WHAT CHALLENGES FACE ASSET MANAGERS, FAMILY OFFICES, ENTREPRENEURS, AND CORPORATIONS IN 2023?
2022 saw the international tax framework continuing to evolve, along with greater scrutiny on transparency and substance and the rising importance of addressing ESG-related issues across all sectors.
Many corporations, asset managers, business owners, and family offices continued to grow their operations throughout last year by expanding and diversifying across international borders and taking advantage of different products and new investment structuring options available in the market to improve efficiencies and open-up new opportunities.
2023 will no doubt see some of those regulatory challenges continue to bite, along with new industry challenges and shifting economic factors, but again a year that will offer plenty of opportunities for those with the right support and strategies in place to address these changing times.
In this article, some of our experts share their insights and expectations for 2023 across five service areas – Capital Markets, Globalization, Private Wealth, Global Tax Developments, and Trusts.
by Remko van Ekelen (Head of Capital Markets – Europe) and Giorgio Incognito (Managing Director, Amicorp Geneva and Lugano)
The difficult capital markets saga of 2022 led to many delays for potential investors, principally on the Covered Bonds programs and ABS. Nevertheless, updates to the Luxembourg Securitization Law established Luxembourg as an even more compelling securitization jurisdiction. Two significant amendments now enable actively managed collateralized debt obligations (CDOs) and collateralized loan obligations (CLOs) to be set up in Luxembourg more easily and with even more refinancing options.
While bond markets, in general, were slower in 2022, we saw market appetite coming back during the last couple of months of the year, with borrowers lining up for new issues in 2023. This year borrowers are rushing back into the market to benefit from lower rates. We expect further market volatility and a potential slowdown in rate hikes, with the expectation that the ECB will top out in July 2023.
On the corporate sustainability side and the ESG side, there will be more developments during 2023, requiring more stringent reporting from corporates. Some key challenges in 2023:
- ESG reporting: Pressure from investors and stakeholders will keep ESG high on corporate agendas. Despite volatile economic and political surroundings, major legal and regulatory measures will come into effect.
- Sustainable financing: The current high demand for sustainable financial Euro products in the market will continue to rise in 2023, potentially providing more favorable financing terms than their non-sustainable counterparts.
In 2022 we saw increased scrutiny of ESG-related issues. We expect this to drive a more structured disclosure for sustainability, which the International Sustainability Standards Board is expected to finalize in 2023. This will potentially bring a stronger emphasis on the concept and look at how this can drive value creation. The International Capital Market Association (ICMA) published a selection of new guidance documents for 2022, which include new definitions for green securitization transactions and sustainability-linked bonds. We expect to see an increasing number of active clients in this space. These combined factors, as well as investors being more attentive to the quality and integrity of the issuers, will reduce the greenwashing concerns which are currently out there and drive further issuance and innovation in the ESG market.
To reach sustainability goals, corporates will need to revisit their priorities and qualify as a recognized partner by investors in the decarbonization of the economy. This will lead to an increased focus on projects in that segment, as multiple emitting sectors are not yet up to par. Getting to net zero by 2050 will require strong growth in Transition Finance.
The needs of some stakeholders to raise capital, optimize cash flow, and lighten the company's balance sheets will create opportunities in Covered Bonds on residential mortgage-backed securities, ABS Securitization Auto lease and Receivables, as well as loans admin programs.
How can Amicorp help?
We provide support to capital market transactions at a local level and on a global scale. We help manage and administer a wide range of deal structures, from securitizations to project finance and syndicated loans providing capital market solutions to public and private companies, financial institutions, private equity, and asset managers. To find out more, contact our team here.
by Hanno de Vriend (Global Head – Outsourcing Services)
In the wake of the COVID-19 pandemic, 2022 witnessed a resurgence in the internationalization of companies. More companies in various sectors are expanding on a global scale. The IT sector, in particular, and others, is witnessing the rapid development of new markets and products, resulting in more companies expanding abroad.
Shifts in production and labor markets often impact companies and organizations looking into globalization, rapid technological advances, and new (emerging) markets. They are facing challenges in starting local operations and need support with navigation through local complexities, back-office organization, market insights, and ease of scaling up.
For those in production companies, local speed to market enables faster responses to customer needs and less product waste from forecasting errors. This does not necessarily require large-scale reshoring, but local presence does bring advantages.
We foresee the emergence of new markets as more global solutions become available. The companies entering these markets require services like market entry advisory, entity incorporation, bookkeeping and financial advice, corporate tax filing and compliance, payroll & HR, work permits, and immigration advisory services.
Ideally, these services will be delivered by local experts and centralized account managers. This one-stop shopping model will relieve clients of time-consuming work so they can focus their time, energy, and resources on higher value-added activities.
How can Amicorp help?
Amicorp Globalization Services help businesses and entrepreneurs to expand internationally and realize their global ambitions. Our team provides expert local market knowledge across multiple jurisdictions to help businesses scale quickly, cost-effectively, and safely navigate through regulatory complexities, bringing them peace of mind, now and in the future.
Through our local offices and global network, we provide support and access to over 100 jurisdictions worldwide, all from a single point of contact. Wherever your global ambitions lie, our team can help make that happen. To find out more, contact our team here.
PRIVATE WEALTHby Hans Herrmann (Chief Asset Protection Officer)
The financial service industry has undergone significant changes over the last year, focusing on increased regulatory scrutiny and improving transparency and accountability in all sectors. In addition to regulatory changes, there have been significant global legal landscape developments. Several court cases and settlements have been related to allegations of misconduct and fraud within the industry, especially in the digital space. This has led to increased pressure for everyone to invest and effect the necessary changes to ensure compliance with industry regulations and standards and to stay ahead of the curve.
The impact of the global economy on interest rates worldwide has been the most significant event of 2022. The events in Ukraine, the cash and future prices for energy and food, and the slowdown in global economic activity placed pressure on business, income, and investments as uncertainty and lack of visibility loomed in almost all areas of the world economy.
A certain recovery is expected for 2023, predicated on a further upturn in the global tourism sector, coupled with the implementation of extensive private and public infrastructure, energy, and construction projects. The commonly accepted vision for 2023 is that global inflationary pressures are expected to persist, with many challenges from all sectors of the world economy and financial markets. The challenge for our clients will be to navigate these waters safely and to be able to anticipate the core risks for their business structures and wealth. The timeframes within which to adjust and react are shorter than ever before.
It is vital to recognize that corporate, professional, and individual investors have diverse needs that require varied approaches. Individual investors are increasingly seeing the value of our fiduciary advice, which provides personalized investment management and where advisers adapt their product offerings to the changes in the market and risk appetite.
On one hand, the corporate segment will be looking to gain from the high interest in cash management and those seeking funding. In contrast, the corporate bond market will be deeper and more attractive to the overall investors' pool. For the Professional segment, the output of pooled investment structures, Private Equity Funds, and other investment vehicles will be the ongoing opportunity for 2023 and beyond.
The continued growth of a professional approach to investing will continue for years to come. Several factors drive this growth, including the increasing complexity of the financial landscape, the aging population, and the growing importance of retirement planning. At Amicorp, we are poised to service this growth in all industry segments and provide valuable direct market insights, guidance, and access to clients looking to invest in these markets, building on the network of our global presence.
How can Amicorp help?
Reviewing your assets and providing consolidation possibilities is part of our DNA. Our clients have a variety of asset types, such as private companies, real estate, and assets held with investment managers, banks, and financial institutions. We monitor the performance, maintain records and offer effective planning solutions. We provide sophisticated support to institutional investors, including using automated systems via our market-leading technology platform to streamline any fund's subscription and redemption processes and day-to-day operations. To find out more, contact our team here.
GLOBAL TAX DEVELOPMENTSby Eric Boes (Chief Legal and Tax Officer)
In the post-BEPS era, the international tax framework keeps evolving extremely fast. During 2022, we witnessed significant transformative tax legislations, which included, amongst others:
- Progress on BEPS 2.0 – Pillar 1 and 2: 100+ Countries agreed to adopt Minimum Taxation Rules of 15% for large multinationals with global consolidated group revenue exceeding EUR 750M
- Proposal for Unshell Directive by the EU to combat Postbox companies, which is still on the drawing board.
- Increasing tax transparency by implementation in the EU of DAC7 for digital platforms operators as of 2023 and DAC8 on Crypto-assets reporting.
- Economic substance requirement in Hong Kong to avail offshore exemption for foreign-sourced passive income.
- Introduction of Controlled Foreign Company (CFC) rules in Taiwan.
In the coming year(s), we can expect:
- The trend is to continue enhancing global tax transparency, substance over form, and automatic exchange of information.
- The trend by many authorities to combat treaty shopping, especially of conduit companies, with the Unshell Directive and other measures.
- Expanding Multilateral Treaty (MLI) network whereby tax authorities start enforcing, i.e., the Principal Purpose Test in tax treaties.
- Countries are adopting Transfer Pricing in line with the international framework and OECD TP Guidelines.
- A post-covid increasing number of tax audits and court cases regarding local decision-making, economic substance, and Place of Effective Management (PoEM) of foreign-owned entities, thereby challenging the tax residency and tax treaty application.
- More pressure from local regulators to ensure service providers are discouraged from aggressive tax structuring.
- Increasing pressure of governments and tax authorities to have a tax framework and policies in place.
- HNWIs are migrating to economically more stable and secure jurisdictions.
We are moving towards a global marketplace where efficient international structuring should be driven by business reasons, requiring enhanced economic substance, increased tax compliance and reporting costs, robust documentation, and corporate governance.
How can Amicorp help?
It is pertinent for Multinational Enterprises ('MNEs') and high-net-worth individuals (HNWI), now more than ever, to make impact assessments of their current structure and transactions and to prepare for actions to anticipate these trends and mitigate adverse effects. This should overall result in an upgrade to more sustainable structures in the post-BEPS world. This can offer experienced local directors all required economic substance, conversion to private funds, Variable Capital Companies (VCC), listing, or securitizations.
Our team of qualified professionals can help you manage your global tax and regulatory requirements through our Regulatory Reporting and Tax Compliance Services. They can support your business across multiple jurisdictions by helping to identify and manage the growing obligations around transparency, ever-increasing regulatory and economic substance requirements, and transfer pricing documentation. Increased stakeholder demands. We can prepare tax health checks of existing structures and support optimizing the legal structure of your business or family wealth. We feel we must go the extra mile in such support, allowing you to focus on your core business activities. To find out more, contact our team here.
TRUSTSby David Willis (Amicorp Trust Services)
In the post-COVID era, there appears to be a growing focus on planning for the transition of wealth to the next generation(s), which will continue for some time. Estate planning has always been important, but the pandemic certainly increased the realization of how fragile things can be. With the ongoing push for global transparency, there have also been increasing regulatory and compliance requirements to manage.
We expect to see ongoing planning concerning the transition of wealth and control to the next generation. Clients are likely to be looking for appropriate exit strategies and engaging family members in relation to wealth generated and operating businesses.
On top of this, there are always market forces, and with increased inflation and recessionary talks, there is a lot of uncertainty, in addition to the ongoing conflict in Ukraine.
As far as Trusts are concerned, there exists continued opportunities in family office creation and holistic estate planning development rather than an exclusive investment-centric approach. Sustainable/ethical investment is also of continued importance.
How can Amicorp help?
Amicorp offers a range of estate and succession planning solutions. These solutions allow families to manage their wealth and transition their wealth from one generation to the next. Our professionals include experienced wealth structures and business developers, knowledgeable in fulfilling families' needs and structuring these families' worldwide assets in a way that protects the wealth and interests of their future generations. To find out more, contact our team here.