Discrimination in the unlike ‘trust-like’
1 Under art.31.1, up-to-date and accurate records of beneficial ownership must be maintained by the trustees of an express trust governed by the law of an EU Member State. In addition, under art.31.4, if the trust generates tax consequences then such beneficial ownership information must be logged in a central register.
By contrast, under the Fifth Anti-Money Laundering Directive (5AMLD),2 art.31 is amended so there is no longer a requirement that the trust be governed by the law of a Member State, but rather that it be administered in a Member State.
Beneficial ownership information must be logged in the central register of the Member State where the trustee resides. In addition, the amended article is stated to apply to trusts as well as ‘other types of legal arrangements, such as, inter alia, fiducie, certain types of Treuhand or fideicomiso, where such arrangements have a structure or functions similar to trusts’.
A new para.10 requires Member States to ‘notify to the Commission the categories, description of the characteristics, names and, where applicable, legal basis of the trusts and similar legal arrangements ... by 10 July 2019’.
The Commission published the consolidated list of such legal arrangements on 24 October 2019.3 Of the 28 Member States, 12 had ‘none’, including Denmark, Finland, Greece, Poland and Sweden. Five Member States sent ‘no notification’, including Austria, Germany and the UK.
Ireland notified express trusts, statutory trusts and trusts imposed or arising by operation of law; Luxembourg, trusts and contrats fiduciaries; Malta, trusts and foundations; and Cyprus, trusts and international trusts.
By contrast, France only notified fiducies; Belgium, fidei-commis de residuo; and the Netherlands, fonds. Therefore, although the holders of a French usufruit may be resident in the UK, whether the usufruit governed by French law is to be regarded as a trust-like structure will be a question for French law. Thus, although the usufruit may be taxed for UK inheritance tax purposes as a trust, there is no requirement to comply with 5AMLD obligations. The uneven nature of the EU playing field may provide some opportunities for forum shopping.
Malta appears to be the only Member State to have notified foundations. Germany has not, but its Stiftungen are already registered in the Transparenzregister, which became fully public on 1 January 2020.
Discrimination is intrinsic in the unlike ‘trust-like’. Will the Court of Justice of the European Union regard the operation of 5AMLD as contrary to the treaty freedoms and operation of the internal market?