On April 26, 2021, the bill to introduce a "UBO register" for trusts (the Trust Register) was submitted to the House of Representatives. The Trust Register is a publicly accessible register that will include certain personal data of ultimate beneficial owners (UBOs) of trusts and similar legal arrangements.
The introduction of a Trust Register is one of the measures included in the (amended) Fourth EU Anti-Money Laundering Directive. The Trust Register is managed as a separate register by the Chamber of Commerce.
This newsletter details the main points of the bill. The Trust Register will exist alongside the "regular" UBO register for Dutch companies and other legal entities. For more information on the UBO-register, please refer to our Noted 'The Dutch UBO register for companies and other legal entities'..
Under the bill, the Trust Registry applies to (i) trusts and (ii) similar legal arrangements.
Trusts originate in Anglo-American law and, in brief, are a legal arrangement whereby property is entrusted by a person (the settlor) to a trustee (trustee) who uses the property for the benefit of one or more beneficiaries, or for a specific purpose, in accordance with the trust provisions. Trusts can be used in the business, family, cultural and charitable spheres.
Each member state of the European Union has determined which legal arrangements within its own legal system are similar in function or structure to a trust. These similar legal arrangements are also subject to the Trust Register.
The Netherlands has designated certain unincorporated funds as similar to a trust. The best known example of such a fund, is the fund on joint account. It does not matter whether that fund is "transparent" for tax purposes.
A company required to be registered in the Dutch trade register is not considered a similar legal arrangement, even if it meets the material characteristics of a similar legal arrangement.
The obligation to register and keep information up-to-date in the Trust Register is placed in the bill on the trustee of a trust or the person holding a similar position in a similar legal arrangement (the trustee). In the case of a mutual fund, the trustee of the fund will normally be designated as the "trustee.
Not every trust or similar legal arrangement (hereinafter: trust) is required to register data in the Trust Register. It must be a trust whose trustee:
Resides or is based in the Netherlands; or
domiciled or established outside the European Union, and acquires property or enters into a business relationship in the Netherlands on behalf of the trust or similar legal arrangement. A business relationship is, for example, a business or commercial relationship with a Wwft institution such as a bank, accountant, lawyer, notary or tax adviser.
Trusts have no registration requirement for the Dutch Trust Register if they are already registered in the trust register of another European Union member state.
The implementation decree (Wwft Implementation Decree 2018) includes which categories of natural persons are considered UBOs of a trust in any case. It is explicitly stated that this is not an exhaustive list.
In any event, the following individuals are considered UBOs of a trust:
the founder(s);
the trustee(s);
the protector(s), as applicable;
the beneficiaries, or to the extent that individual beneficiaries cannot be determined, the group of persons in whose interest the trust is primarily created or operated; and
any other natural person who by direct or indirect ownership or through other means exercises ultimate control over the trust.
Unlike the "regular" UBO register, no indicative minimum percentage has been included for qualification as UBO of a trust. It is therefore not necessary for there to be an (ownership) interest of more than 25 percent; even a smaller interest already qualifies as a UBO.
For those cases where it is not possible to determine the individual beneficiaries, for example because the beneficiaries will only be determined in the future, it is important that the group of natural persons be defined precisely, by specific characteristics or by category, so that the individual beneficiaries can still be determined at the time of disbursement or when the beneficiaries exercise their final rights and the trustee can proceed to update the information in the Trust Register.
Trustees must register information for each trust in the Trust Register. Registration assigns the trust a unique identifier, which must be reported in all written communications made on behalf of the trust. The UBO is notified of the registration through an automated process.
Part of the information to be recorded is publicly accessible. Another part of the UBO information is accessible only to competent authorities and the Financial Intelligence Unit.
in respect of the trust:
Name and type;
Date and place of creation;
and in respect of each UBO:
First and last name;
Month and year of birth;
Nationality;
Residential state; and
Nature and extent of the UBO's held beneficial interest.
in respect of the trust:
Copy of documents showing the information recorded about the trust.
and in respect of each UBO:
Citizen service number / foreign tax identification number (TIN);
Day of birth;
Country and place of birth;
Residential address;
E-mail address;
Copy of valid identity document;
Copy of document(s) substantiating why a person has UBO status and showing the nature and extent of the beneficial interest held by the UBO; and
Copy of documents showing information recorded about the UBO.
If a UBO has no economic interest in the trust, but only control rights, for example, this can be declared in the registration. The registration system will be set up accordingly.
In cases where the extent of the UBO's economic interest is still unclear or uncertain, the trustee will have to consider on a case-by-case basis whether sufficient information is available to indicate the range within which the economic interest falls. If it is not possible, then it will suffice to report that the economic interest cannot be further determined.
The UBO information - after the grounds for recording said information cease to exist - will remain visible in the registry for a period of 10 years.
Under the Directive, member states may provide on a case-by-case basis that public access to UBO information be shielded if the UBO is a minor or incapacitated, or if publication of UBO information would expose the UBO to a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation.
In the Netherlands, the UBO information of a minor or incapacitated person is shielded upon request. In other cases, UBO information can only be shielded if the UBO is secured by the Openbaar Ministerie or the National Coordinator for Counterterrorism and Security. When shielding, the nature and extent of the economic interest of the (shielded) UBO does remain visible. The grounds for shielding the Trust Register are the same as the grounds for shielding the regular UBO Register.
Based on the (amended) Fourth EU Anti-Money Laundering Directive, implementation of the Trust Register should have been achieved by March 10, 2020. The Netherlands did not meet this implementation deadline. It is not yet clear when the Trust Register will take effect. This partly depends on the legislative process. After entry into force, trustees will have 3 months to register the UBOs of trusts. After this transition period expires, a trustee must comply with the registration requirement within one week and changes must also be reported within one week.
Competent authorities and Wwft institutions are subject to a feedback obligation. This feedback obligation means that they are required to report to the Chamber of Commerce any discrepancy they find between the information in the Trust Register and the UBO information in their possession. In doing so, competent authorities are only required to report back if appropriate and to the extent that this requirement does not unnecessarily interfere with their duties.
Violation of the obligations described above is considered an economic crime and, based on the bill, can be enforced with both criminal and administrative sanctions. It will also be possible to impose an order for periodic penalty payments as a "remedial sanction. If the offense is committed intentionally, it may result in imprisonment for up to two years, community service or a fine.
