New Legislation Concerning Registration of Beneficial Owner

New Legislation Concerning Registration of Beneficial Owner

Law No 89/2017, of 21 August, which approves the Legal Regime of the Central Register of Effective Beneficiaries, thus transposing Chapter III of the Directive (EU) nº 2015 / 849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, has introduced amendments to several legislation.

      I.   Purpose

Law No 89/2017 arises in the context of an increasing concern for transparency and legal certainty, as well as with ensuring compliance with money laundering and terrorist financing prevention obligations.

In addition, by establishing a CRBO for certain entities, allowing access and the exchange of information between Tax Administrations, this Law constitutes a measure against aggressive fiscal planning, establishing means that lead to greater transparency and exchange of information for tax purposes.

     II. What is CRBO 

Central Registry of the Beneficial Owners (henceforth, CRBO), is a database, partially accessible by the public, containing information about natural persons who, directly or indirectly, hold ownership or effective control of the entities covered by it, which will be managed by Instituto dos Registos e do Notariado, IP.

     III. Concept of beneficial owner

Under the terms of Law no 89/2017, beneficial owners (henceforth, BO) are the natural persons on whose behalf an operation or activity is carried out. In other words, beneficial owners are those who ultimately have the ownership or effective control of the entities listed below.

     IV.     Entities subject to CRBO

Among the entities subject to the rules of the CRBO are:

-         Associations, cooperatives, foundations, civil and commercial societies, as well as any other personalized legal persons, subject to Portuguese law or foreign law, that pursue their activities or carry out legal business or any legal acts within national territory which determines the attainment of a taxpayer identification number (henceforth, TIN) in Portugal;

-         Representations of international or foreign law legal persons that are active in Portugal;

-         Other entities which, pursuing their own objectives and activities different from those of their associates, are not endowed with legal personality;

-         Fiduciary management instruments registered in the Madeira Free Trade Zone (trusts);

-         External financial branches registered in Madeira Free Zone;

-         When they do not fit into the foregoing situations, trust funds and other collective interests centers without legal personality with a similar structure or functions.

Certain entities are not covered by the scope of the CRBO, namely:

-         Companies with shares admitted to trading on a regulated market subject to disclosure requirements which are consistent with European Union law or standards;

-         Consortia and Complementary Groupings of Companies;

-         Condominiums, in respect of buildings that are constituted as horizontal property, provided that their total net asset value does not exceed EUR 2,000,000.00 and no more than 50% of property is held by a single holder, joint owners or natural persons who are to be considered as beneficial owners, in accordance with the criteria laid down in the new Law on Combating Money Laundering and Terrorist Financing (Law No 83/2017).

     V.     Obligations 

Entities that are subject to the CRBO are required to:

-         Keep an updated record of their BO.

-         Declare information about their BO: the initial declaration regarding the beneficial owner must be made, in relation to the entities to be incorporated, at the time of its incorporation or of the first registration in the Central Registry of Companies, depending on whether or not they are subject to commercial register, while for already incorporated entities the declaration must be made within a term yet to be defined by an ordinance.

-         Update the information provided to the CRBO whenever it is necessary, which should be notified as soon as possible and never later than 30 days after the date of the fact that determines the change.

-         Confirm the validity of the information about the BO by means of an annual declaration, to be filed until the 15th of July; regarding entities subject to the submission of Simplified Business Information, said annual declaration shall be filed together with it.

-         Verify the information and updates regarding BO in all the circumstances in which law requires evidence of a regular tax situation.

     VI.     Information about BO

The entities subject to the CRBO must provide information, regarding the beneficial owner, including information on the circumstances relevant to the quality of BO and the economic interest held. Of the information provided on the BO, the following will be collected for CRBO purposes:

-         Full name;

-         Date of birth;

-         Nationality;

-         Citizenship;

-         Full address of permanent residence including the country;

-         Identification document details;

-         TIN, when applicable, or TIN issued by the competent authorities of the State or States of their nationality or equivalent number;

-         Contact electronic address, when applicable.

The information contained in the CRBO will be made accessible to the judicial, police and sectoral authorities provided in the new Law on Combating Money Laundering and Terrorist Financing as well as to the Tax Authority, within the scope of their legal responsibilities in the fight against money laundering and terrorist financing.

In addition, the following information on BO will be made publicly available on an electronic page:

-         Name;

-         Month and year of birth;

-         Citizenship;

-         Country of residence;

-         Economic interest held.

The access to this information is yet to be regulated by ordinance.

The possibility of restrictions on access to information on BO is foreseen in special cases, based on the fact that access to such information may expose the BO to certain risks foreseen by law.

     VII.     Non-compliance with CRBO obligations

Failure by the entities subject to the CRBO to comply with the obligations to keep an updated BE record constitutes a misdemeanor punishable with a fine of EUR 1,000.00 to EUR 50,000.00.

Additionally, until the situation is regularized, the non-compliant entities are temporarily prohibited from:

-         Distributing profits for the year or make advances on profits during the year; enter into supply contracts, public works contracts or purchase of goods and services contracts with the State, autonomous regions, public institutes, local authorities and private social solidarity institutions which are mainly financed by the State Budget;

-         Apply for the concession of public services;

-         Admit to trading on a regulated market financial instruments representing its share capital or convertible thereto;

-         Launch public distribution offers of any financial instruments issued by them;

-         Benefit from investment and public funds support;

-         Intervene in any business that has as its object the transfer of property or the constitution, acquisition or alienation of any other real rights of fruition or guarantee on any real estate assets.

Failure to comply with the identified obligations or lack of justification that exempts from the obligation to provide that information may also imply the publication in CRBO of the default situation by the entity, as well as its registration at the Commercial Company Registrar.

Finally, the provision of false information to the CRBO constitutes a false declarations criminal offense.

     VIII.     Entry into force

These provisions shall come into effect 90 days after its publication, and it is expected that the necessary regulations for the declarative procedure and registration of information in the CRBO will be published by that time.