexible means to
manage wealth across borders. By utilising a life insurance solution, the family
can maintain control over their assets while benefiting from tax efficiency in
Australia. Utmost insurance products are “eligible policies” for Australian tax
purposes, which means they can provide significant tax benefits when structured
correctly.
We regularly review our contracts to ensure they are tax compliant for
policyholders considering relocating to Australia, and we have sought formal
product tax rulings to confirm our understanding.
Tax benefits include tax-deferred internal investment growth, meaning the family
won’t face immediate tax liabilities on underlying investment income and gains.
This deferral can be particularly advantageous for families looking to
accumulate wealth before passing it on to the next generation. Additionally, the
policy can be designed to ensure that the proceeds are distributed in a
tax-efficient manner, minimising the tax burden on the beneficiaries.
But here’s where it gets even more interesting: the flexibility of these
policies accommodates estate planning tailored to the family’s unique
circumstances, either through simple beneficiary nominations, or in conjunction
with a family trust to control the timing of distributions.
Curious about how this could work for your clients and their family? The nuances
of life insurance and its tax implications can be complex, but that’s where
expert technical support comes in.
For more details on how you can make the most of these opportunities for your
clients, contact your Utmost Wealth Solutions sales representative. After all,
the right strategy today could mean a world of difference tomorrow. Let’s dive
into the details together!
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COUNTRY FOCUS
SPAIN & FRANCE
SPAIN: THE EUROPEAN ALTERNATIVE TO THE ANGLO-SAXON TRUST: UNIT-LINKED LIFE
INSURANCE
Nerea Llona
Tax & Legal Counsel - Spain & LatAm
In an interview with Nerea Llona, Tax and Legal Counsel - Spain and LatAm, José
Luis López-Hermida of KPMG Spain discusses the use of unit-linked life insurance
as an alternative to Anglo-Saxon trusts for high-net-worth individuals in Spain.
This article explores the benefits and flexibility of unit-linked life insurance
in wealth and succession planning.
Read more
FRANCE: TRANSFORM DISMEMBERED CAPITAL EFFICIENTLY WITH LIFE INSURANCE
Benjamin Fiorino
Wealth Structurer / Tax & Legal Counsel, France
Our Senior Wealth Planner for France, Benjamin Fiorino, shares insights into our
cutting-edge expertise on the complex topic of dismemberment.
Read more
SPAIN: THE EUROPEAN ALTERNATIVE TO THE ANGLO-SAXON TRUST: UNIT-LINKED LIFE
INSURANCE
Nerea Llona
Tax & Legal Counsel - Spain & LatAm
In an interview with Nerea Llona, Tax and Legal Counsel - Spain and LatAm, José
Luis López-Hermida of KPMG Spain discusses the use of unit-linked life insurance
as an alternative to Anglo-Saxon trusts for high-net-worth individuals in Spain.
This article explores the benefits and flexibility of unit-linked life insurance
in wealth and succession planning.
TRENDS IN WEALTH MIGRATION AND TAXATION
Recent data indicates that over 128,000 high-net-worth individuals will relocate
in 2024, driven by significant tax changes in traditionally attractive countries
like the UK, Italy, and Portugal. Spain, with its favourable tax regimes such as
the ‘Beckham Law’ and new incentives in Madrid for those who are resident there,
is becoming a preferred destination, especially for Latin Americans.
CHALLENGES WITH TRADITIONAL WEALTH PLANNING VEHICLES
Traditional planning vehicles like private holding companies, private
foundations, and trusts face certain operational, legal, and tax challenges in
Spain. Trusts, in particular, are not recognised in Spanish law and are
transparent for tax purposes, complicating their use for estate planning and
prompting the need for alternative solutions.
ADVANTAGES OF UNIT-LINKED LIFE INSURANCE
Unit-linked life insurance offers several benefits:
* Flexibility: Policyholders can set terms and conditions for asset use and
transfer, and they are adaptable to changing circumstances.
* Confidentiality: Maintains privacy as a private contract between the insurer
and policyholder.
* Tax Efficiency: Provides options for income tax deferral and optimised wealth
transfer in a controlled manner to the next generations. They are especially
beneficial for high-net-worth individuals with international mobility needs.
UNIT-LINKED LIFE INSURANCE AS AN ESTATE PLANNING VEHICLE
This type of insurance allows policyholders to establish terms and conditions
for the policy offering flexibility in estate and succession planning. It
enables the transfer of assets to be deferred and divided according to the
policyholder’s instructions, regardless of the provisions of the last will and
testament. Beneficiaries and conditions can usually be modified as needed, and
payments of the insurance benefit can be planned in advance independently of
unpredictable events like death.
INTERNATIONAL PERSPECTIVE
Unit-linked life insurance is similar to trusts in involving professional
managers and custodians to hold assets, whilst it provides the necessary legal
security and is fully regulated under Spanish law. Specialised insurers based in
Luxembourg and Ireland are noted for their expertise in this area, offering
significant advantages in investor protection and potential VAT savings to the
policyholder.
CONCLUSION
Unit-linked life insurance is a robust alternative to trusts, providing
flexibility and legal security from a Spanish perspective in an unstable
regulatory and tax environment. It helps high-net-worth individuals navigate the
complexities of international wealth taxation effectively.
Download the PDF
English Spanish
FRANCE: TRANSFORM DISMEMBERED CAPITAL EFFICIENTLY WITH LIFE INSURANCE
Benjamin Fiorino
Wealth Structurer / Tax & Legal Counsel, France
Our Senior Wealth Planner for France, Benjamin Fiorino, shares insights into our
cutting-edge expertise on the complex topic of dismemberment.
THE CAPITALISATION POLICY OR LIFE INSURANCE?
In France, a capitalisation policy is almost systematically used for the
reinvestment of dismembered capital. However, since the most recent Court of
Cassation case law in October 2023, single life insurance policies have often
become a better solution for optimising and planning your client’s estate.
THE CONCEPT OF THE DISMEMBERED BENEFICIARY CLAUSE
PRINCIPLE
A dismembered beneficiary clause enables insurance death benefits to be
efficiently passed to the insured’s heirs. It often designates the spouse as the
“usufructuary” (the person who will have access to the capital during their
lifetime) and the children as “bare owners” (the recipients of the capital upon
the death of the usufructuary).
Upon the policyholder’s death, the death benefit[1] is paid in full to the
usufructuary spouse, while the children, as bare owners, have a right to claim
on the surviving spouse’s estate.
TAX CONSIDERATIONS
The advantage of this arrangement is that the children, as bare owners, are only
taxed on a portion of the death benefit depending on the age of the usufructuary
spouse (see table below). Meanwhile, their restitution claim is on 100% of the
death benefit. The usufructuary spouse is exempt from inheritance taxation.
CASE STUDY
At 68, Bertrand takes out a life insurance policy for €2,200,000 with the dual
objective of protecting his wife, Laura, and ultimately passing his wealth
efficiently to his children, Tom and Juliette. Consequently, he chooses a
dismembered beneficiary clause.
Upon Bertrand’s death, Laura receives €3,000,000, and the children each have a
claim of €1,500,000 on her estate while only paying taxation of €943,250 each
(€216,015 tax per beneficiary).
REINVESTING THE DISMEMBERED CAPITAL
Laura may decide to reinvest the €3,000,000 dismembered capital into a
capitalisation policy or a life insurance policy, such as Private Wealth
Portfolio France.
KEY POINT
The recent Court of Cassation case law (11 October 2023) confirms that when
reinvesting the €3,000,000 dismembered capital in a life insurance policy with
the bare-owner children designated as ‘free of charge’ beneficiaries (à titre
gratuit), upon Laura’s death, the children will be taxed on the death capital
they receive under the favourable life insurance conditions. Additionally, they
will benefit from the restitution claim of €3,000,000 received upon Bertrand’s
death on the remaining estate of Laura.
The table below compares the taxation due by the children depending on whether
Laura reinvests the €3,000,000 dismembered capital into a life insurance policy
or a capitalisation policy.
Assuming that upon her death the dismembered capital is worth €3,800,000 and her
real estate is valued at €4,000,000.
With a tax saving of over €373,000, a life insurance policy, such as Private
Wealth Portfolio France, is significantly more tax-efficient compared to a
capitalisation policy.
--------------------------------------------------------------------------------
UNLOCK ADVANCED INSIGHTS ON DISMEMBERMENT SCENARIOS
Marie Salvo, Head of Sales for France, and Benjamin Fiorino have developed a
detailed guide, addressing several scenarios and practicalities with major
impacts.
This guide is exclusively reserved for our partners.
To receive this comprehensive resource packed with invaluable insights and
detailed scenarios, contact Marie Salvo.
Marie Salvo
Head of Sales – France and Monaco
E: marie.salvo@utmost.ie
M: +33 (0)6 29 47 66 92
--------------------------------------------------------------------------------
[1] after reduction of 17.2% social contribution on capital gains only
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CASE STUDY INSIGHTS
READ OUR CASE STUDIES TO LEARN HOW UNIT-LINKED LIFE INSURANCE IS EFFECTIVE FOR
THE FINANCIAL NEEDS OF HNWIS AND HOW IT CAN OVERCOME SPECIFIC CHALLENGES FACED
BY WEALTH MANAGERS.
Nerea Llona
Tax and Legal Counsel
Spain and LatAm
ENSURING TAX-EFFICIENT INVESTMENTS FOR RETIREMENT IN SPAIN
Jim, a 60-year-old UK tax resident, is planning to retire in Spain at age 65.
With a lump sum of €2,000,000 to invest, Jim seeks a tax-efficient solution that
remains compliant in both the UK and Spain.
This case study explores how a tailored offshore bond can provide the
flexibility and tax advantages needed for a smooth transition to retirement
abroad.
THE CLIENT
Jim, a 60-year-old UK tax resident, is still working but plans to retire in
Spain at age 65, where he already owns a property. He has a lump sum of
€2,000,000 to invest now and is keen to do so in a tax-efficient manner. Jim
wants to ensure that he does not have to restructure his investment when he
moves to Spain in five years’ time.
THE SOLUTION
Investing in a financial product that is tax efficient in both the UK and Spain
can be challenging due to differing tax regimes. Additionally, many offshore
bond providers lack the capability to offer portability when moving out of the
UK. Furthermore, some providers are not fully aware of the complexities involved
in ensuring the offshore bond remains compliant in Spain. Key aspects of a
policy that may need to be amended include:
1. Level of death cover
2. Beneficiary nominations
3. Investment options and underlying assets – an essential requirement that
must be met through the whole life of the policy and cannot be endorsed at
the time of relocation to Spain
4. Tax reporting and withholding taxes
5. Intermediary appointments
THE BENEFITS
An offshore bond from Utmost Wealth Solutions offers Jim a compliant and
tax-efficient solution in both jurisdictions. Our Technical Services team
possesses the tax and regulatory expertise to adapt the policy and make it
portable from its inception, ensuring it remains compliant and tax-efficient in
both the UK and Spain.
Jim will benefit from the following tax advantages:
* Gross roll-up of income and gains (UK & Spain)
* 5% annual tax-deferred allowance (UK only)
* Reduced foreign withholding taxes on dividends (UK & Spain)
* Tax reporting (UK and Spain) and withholding tax deductions (Spain only) to
simplify the policyholder’s tax liabilities through self-assessment
* No VAT on discretionary asset management fees (UK and Spain)
* Beneficiary nominations (Spain only) to simplify and expedite the death claim
process
* Estate and wealth planning opportunities (Spain only)
For more details about our Spanish portability offering, contact your Utmost
Wealth Solutions sales representative.
UPCOMING EVENTS
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27 November Register
TECHNICAL SERVICES
TEAM
WE PROVIDE EXPERT, TIMELY SUPPORT FOR PARTNERS IN THE HIGH AND ULTRA-HIGH NET
WORTH MARKET THROUGH ONE OF THE MOST QUALIFIED TECHNICAL SERVICES TEAMS IN THE
INDUSTRY.
* Day to day technical support
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* The latest regulatory and tax developments
* Product structuring to address specific client needs
Download the Technical Services Team Overview
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The information presented in this briefing does not constitute tax or legal
advice and is based on our understanding of legislation and taxation as of
October 2024. This item has been prepared for informational purposes only.
Utmost group companies cannot be held responsible for any possible loss
resulting from reliance on this information.
This briefing has been issued by Utmost Wealth Solutions. Utmost Wealth
Solutions is a business name used by a number of Utmost companies:
Utmost International Isle of Man Limited (No. 024916C) is authorised and
regulated by the Isle of Man Financial Services Authority. Its registered office
is King Edward Bay House, King Edward Road, Onchan, Isle of Man, IM99 1NU,
British Isles.
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Its registered office is Navan Business Park, Athlumney, Navan, Co. Meath, C15
CCW8, Ireland.
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as a Licensed Insurer by the Guernsey Financial Services Commission under the
Insurance Business (Bailiwick of Guernsey) Law, 2002 (as amended). Its
registered office is Utmost House, Hirzel Street, St Peter Port, Guernsey, GY1
4PA, Channel Islands.
Where this material has been distributed by Utmost International Middle East
Limited, it has been distributed to Market Counterparties on behalf of Utmost
Worldwide Limited by Utmost International Middle East Limited. Utmost
International Middle East Limited is a wholly owned subsidiary of Utmost
Worldwide Limited and is incorporated in the Dubai International Financial
Centre (DIFC) under number 3249, registered office address Office 14-36, Level
14, Central Park Towers, Dubai International Financial Centre, PO Box 482062,
Dubai, United Arab Emirates and is a company regulated by the Dubai Financial
Services Authority (DFSA).
Further information about the Utmost International regulated entities can be
found on our website at https://utmostinternational.com/regulatory-information/
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