International Finance – Wilkins Southworth

Do other countries operate a domicile system similar to the UK?

Chris-Wilkins — Mon, 20 Jun 2022 16:20:05 +0000

World Wide Taxation

The UK domicile (more specifically, non-domicile) system has been the subject of much criticism over the years. Seen as a means of attracting wealthy individuals to a country, yet allowing them to retain their overseas residency, there are many pros and cons. Those under the impression that the UK is the only country to operate such a domicile system will be surprised.

While the details and formalities may be different, we will now look at similar schemes across the world.

Portugal

The Portuguese system, known as the Non-Habitually Resident (NHR) tax regime, was introduced in 2009. The scheme lasts for ten years and targets high net worth individuals, pensioners and professionals with skills that are scarce in Portugal from time to time. Under the qualification criteria, you must not:-

Be classed as a tax resident under Portuguese domestic legislation
Not have been taxed as a Portuguese resident during the previous five years

In order to qualify as a tax resident in Portugal, you must fulfil at least one of the following two conditions:-

Remain in Portugal for more than 183 days during the relevant fiscal year
Have a residence in Portugal on 31 December of the year of your application, to hold this as your habitual residency

To make the NHR scheme attractive, there need to be tax benefits. These are as follows:-

You will be charged a flat rate of 20% on income from high-value jobs
Where tax is paid at source, or there is a double taxation arrangement, there is no additional tax charge on global income

Those who follow the Portuguese tax system will be aware that in the past, the government has used what is known as the “Golden Visa” to attract wealthy individuals willing to invest in Portugal. This is a different scheme from the NHR.

Ireland

It is fair to say that the Irish government has been controversial regarding individual and company taxation in previous years. Indeed, there is an ongoing case brought by the EU against Apple and the Irish government regarding a favourable tax scheme. However, when it comes to non-domicile status in Ireland, there are numerous benefits for individuals:-

Tax is only charged on Irish sources of income
Only when remitted to Ireland will overseas income be taxed
Overseas income earned while a non-resident of Ireland is not taxed if sent to Ireland at a later date
Individuals with non-dom status living in Ireland can use overseas funds for everyday living expenses with no tax liability
Those resident in Ireland, but holding non-dom status, will pay capital gains on Irish and UK disposals

Those domiciled in Ireland will be required to pay the €200,000 domicile levy if they meet the following conditions:-

Global annual income of more than €1 million
Income tax paid on global earnings
Own Irish property worth in excess of €5 million
Irish sourced income of less than €200,000 in a tax year

It is important to note that any Irish income tax charges in a fiscal year can be offset against the €200,000 domicile levy.

Cyprus

There is a general misconception that Cyprus is considered a tax haven. After increasing corporation tax to 12.5% in 2019, the Organisation for Economic Co-Operation and Development (OECD) afforded Cyprus the same status as many other European countries. However, there are still several issues to be aware of concerning domicile and non-domicile tax status.

If you’re domiciled in Cyprus, the tax regulations are very straightforward:-

Cyprus income tax applies to worldwide income
A Special Defence Contribution (SDC) will be imposed on worldwide dividends, interest and rental income

So, those who saw Cyprus as some form of tax haven may need to think again. Those who switch their tax residency to Cyprus will automatically receive non-dom status for a maximum of 17 years. As a non-dom, there are issues to consider, such as:-

Income tax will only be charged on Cyprus income
There is no SDC on worldwide income

The tax system in Cyprus, along with many other countries, is used to attract inward investment for the long-term benefit of the country.

Malta

While Cyprus is seen by many as a tax haven, although not officially recognised as such, Malta is officially recognised as a tax haven along with Luxembourg and Ireland. There are specific differences regarding tax liabilities for those with domicile and non-domicile status. Those with domicile status in Malta will be taxed on:-

Worldwide income
Certain capital gains crystallised in Malta

The situation regarding non-dom status is very different, and there are many issues to be aware of, such as:-

Taxed on Malta income
Taxed on certain capital gains in the country
Taxed on foreign income remitted to Malta
Overseas capital gains are not subject to tax in Malta, even if received in the country
Optional flat 15% tax rate on all income remitted to Malta
Minimum tax liability of €5000 per annum for non-domiciled individuals when remitting overseas funds to Malta

There are some anomalies to consider, such as “certain” capital gains. Therefore professional advice should be taken at all times.

Belgium

The tax situation for domiciled, non-domiciled and expats living in Belgium varies widely. It would be advisable to take professional advice before making any move. We will take a look at the various tax obligations starting with those domiciled in Belgium:-

Belgium income tax is paid on worldwide income
There is a wealth tax of 0.15% charged on securities accounts with an average annual balance exceeding €1 million

It is important to note that capital gains are not taxable to individuals in Belgium if carried out within the typical framework of an individual’s private estate. That will surprise many people!

Non-domicile status tax considerations:-

Income tax is only charged on Belgium income
If at least 75% of worldwide income is sourced in Belgium, individuals can make use of the personal tax allowance

The Belgian authorities also have a third tax status which relates to expats working in the country temporarily:-

These rules only apply to overseas nationals earning more than €75,000 per annum
Benefits are available, including tax-free reimbursement of living and housing expenses
Expats working in Belgium will have 30% of their Belgium income shielded from tax, up to a maximum of €90,000
These rules only apply to expats working in Belgium on a temporary basis, but resident in another country

It is fair to say that while very useful, the Belgium tax system for those domiciled, non-domicile and expats working temporarily is a little more complicated than usual.

Holland

The Netherlands income tax system is one of the more complicated in Europe, with taxable income split into three different groups. These groups are:-

Taxable income from profits, employment, homeownership, wages, pensions, social benefits and value of owner-occupied property
Taxable income from substantial interests
Taxable income from savings and investments

Now, if we look at the specific tax status of individuals and their liabilities, we find that those with a domicile status:-

Pay tax on their entire worldwide income
All three income groups apply

The situation for those with non-domicile status is very different:-

Individuals are only taxed on Netherlands income
On occasion, some types of overseas income can be taxed (take advice)

Then we have qualifying non-resident taxpayers who live outside of the country:-

Those who live outside Holland but pay taxes in the country may be eligible for qualifying non-resident taxpayer status
The one condition is that they pay Dutch tax on more than 90% of their worldwide income
Those who qualify will enjoy the same tax deductions, tax credits and tax-free allowances as taxpayers resident in Holland

There is more! There’s also what is known as a 30% ruling with the following criteria:-

Those who bring “specific and scarce skills” to Holland may be eligible for benefits associated with the 30% ruling
The ruling will shield 30% of the individual’s income from taxation for five years (previously eight years)

While the system is complex and sometimes difficult to follow, there is better news on global double taxation arrangements. Those who may be eligible to pay Dutch tax on their overseas income will not need to do so if tax is already deducted at source.

Italy

When you consider the much covered Italian pension time-bomb, not to mention the enormous VAT gap, you might have expected a relatively harsh Italian income tax system. In what is a fairly straightforward system, those with domicile status:-

Pay Italian tax on their worldwide income
Will be charged a wealth tax covering overseas real estate and financial investments

Those with non-domicile status will abide by the following tax rules:-

Only income produced in Italy will be susceptible to Italian income tax
Worldwide income will not be included in any tax liability calculations

However, there is an Italian levy to consider for those looking at switching their tax residency. They can either:-

Apply for non-Italian sourced income to be taxed at a flat €100,000 per annum
Apply for overseas income/assets to be taxed in line with Italian residents

For those with significant assets, income and investments overseas, it may be worth considering the Italian levy. However, professional advice should be taken if you are considering changing your tax status.

Switzerland

Despite the perceived complexities of the Swiss taxation system, residency and non-residency, the system is relatively straightforward. There is the added input from federal, cantonal and municipal bodies, but the system is reasonably easy to understand. Those with a domicile status will be:-

Taxed on worldwide income
Taxed on worldwide wealth (only at cantonal and municipal levels)
Taxed on income at three levels, federal, cantonal and municipal
Able to opt for a lump sum taxation payment, based on seven times annual rent/deemed rentable value of an owned property

So a lot to think about there! However, for those with non-domicile status, the situation is much clearer:-

Taxed on Swiss sources of income
Taxed on Swiss sources of wealth

Many of the historic tax benefits associated with the likes of Switzerland have been eroded in the worldwide quest to clamp down on tax avoidance and tax evasion.

The complicated world of personal taxation

While many countries appear to “sing from the same tax hymn sheet”, the devil is in the detail when you delve a little deeper. It is essential to take professional financial advice if you are considering moving your residency and tax status. As individual country tax regulations tend to change regularly, it is also crucial to monitor any announcements which may impact your situation.

The post Do other countries operate a domicile system similar to the UK? appeared first on Wilkins Southworth.

Business or Russian Roulette?

Chris-Wilkins — Tue, 06 Jul 2021 10:01:20 +0000

Western businesses have an uphill struggle to get on in post-Communist Russia. Chris Wilkins reports.

The papers are full of it; television documentaries extol it – Russia is the place to make a million. The opportunities are endless, so instead of bricklaying in Berne, grape picking on the banks of the Gironde, or tiling in Tunis, why not try reviving lost fortunes in Russia?

The sheer geographical scale of the place is enormous. The 15 states that make up the former Soviet Union have a combined external border of 36,000 miles and cover one-sixth of the earth’s land mass. Russia’s economy has the world’s richest natural resources, including significant deposits of diamonds that have been found in the Arkhangelsk and St. Petersburg regions. In fact, the importance of these finds have been so great that South African diamond giant De Beers has, for the past few years, been holding high level discussions to agree a restriction of supply. Uncontrolled large volumes of diamonds, as could be supplied by Russia, coming on to the market in an unplanned way, could severely affect the world price and subsequently destabilise the market.

But diamonds are not the only source of raw wealth. Kazakhstan is reputed to have more oil and gas deposits than the whole of Kuwait. At the moment, Kazakhstan as three oil refineries producing some 27 million tons of crude oil each year. But, apart from 7.5 million acres of cannabis currently being cultivated there, very little else of note is to be found in this desolate and desperate wasteland.

The flow of foreign funds into Russia reached $400m in the first quarter of 1994, and foreign investment totalled $2.9bn in 1993. Boris Jordan, head of the Credit Suisse First Boston branch in Moscow – the largest foreign bank currently engaged in trading shares in Russia, and the only bank with a brokers’ licence from the Russian Ministry of Finance – confirmed: ‘The world has not yet woken up to the fact that Russian assets are so extremely cheap.’

In a world of supply and demand, homogeneous products, surmountable trade and tariff barriers, why the inequity? Surely everyone should be heading for Russia and setting up business there.

Raw products aside, considerable consumer demand and cheap labour are all easily available, and should lead to potentially large profits.

The problems are multiplicitous but can be boiled down to the following: a lack of an infrastructure; a plethora of foreign cultures, frequently in opposition with each other; rapidly changing tax and law regimes; an absence of any effective banking system; and intolerable crime and security problems.

Getting to Russia is not so very straightforward. There are only two flights a week to and from Kazakhstan and none direct from London; one has to fly via Moscow or Istanbul. The inbound flight arrives every Wednesday morning and the outbound flight leaves approximately two hours later. So, if business cannot be conducted within that time, even when it is carried out at the airport to cut down on travelling time, then there is a danger of being stuck there for a week.

The country is obviously still not set up for business. The best way to imagine most of Russia is as a sort of cowboy hicksville town with an overflow of European and American businessmen looking confused.

All Western businesses in Russia are headed up by ex-pats. Not because the Russians are too unintelligent for the job, but because their culture is so very different. It is not unusual to find that a business discussion that would take two hours in London, can easily take two days in Russia.

Currency is the by-word for success of any kind.

It is virtually impossible to buy a carpet for the office because the shopkeeper will only accept American dollars. Since 1 January 1994, it has been illegal to use any cash currency other than the Rouble. Credit cards, however, are accepted, but only a few shopkeepers have the system to process them, so the few have to act as intermediaries for the many. It can all be rather complicated and items that initially appeared to be bargains rapidly become sources of sheer frustration.

President Yeltsin brought in a federal tax of 3% on enterprises and organisations. This is calculated and paid in the same way as VAT, but does not have the same name, although it effectively increases Russia’s ‘VAT’ level to 23%. This presidential decree was signed on 24 December, published in the second week of January 1994 and came into effect on 1 January 1994.

This has hardly made the job of the finance director any easier – it is almost impossible to plan cashflows, sales pricing, marketing or anything else with retrospective taxes. In addition, there are federal taxes, local government taxes, profits taxes, taxes on wages (levied if employees are paid more than six times the state minimum wage: the average wage is currently about $40 per month), property taxes…the list is endless.

Once a company’s money has been introduced into Russia, it is necessary to engineer ingenious means of getting it out.One of the more common methods is to utilise intermediate holding companies in low withholding tax countries, or to explore new tax treaties: for instance, the UK Inland Revenue has just announced a double taxation treaty with Uzbekistan.

‘I promise to pay the bearer on demand the sum of’, agency law and ‘guardian of our monies’ are terms not recognised by the Russian banking system. Furthermore, there are no cheque books in Russia, hence the term ‘bank payment requests’ instead of ‘cheques’. And there are no paying-in books, just bank payment requests. But there are still authorised signatories. Russian banks will not release money unless they are satisfied that the bank payment requests are for a valid, contractual purpose. Accordingly, each one must be pinned to the original invoice to prove the validity of the transaction. If an invoice is lost, the bank will not authorise the payment. At this stage, it is worth bearing in mind whose money it is, and who has made the request to pay.

Once this obstacle has been surmounted, the next problem is to estimate when monies paid into the bank account will clear. There is a clearing system of sorts, but on the whole, the payee is in the hands of the bank system and simple administration errors can frequently lead to considerable delays. For example, the banker may leave the payment request forgotten in a drawer until it is discovered days later. Unfortunately, this means that the bank can have money invested by a company floating around the system from between one to four weeks. Obviously, this creates horrendous cashflow problems for any company that gets that far in Russia.

Security, personal or otherwise, is another subject that businesses must contend with. Even employees who find a flat in a self-contained block, with a mobile and fixed phone to call the police at any time, would be safer with a metal front door. In the event of a burglary, the earliest response time the police can give to a call is 20 minutes and serious burglars are happy to attempt a break-in, even if the occupant is inside.

Police facilities are notoriously slim – a police raid was scrapped recently because they simply did not have enough cars to get there. For the criminal, the risk of capture is minimal and those who are caught have friends with the means to bribe an early release.

The official statistics show there to be 900 murders each year in St. Petersburg alone, more than the total figure for the whole of the UK last year. Unofficially, life is cheap and murder is rife. Almost 90% of businesses pay as much as 20% of their profits to the Russian mafia. Crime is endemic. The criminals drive flash cars, have expensive clothes and high-powered weaponry. To convince a reluctant shopkeeper to pay extortion money, the commissioning of the murder of his wife or child may cost as little as $700.

Few Russians remain unaffected by the mafia; visitors are exhorted not to walk anywhere but to take taxis because street mugging is common. Money is extorted from local businesses; a typical example occurred when a newly-opened Alfa Romeo showroom received demands for money. For two weeks, they were curtly refused, but then, two men walked into the showroom and shot two customers and a salesman.

Finance directors are particular targets for kidnapping. As a consequence, most have full-time bodyguards.

The criminal mind concludes that the finance director controls the money, then he must know where the money is kept and that he must know where the money is kept and that he must be important enough to be worth holding to ransom. Resistance during a kidnap could mean the loss of a finger or an ear.

The locals, of course, are used to all this and are, on the whole, kind and helpful towards visitors. When they park a car, they will remove the windscreen wipers – to leave them as an open invitation for thieves. They will escort a visitor back to the hotel – mugging is common. And they will explain to the tradesmen that ‘urgent’ means now, not next week.

So, is anyone still interested in trying their luck in Russia?

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Doing Business in Russia

Chris-Wilkins — Tue, 06 Jul 2021 08:10:21 +0000

Chris Wilkins FCCA has clients in St Petersburg, Moscow and Kazakhstan. He has travelled on business in Russia and regularly grapples with the vagaries of Russian taxes. Here he explores the pros and cons of working in Russia.

When I left Pannell Kerr Forster’s London office last May, after being an audit manager for four and a half years, to make a name for myself in the big wide world, the one good bit of advice I was given was ‘never turn down a new client’.

The next week I turned up at my new workplace – an extension to my house – and took up my position as chief bottlewasher, cleaner, audit clerk, filing clerk and, oh yes, partner. Work was advertised in the usual way and slowly but surely a variety of clients passed through our door – self-employed sub-contractors, small sole traders, individual capital gains tax problems, profit-related pay schemes and management accounts for a Russian telecommunications business with a US$2.3 million turnover. This was a subsidiary of a company quoted on the Toronto and New York stock exchanges which had invested C$26,500,000 in the subsidiary – a bit out of the ordinary!

Remembering the advice I had been given, the answer was ‘Yes, but what’s the question?’ What are the reporting requirements? Conforming to what accounting standards? And do I get paid in roubles, Canadian dollars, US dollars or sterling (in reverse order of preference)? In the last year alone the value of the rouble to the US dollar has roughly halved. It used to be 1,000 roubles to one US dollar, now it’s 1,940 roubles. Fortunately, the holding company, or should I say parent company undertaking, had other interests in the United Kingdom, therefore it was agreed that we would be paid in sterling.

The largest department store in St Petersburg

Anyway, we seemed to fit into this cosy tripartite agreement (Toronto, London, Russia). Besides, if all else failed, we could be used as messengers. St Petersburg is three hours ahead of us and Toronto is five hours behind us. So in a normal working day, the Russian staff leave their office at 5pm when the Toronto staff are just starting their day at 9am. We, on the other hand, can pass the messages to Toronto from St Petersburg, get an answer, alter the accounts and send these to St Petersburg in time for 9am their time the next day.

The problem with all this is that 9am in St Petersburg is 6am our time and 5pm in Toronto is 10pm our time. So when the accounts are due to be finalised each month, our days become rather long. Our saving grace is that the Russians can speak good English and the Canadians’ English is passable.

Prior to accepting the assignment, we had to consider the impact that this would have on the practice and our ability to deal with it. As we were giving no audit opinion and we were only dealing with one subsidiary of the holding company, which in turn had its quarterly statements and year-end accounts audited by external auditors, then it was felt that no undue influence could be placed on us. Obviously we had to increase our professional indemnity insurance. Funnily enough, we found that we were a ‘one-off’. After three tries, we ended up with an American firm who, for a nice fee, thought that they could help us out. I was not sure who was helping who, as I passed my large cheque over to them!

The next problem was sorting out where all the telecommunication sites were and how to account for them all. Fortunately, I had been to St Petersburg before, but hadn’t explored the Russian hinterland. The place is enormous: 36,000 miles of border, containing 15 of the former Soviet republics and covering one sixth of the earth’s land mass. Russia’s economy has the world’s richest natural resources. Very significant deposits of diamonds have been found in the Arkhangelsk and St Petersburg regions of Russia. Russia actually produces more diamonds now than South Africa. This fact seems to have triggered De Beers into action, since large volumes of diamonds as could be supplied by Russia, coming onto the market at unplanned times, could severely affect the world price and destabilise the market.

The company’s second major base of operations is Kazakhstan in Siberia. This is the second largest republic within the Commonwealth of Independent States (CIS) and is reputed to have more oil and gas deposits than the whole of Kuwait. Kazakhstan has three oil refineries, producing some 27 million tons of crude oil a year. Apart from the 7.5 million acres of cannabis that is currently being cultivated here, there is very little else of note in this desolate and desperate wasteland.

There are only two flights a week to and from Kazakhstan – none direct from London; only via Moscow or Istanbul. The inbound flight arrives every Wednesday morning; the outward bound flight leaves approximately two hours later. Therefore, if you can’t conduct your business in under two hours, preferably at the airport to cut down on travelling time, then you’re stuck there for a week.

St Petersburg is much more accessible and has three direct flights a week with British Airways from Heathrow. Unusually, but not surprisingly, as you fly due east, the flight time is approximately the same as the time difference – three hours. The flight is not the problem; if you want to go to Russia, your problems start long before then. You must apply to the Russian embassy for a visa. Together with this application must be a letter from your Russian client inviting you to their offices and confirmation of your hotel booking.

You cannot just stay with your friends in Russia: unless you have your own accommodation, you must have reserved a hotel room for your stay. There are half a dozen good hotels in St Petersburg, all of five-star quality (and price). The food is also very good. Most of it is driven in from Finland each day. The Finnish border is only about four hours’ drive from St Petersburg.

Nearly all the large capitalised businesses in Russia are funded by Western money.

In the first quarter of this year, US$400 million of foreign funds was channelled into the country. Foreign investment totalled US$2.9 billion last year. Nearly all of these businesses are joint ventures with Russian parties. The westerners provided the capitalisation and some heads of department, but the businesses are staffed by Russians. The General Director (managing director) is usually a Russian. Most of these joint ventures are for a period of five to ten years, with an ever decreasing number of western staff stipulated in the joint venture documentation. Property prices have shot up in Moscow and St Petersburg with the flood of western staff demanding more accommodation. Our client’s company flats have doubled in price in just under 17 months.

Downtown St Petersburg

Due to the malaise in the Russian economy – inflation was 200% per annum last year, but may fall to 100% per annum this year – and the falling exchange rate, it is illegal to use any other currency in Russia other than the rouble. This sanction was brought in on 1 January 1994 and enforced rigorously. The payer and payee in the transaction both get fined for paying and receiving any foreign currency. The Grand Hotel Europe, where Prince Charles stayed on his recent trip to St Petersburg, has been fined US$17 million for currency violations.

Conversely, extracting money from Russia is not easy. The Russians like to see continual investment: for example, if the parent company purchases an asset for its Russian subsidiary, the repayment of these monies is tricky to negotiate as they don’t represent a third party liability of the Russian company. The art is to enter into the contract directly between the Russian subsidiary and the supplier, but in practice people aren’t too keen on getting paid in roubles. Even the taxi drivers will only accept dollars, which is illegal for you to pay and them to receive.

Another interesting quirk to the system is the Russian banking system – or lack of it. There are no cheques in Russia, just bank payment requests. While it is your money sitting in the bank, you can only request for a payment to be made on your behalf. If this request isn’t backed up by the original invoice which is being paid, then it can be refused. For example, , if I want to give you 10,000 roubles because I like you, this is not a valid request. There is no invoice to attach to it, therefore no payment will be made – tough!

Cashflow forecasts can be difficult and unpredictable.

Three days to receive cleared funds in England may seem a long time but at least it is predictable. As monies can take from one week to four weeks to clear, to some extent your cashflows are guesstimates. However, a lot of the predictability about Russia is that it is unpredictable. There are no yearly budgets advising you of forthcoming tax rises and spending forecasts. These come in the form of presidential decrees which are not necessarily announced before the tax rise takes place!

The announcement was made 14 days after the tax rise took place…
President Yeltsin recently brought in a federal tax of 3% on enterprises and organisations. This is calculated and paid in the same way as VAT, but not called VAT although it effectively increases the VAT rate to 23%. This presidential Decree was signed on 24 December 1993, published in the second week of January 1994 and took effect from 1 January 1994. In addition, there are federal taxes, local government taxes, profits tax, tax on wages (levied if you pay your employees more than six times the State minimum wage), property tax and so on. Russia is a fascinating place to explore, interesting to work in and mind-boggling to account for. Russian management accounts are prepared in roubles each month on a basic income(everything received, not receivable) and expenditure (capital and expenses) basis. VAT is paid on the fourteenth of the following month on the dot or the Russian tax police (who carry firearms) come and collect it from you. The equivalent of corporation tax is paid quarterly based on the quarter’s excess of income over expenditure.

These accounts are then ignored for our management accounts which are prepared in accordance with UK accounting principles. The management accounts are then incorporated in the holding company’s accounts. As the holding company is still in its start-up period, our accounts are again altered (under Canadian GAAP the bulk of the expenditure can be capitalised in the year-end group audited accounts).

As the Russian management accounts, UK management accounts and Canadian year-end accounts are all prepared from the same raw data conforming to the local accounting standards, but all have totally different net profits, the phrase ‘Lies, damned lies and statistics’ often comes to mind

The post Doing Business in Russia appeared first on Wilkins Southworth.

The Chinese Puzzle

Chris-Wilkins — Tue, 06 Jul 2021 07:34:13 +0000

“It’s Norman on the line”, my secretary said.
“Hi Chris, how’s it hanging?”, Norman always started his conversations with the same opening gambit.

The phone line from Toronto was crackling, so he was probably using his favourite trick of walking around the room fiddling with his executive toys and chatting on his mobile. “Gloria says Hi also”. Gloria is his trusted P.A. who manages to sweep up all the loose ends that Norman gets too bored to deal with and who manages, in that super efficient way, of appearing swan like in whatever she does, but underneath is frantically trying to get the document completed in time for the deadline.

“Hi Norman”, I retorted, half choking on my ham roll – why is it that he always rings me first thing ‘his’ time, right in the middle of my lunch-time snack? “I’m off, I’m outta here!”, he exclaimed. Silence. What’s he talking about? Norman is the President and chief financial officer of a Canadian quoted company that owns a gold mine in China, drilling rights in Tanzania and juggles with company assets of Can$20million around the globe.

“Yeah, I’ve got a job in New York, you remember that big quoted company I was on about? Well, they want me and I’m off”.

“Great”, I said, “brilliant, well done” – and any other plaudits I could think of. “What about the family?”

“Well I’ll commute home at weekends and work in New York, all week”.

“Fine, great” – my vocabulary was limited, I was non plussed. Norman had been with the firm for as long as I could remember, I was his point of contact if ever he needed UK tax advice. As the company was Canadian we didn’t do too much else for them.

“Got all your share options sorted out?”, I said.

“Yep all done and dusted, needs NASDAQ approval but that’s a Slam Dunk” – even I, after working with Norman all these years had worked out what a Slam
Dunk was – “it’s in the bag”, he elaborated.

“How’s business?” I ventured.

“Good, Hans has got some good core samples, the rigs just been overhauled and we’ve sold the Kazakhstan operation” – fantastic, I got fed up having to take toilet paper with me every time I went to that place anyway. If ever Aeroflot ask me to take a seat without a seat belt again I’ll scream.

So, after niceties were exchanged I began to tum my mind to the purpose of the conversation. Norman never rings up for pleasantries or to pass the time of day. “Well, you know the company chairman is now in England, he’s decided to shut this office when I go. Gloria will be looked after but they need a Chief Financial Officer to replace me. Can’t be a director because you’re not Canadian, but what do you think?”, I’d just finished my partners audit review that morning on our largest audit client which had a turnover of £1.8million.

Running the finances of a company with assets of Can$20million certainly got my attention. “What? Why me?”, I spluttered.

“Well, you help us with our consolidations, you can get specialist advice from our Canadian auditors and lawyers, and you have a reasonably good handle of GAAP and Canadian Tax, what do you think? Listen, I’m coming over on 2 January, let’s have a chat and meet the Chairman, speak to you soon.”

I put the phone down and stared into space for a minute, the phone rang again. “Chris, it’s Neil on the phone, can he claim VAT back on the purchase of his car?” – nothing like clients to bring you down to earth.

So that’s the phone call that changed Wilkins Southworth in January 1998 to a new global dimension.

Sure, we had clients in the former Soviet Union, New York, Singapore, Hong Kong, Australia etc., but nothing quite this big, nothing quite this intensive and pressurised. The Company prepared quarterly accounts for filing with the Vancouver Stock Exchange within sixty days of the quarter end. Press releases on company financials, drilling licences, mineral strikes all had to be released on time and approved by the directors, and, oh yes, Directors meetings. If ever you feel like you’re being fed to the lions, try and take part in a transatlantic telephone board meeting where five directors are phoning in from all over the world to a Bell conference call facility set up by the Company Secretary, a solicitor from a large firm of lawyers in Toronto. The directors will have already had the quarterly report we’ve prepared which will have consolidated figures from entities in Cyprus, China, Tanzania, UK and Canada. Apart from racing against time to get everyone to send you the details – the phone lines in Tanzania went down for three weeks at one time and mobile phone bills cost twice as much as local hotel phones – the operation in China got flooded and they couldn’t get back to their office to send things across until the last minute – you then have to consolidate it and sort out the queries. China is ten hours ahead so we ring first thing in the morning, Vancouver is eight hours behind so we ring last thing at night and often have to stay late to receive their responses. Once done the directors then have the chance to question you on anything, and I mean anything, they want. It’s not like a formal board meeting where you’re all around the table chatting over a cup of tea and referring to your working paper files, these guys expect immediate responses to questions before they either go to bed, or jump on a train and go to work depending which country they’re in.

You need to try and guess the questions and do what if scenarios so most of the answers are rehearsed. But there’s always one, and Hank, a Vancouver fund manager would be the one to ask the off the wall question e.g. the company’s financials are pointing towards a loss of CAN$11million in the figures Norman prepared before he left, but which I’m charged with reporting on. The company obviously needs restructuring and big decisions have to be taken.

“Hello, Chris it’s Hank here”, (on a transatlantic telephone board meeting you always have to give your name first or you never know who’s asking the questions – unless their accent is particularly striking) say, “how much do we pay a quarter to our web-site engineers?”. Well, sure as hell an off the wall question. The phone went quiet, Hank always started off with a question like this that led on to something that made quite a bit of sense, or was he just testing me? Bearing in mind we’d never met, he didn’t know me from Adam – was he the board’s stalking horse? CAN$225 I said, – you either know it or you don’t. A huge sigh of relief went over me when I’d finished that first board meeting and answered all their questions fully. I never got a ‘well done’, but I guess the fact that I’m still around is praise enough.

No sooner had we got over this, then I was into the year end figures dealing with auditors in China, Tanzania, Toronto and England. Solicitors in Canada, the stock exchange in Vancouver and printers in Vancouver. The days got very long, I’d just survived the January tax deadline for our U.K. clients and I was right into this – no rest for the wicked. Countless board meetings – is this what the press release said Chris? – is it better to say ‘the company shall do this’, than ‘the company will do this’, have you checked it with Robert, the lawyer? We eventually got everything sorted and then it all went to the printers. We had the whole office checking the printing proofs – the printing costs were phenomenal and I didn’t fancy taking the blame for the glossies to be reprinted. AGM went O.K. but again off the wall questions were abound. Then, straight into restructuring. A new shareholder was found to invest US$4.5million. Their lawyers crawled over everything – due diligence gone mad. We all had to sit in the hot seat at times with transatlantic board meetings, transatlantic due diligence conference calls, answering that sharp legal brain that shoots questions at you fired with skill at a rapier speed and all pointed straight at the jugular. You really felt that you were in the electric chair unable to move with your only weapon a sharp brain and an even sharper tongue. Ambiguity was not acceptable, deviation was steered back on course and errors would be crucified. I’d already notified our professional indemnity insurers before we took on the case, but nervous flutters were there. Should I have said ‘weighted average number of common shares outstanding is…’ or just ‘average number of common shares…’. Should I have mentioned ‘the special warrants’ in answer to that question or just commented upon the ‘A’ warrants, as requested? I ran the questions through my mind over and over again, yes I think all the answers I gave were correct and that favourite saying for lawyers ‘to the best of my knowledge’.

Well, the deal went through, the company was restructured and we’re still in situe. Another one we must have got right. If you like pressure, it’s a great job to do, but next time someone rings you up when you’re having your lunch, tell them you’ll ring them back!

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