The bell has rung

The bell has rung and 2015 is off to a flying start. The euro extended its longest uninterrupted losing streak falling below the $1.18 mark to trade at around the same level as when it was introduced in January 1999.

Oil has also fallen by significantly more than 50% to below $50 within a similar brief period. These are economic phenomena.

Nonetheless these phenomena punctuate our position in the scheme of the aftermath of global financial and economic re-engineering. In addition to these, there are a good number of upcoming snap and general elections across the world. Political risk will not cease influencing how we continue to manage our financial lives.

What does this mean for you?

A crystal ball is an impossibility, but to avoid any adverse side effects you should plan to have your affairs positioned in such a fashion that whichever way the pendulum swings, it doesn’t destroy your hard work.

The heavy swing of policy changes, such as the ones I wrote about earlier in January, may only be the start.

One particular change that appears very simple by inception is how Portugal is to tax what legislators have termed “fiduciary structures”.

The new fiscal legislation was published in the IRS tax code dated December 31, 2014 and will be enforced from January 1, 2015.

According to a number of articles in the code, from January 1, 2015 any withdrawals or liquidations from offshore fiduciary structures will be taxed either at 28% or 35% for the Portuguese resident. This is very similar as to how bank interest is taxed from a national or offshore Portuguese viewpoint.

Thus far, this appears to have been interpreted by the professional community as trusts. Some advisers and managers have already actioned changes to safeguard their clients’ interests. For the astute client, perhaps a calm observation of your position is required.

Trusts are not the only fiduciary structures. There is a diverse universe of trusts and other platforms, such as offshore investment bonds that deserve sensitive thought. Discretionary trusts, pension trusts, UK SIPPs, charitable trusts, life policies, should all be considered.

Over the last decade or so, these types of vehicles have not been exclusively for the uber wealthy and those with less than half-a-million euros worth of lifetime savings have implemented these compliant and mainstream structures into their financial plans.

If so, does this mean that the bell has rung for change and trusts and investment bonds are prime targets? It certainly provides opportunity for the unscrupulous professional to influence the layman with a knee-jerk reaction to exit from an existing position, without studied thought, and possibly resulting in a far worse position in the long term.

Long-term financial plans need deliberation and, of course, decisive action. Tax is what it is and has to be assessed and collected correctly. Structures should not be established solely with the intent of never paying any tax. The important question is, what is the correct amount of tax you should be paying?

Fiduciary structures will continue to provide numerous advantages to the investor whether it be for income, growth, tax-efficiencies and estate planning.

Any overnight changes to how these are taxed must be understood and integrated into your annual planning to keep you and yours safe, secure and compliant.

Dealing with a tax adviser that understands national and international tax laws, both in their theory and in practice, should work in harmony with any long-term financial plan.

This article is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investments or course of action.

By Raoul Ruiz Martinez
|| [email protected]

Raoul Ruiz Martinez is a resident and independent consultant for Finesco Financial Services Ltd., Glasgow and advises clients on private financial matters in both the UK and throughout Europe under the MiFID regulation. Finesco Financial Services Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Some of the services provided are not regulated by the FCA because they are not included within the Financial Services and Markets Act 2000. | 289 561 333