Ecovis in Estonia

MiCa regulation 2023: Stablecoins and e-money tokens issuance

27.09.2023

The EU’s Markets in Crypto-Assets (MiCA) regulation provides long-needed legal clarity for the the crypto market. Among other things, MiCA provides a comprehensive framework for the operation, structure and governance of crypto-asset issuers and service providers by establishing a uniform EU regulatory regime that will supersede national laws. The Ecovis experts in Lithuania explain the details of MiCa regulation 2023.

As the complex landscape of crypto regulation continues to evolve, it is becoming increasingly urgent for credit institutions and electronic money institutions (EMI) to seek expert guidance. This is especially true during the transitional phase of MiCA’s implementation, as regulated entities will be the first to be scrutinised under the regulation.

To ensure a smooth transition and compliance with the new standards, it is essential that all participants in the crypto market seek professional counsel. With less than a year left for stablecoin issuers to prepare for MiCA, the following is a summary of the essential preparation required.

Evaluation of the company’s own technical capabilities

• Individual technological capabilities for stablecoin issuance
• Procurement of an existing issuance infrastructure
• Acquisition of CASPs (Crypto Asset Service Providers) for the creation of the infrastructure

We support you in implementing the MiCA regulation correctly and on time.

Inga Karulaityte, Partner of ECOVIS ProventusLaw, Vilnius, Lithuania

Preparation of the white paper

• Procurement of the appropriate underlying technology and infrastructure
• Evaluation of corporate and governance arrangements
• Establish adequate tokenomics
• Evaluation of conflicts of interes
• Evaluation and establishment of cooperations with third parties
• Strategy for offering the e-money tokens (EMT) to the public
• Consideration of possible trading platforms for the distribution of EMTs

Evaluation of risks and liability for:

• Inadequate technical standards of the underlying technology
• Misleading white paper
• Inconsistent marketing materials
• Deficits in the safeguarding arrangements for clients’ funds

Overall, the implementation of MiCA marks a significant milestone in the legal clarity of the crypto market and provides a novel legal framework applicable to current crypto market actors and potential participants. To ensure a smooth transition, companies and especially regulated entities are encouraged to use the remaining year of the transitional period to establish a robust infrastructure and ensure that their activities are compliant.

For further information please contact:

Inga Karulaityte, Partner of ECOVIS ProventusLaw, Vilnius, Lithuania
Email: inga.karulaityte@proventuslaw.lt

System and Organization Controls: Which compliance standard is the most suitable

26.09.2023

System and Organization Controls (SOC) in versions SOC 1^®, SOC 2^® and SOC 3^® are auditing and reporting standards of the AICPA (American Institute of Certified Public Accountants). These standards enable service providers such as data center operators or cloud providers to ensure and prove to their customers that they have the effective controls and measures necessary to provide the required services securely. The Ecovis consultants know the details.

SOC 1^®: Internal Control over Financial Reporting (ICFR)

This standard is specifically designed to examine the controls in place at service providers that are relevant to the service provider’s financial reporting. There are two types of report:

• Type 1 – a report on the suitability of the design and adequacy of controls to achieve the relevant control objectives at a given time.
• Type 2 – a report on the effectiveness of controls in achieving the relevant control objectives during a specified period of time (typically 6 months or 1 year).

We check for you whether your service provider has installed comprehensive security measures for data processing.

Gholamreza Aminzadeh, Senior Consultant, iAP-Independent Consulting + Audit Professionals GmbH – an Ecovis company, Berlin, Germany

SOC 2^®: Trust Services Criteria

The controls to be examined (& reviewed) in SOC 2 and SOC 3 reports are measured (& assessed) against the so-called trust services criteria for security, availability, processing integrity, confidentiality and privacy. SOC 2 reports can also be Type 1 (adequacy of controls) or Type 2 (effectiveness of controls over a period of time).

SOC 3^®: Trust Services Criteria for General Use Report

As with a SOC 2 report, a SOC 3 report addresses controls related to security, availability, integrity, and privacy/trust. SOC 3 reports are subject to the same audit criteria as SOC 2 reports. However, there are some differences between SOC 2 and SOC 3. For example, SOC 2 reports are confidential and are only provided to certain clients, whereas SOC 3 reports are intended for public consumption and are usually posted on the company’s website as a marketing tool.

Conclusion

Whenever accounting-related or financially critical data and processes are outsourced, companies should ask their future service providers for a SOC 1 report. If a company wants to outsource the processing of its sensitive customer data to an external service provider (cloud/computing center), the IT service provider in question should obtain a SOC 2 report. As a rule, the service provider’s clients do not ask for a SOC 3 report. The service providers themselves make the SOC 3 report available to the public and thus transport certified security.

For further information please contact:

Gholamreza Aminzadeh, Senior Consultant, iAP-Independent Consulting + Audit Professionals GmbH – ein Unternehmen von Ecovis, Berlin, Germany
Email: g.aminzadeh@audit-professionals.de

Real estate tax France: 3% annual tax on the market value of real estate properties

25.09.2023

French and foreign legal entities owning real estate in France could be subject to file a tax return every year. Failure to comply may lead to an automatic tax of three percent based on the market value of the property. The Ecovis experts explain the details.

Scope of the tax

The 3% tax applies to any entity, French or foreign, with or without legal personality (such as limited companies, partnerships, economic interest groupings, syndicates, groups, pool joint ventures, trusts and comparable institutions, etc.) owning real estate properties or rights in rem in France on 1 January of the tax year, either directly or through an intermediary (Articles 990 D to 990 G of the French Tax Code (FTC)).

It is computed on the value of the French assets subject to the declaration obligation.

Exemptions

Some exemptions apply:

• Either linked to the nature of the entity (Article 990 E 1° and 2° of the FTC), such as (i) international organisations and sovereign States, (ii) listed entities and subsidiaries, or (iii) entities not considered to have a preponderance of real estate assets (i.e., French real estate making up less than 50% of the French assets, although it should be noted that this excludes real estate assets assigned to the professional activity).
• Or linked to the location of the entity’s registered office, which must be located either in France, within the European Union, in a country that has signed an administrative assistance agreement with France to combat tax evasion and avoidance, or with a country that has signed a treaty containing a non-discrimination clause (Article 990 E 3° of the FTC).
  This last case concerns only the following entities: (i) those with a low preponderance of real estate, (ii) pension funds or entities recognised as being of public interest, (iii) some specific real estate investments (French SICAV, FPI), and (iv) entities which have undertaken to provide certain information:
  • Either to provide the tax authorities with information relating to the location, consistency and value of properties, identity and address of those who hold more than 1%, and the number of shares or other rights held by each of them by filing a yearly declaration (form 2476 SD) no later than 15 May,
  • Or undertake, upon request, to provide the tax authorities with such information on the date of acquisition of the property or within 60 days.

The exemption may be partial if the entity concerned only partially discloses the identity of the holders on 1st January.

We support you in submitting the tax return for your real estate assets correctly and on time.

Vanessa Raindre, Tax partner, MD Legal, Paris, France

Penalties

Failure to file a declaration can trigger the procedure for automatic taxation (Article L 66 4° of the tax procedural code) coupled with late payment interest (Article 1727 of the FTC) and the penalty provided for by Article 1728 of the FTC (minimum 10%).

Those benefiting from an exemption who have not complied with their filing obligations can still claim the exemption if they correct the situation within 30 days of the request by the tax administration. However, this correction is only available once.

For further information please contact:

Vanessa Raindre, Tax partner, MD Legal, Paris, France
Email: vanessa.raindre@mdlegal.fr