The register for ‘ultimate beneficial owners’, also referred to as the UBO register, is the result of the 4th Anti-Money Laundering Directive. This Directive was adopted by the European Parliament on May 20, 2015 and must have been implemented in the legislation of the Member States on June 26, 2017.
On July 5, 2016, the European Commission announced that it wants to take a number of additional measures concerning the UBO register with the aim of achieving greater transparency, including with respect to the tax authorities of all EU Member States and possibly even for tax authorities worldwide. The additional measures that have now been proposed are:
- full public access to the UBO registers;
- reduction of the percentage necessary to qualify as a UBO from 25% to 10% for “businesses that risk being used for money laundering or tax evasion”. The European Commission proposes using the definition ‘Passive Non-Financial Entity’, which is also used in other guidelines. Unlisted investment companies could fall under this definition. For all other companies, the threshold remains 25%;
- Direct interconnection of registers between Member States, to facilitate the cooperation between Member States.
Lastly, the European Commission has called on Member States to bring forward the date on which the UBO register would effect to January 1, 2017.
The above are proposals; these still need to be adopted by the Council. Draft legislation to implement the Directive is still awaited in the Netherlands. Pending this legislation, it is still not known which entities will have to register their UBOs. We are, of course, keeping a close eye on the legislative agenda in Brussels and in The Hague.
What is currently known about the UBO register is summarized below.
What is an UBO?
UBOs are the individuals who have formal or de facto control over an entity. The following individuals are designated as an UBO by the Directive:
i) An individual who directly or indirectly has a shareholding of more than 25%.
ii) If no person as designated under i) can be identified, then the individuals belonging to the senior management staff are designated as UBO.
The identities of the following persons must be registered by trusts:
- The founder of the trust;
- The trustee(s);
- The protector (where applicable);
- The beneficiaries (or class of beneficiaries) and any other individual exercising effective control over the trust.
Entities and companies that must register their UBO(s)
Registration is mandatory for all legal entities of a Member State and all companies incorporated within the territory of a Member State. These entities will have to ensure that information regarding their ultimate beneficial owners is available in addition to the usual information. This information will have to be stored in a central register that is situated outside the company.
What information will be included in the register?
It appears from the Directive that the following details of the ultimate beneficial owners must be included in the register:
- Month of birth;
- Year of birth;
- Country of residence;
- Nature and extent of the economic interest held by the UBO.
Entities with an obligation to register should not rely solely on the UBO register. Therefore, the entities must also be able to provide relevant copies of identification and verification data and other relevant documentation concerning the identity of the ultimate beneficial owner. This means that this information must be included in the accounts and records of the entity itself.
Persons/entities with access to the register
At least the following persons/entities should have access to the register:
- Competent authorities and financial intelligence units of the Member States.
- Institutions with a registration obligation under the 4th Anti-Money Laundering Directive. Examples of these include banks, life insurance companies, investment firms, accountants and notaries.
- All persons or organizations that can demonstrate a legitimate interest that is related to countering money laundering and the financing of terrorism and related predicate offenses including corruption, tax crimes and fraud.
The term ‘legitimate interest’ is not defined further by the European legislator. A Member State may also elect to make the UBO register a public register.
The introduction of the UBO register in the Netherlands
Having regard to statements by the Ministry of Finance, it is expected that almost all legal entities incorporated under Dutch law will be obliged to register their ultimate beneficial owners. In addition to the information that must be made available in the register, entities will have to include the following details of the ultimate beneficial owners in their own accounts and records:
- Date of birth, place of birth and country of birth;
- If possible, the Citizen Identification number (BSN) and/or foreign tax identification number;
- Copy of the document verifying the identity of the shareholder;
- Documentation substantiating why a person has the status of UBO and the size of the corresponding (economic) interest.
In the Netherlands the UBO register will be a public register. For a small fee, everyone will be able to search for the ultimate beneficial owner of an entity. To protect the privacy of the ultimate beneficial owners, a number of safeguards are attached to the register, however.
As stated above, we are keeping a close eye on the legislative agenda in Brussels and in The Hague. If you have any questions about the implications of the introduction of the UBO register, please contact your tax advisor at Meijburg & Co.