og2010

Offshore Guide www.offshoreguide.biz

2010/11

The Changing Face of International Finance Staying Tax-Efficient * Legislative Developments * IFC Profiles * HNW Lifestyle * New Opportunities

Offshore Guide The Business Annual Offshore Guide promotes the view that reputable international financial centres (IFCs) are key to the ongoing resurrection, growth and stability of the global economy and that the vast array of investment opportunities and corporate structures they make available remain an essential aspect of any private or institutional portfolio, despite the relevant jurisdictions being scrutinised and leaned on as never before.

Growing wealth in Asia and South America is opening up new markets and increasing competitiveness, and IFCs are invaluable conduits for foreign investment into such developing economies in the process stimulating subsequent domestic investment there.

Against the backdrop of the recent challenging global economic climate, IFCs have found themselves under ever tighter scrutiny as governments across the globe have joined forces in an attempt to get their hands on what they view as uncollected tax revenues held there.

This collective effort has in fact sorted the wheat from the chaff with jurisdictions unable or unwilling to meet the new criteria choosing instead to shut up shop. The ‘market leaders’ meanwhile, have adapted admirably and in many cases been notably proactive in ensuring compliance with the key directives from the international watchdogs, and in some cases even going over and above what was required.

It is hoped that after the transitional stage is over at long last legitimacy will be bestowed upon the sector, for it is one which offers not just tax efficiency potential, but also a wealth of innovative tailored products and vehicles, and unparalleled management expertise uniquely tailored to clients’ requirements.

The death knell of International Finance Centres has been sounded too soon, and they remain very much open for business.

Editor: Richard Smith Business Development: Dominic Hale, James Wilson Production Manager: Claire Turner Designer: Wallace Wainhouse Editorial: Joanna Gray, Frances Law, Magnus Andersen, Ken Shaw All enquiries: info@offshoreguide.biz W: www.offshoreguide.biz Disclaimer::The information contained in this publication has been obtained from sources the proprietors believe to be correct. However, the publishers cannot be held responsible for any errors or omissions. In no way does any of the content constitute legal advice and the publishers and staff accept no responsibility nor legal liability for any loss or damage caused by or arising from reliance on it. Persons are reminded that independent professional advice should be sought before any investment decisions are made.

Copyright: No part of this publication may be reproduced without the prior consent of the publisher. © Business Annual Offshore Guide. Unless otherwise stated all photographic content is licensed under the Creative Commons (cc) attribution license. To view a copy of this license visit http://creativecommons.org/licenses/by/3.0/ Cover photos - top left - Pocket Wiley / CC BY, top middle - Kathleen Conklin / CC BY, top right , middle left, bottom middle - © Chad McQueen, centre - Julien Min Gong / CC BY, middle right - Jim Trodel / CC BY, bottom left - Francisco Diez / CC BY, bottom right - Didier Baertschiger / CC BY.

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Contents Comment

Profiles

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Asia-Pacific 6

International Financial Centres and the World Economy A STEP (Society of Trust and Estate Practitioners) commissioned report, by Prof. James Hines

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Blueprint for Change Excerpts from a statement on the financial services sector, by Cayman Islands Premier, the Hon. McKeeva Bush

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‘Islamic Finance Becomes a Viable Component of Financial System’

by Mushtak Parker

22 24 25 26 27 28

Cook Islands Hong Kong Labuan Marshall Islands Samoa Vanuatu

Caribbean

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Why Consultants Work Whether you’re already offshoring or about to tiptoe overseas, using a consultancy service will save time and make money

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Jersey Continues to Offer Key advantages Post G20 and OECD “White List”

by Geoff Cook, chief executive, Jersey Finance Limited.

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Credit Crisis: Impacts On Transfer Pricing

by Jobst Wilmanns, Christian F.A. Jacob and Manuel Imhof, PWC AG WPG

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Ras Al Khaimah Adriaan Struijk, Chairman of the Freemont Group explains why Ras Al Khaimah (RAK) is fast becoming one of the world’s foremost tax free jurisdictions

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Working Offshore Joanna Gray examines the highlights of life in three low tax jurisdictions

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32 34

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36 39

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Anguilla Antigua Bahamas Barbados Belize British Virgin Islands Bermuda Jamaica Panama St. Kitts Nevis St. Lucia St. Vincent Turks & Caicos Islands

Europe 41

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44

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Andorra Gibraltar Cyprus Switzerland Guernsey Jersey Isle of Man Liechtenstein Luxembourg

Africa 46 48 49 50

Botswana Liberia Mauritius Seychelles

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OECD Model Tax Convention on Income and Capital Article 26: Exchange of Information

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Why High Taxes are Counter- productive Could we be about to see a tax migration, asks Joanna Gray?

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Clearer Tax Jeffrey Owens, Director, OECD Centre for Tax Policy and Administration provides the OECD perspective

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Foreword from the Final Report of the Independent Review of British Offshore Financial Centres

by Michael Foot

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Industry Experts Predict Greater Market Discipline and More Due Diligence in 2010 Walkers seminar offers perspective from regulators and investment managers

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History of Offshore Finance

by Joanna Gray

Lifestyle

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Golf Simulators

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Contemporary Art Frances Law explains there are still ways to enjoy art and make money at the same time Yacht Ownership Needn’t be Taxing

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International Financial Cent A STEP (Society of Trust and Estate Practitioners) commissioned report by Prof. James Hines Offshore Financial Centres play a key role in the international financial system, improving the availability of credit and encouraging competition in domestic banking systems. The result is a boost in investment in the major economies, which ultimately supports job creation and growth.

International financial centres (IFCs) are countries and territories with low tax rates and other features that make them attractive investment locations. These properties of IFCs occasionally raise concerns that they may erode tax collections, divert economic activity, and otherwise burden nearby hightax countries. A large body of economic research over the last 15 years considers these issues, with findings that point sharply in the opposite direction: the evidence strongly suggests that the policies of IFCs contribute to investment, employment, and the efficient functioning of markets and government policies in other countries.

IFCs contribute to economic activity by improving the potential profitability of business operations elsewhere. As a result, for a typical American firm, a 1 percent greater likelihood of establishing an IFC affiliate is associated with a 0.5-0.7 percent greater sales and investment growth in the same region in countries other than IFCs. Furthermore, foreign investment stimulated

by IFCs also appears to encourage greater domestic investment: the American evidence is that 10 percent greater foreign capital investment triggers 2.6 percent additional domestic capital investment, and that 10 percent greater foreign employment is associated with 3.7 percent greater domestic employment. Evidence of the behaviour of European, Canadian, Australian and other

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firms offers similar conclusions: expanded foreign economic opportunities are associated with greater domestic investment and employment.

The evidence strongly suggests that the policies of IFCs contribute to investment, employment, and the efficient functioning of markets and government policies in other countries.

Other evidence indicates that the financial services offered in IFCs contribute to the competitiveness of financial markets in the regions in which they are located.

Commercial banks in countries with nearby IFCs have lower interest rate spreads than do other countries, and their banking sectors are less concentrated, as reflected in lower market shares for the five largest banks. By every measure credit is more freely available in countries proximate to IFCs, reflecting the degree of banking competition and the resulting stability of their financial architectures.

IFC economies have grown very rapidly in the period since 1980, with average per capita annual growth rates of 3.3 percent, compared to 1.4 percent for the world as a whole. This fast pace of economic growth reflects the benefits of attracting high levels of foreign investment and indirectly contributes to economic prosperity elsewhere through the usual process by which affluence spreads across countries.

Among the notable features of IFCs are not only their high average incomes and small populations (many are islands), but also, according to new research findings, their very high scores on governance quality measures. Recent evidence implies that improving the quality of governance from the level of Brazil to that of Portugal raises the likelihood of a small country being an IFC from 26 percent to roughly 61 percent.

This association of IFCs with governance quality carries implications for their own and other countries through the widely-observed process by which governance influences economic outcomes, and in particular, by which bad governance retards economic performance.

Economic outcomes aside, are the tax policies of other countries somehow undermined by those of IFCs? IFCs are typical of small countries in imposing low income tax rates and instead relying on expenditure-type taxes. Contrary to popular

Photos: Andrew Magill / CC BY, Julien Min Gong / CC BY

tres and the World Economy impression, IFCs are not the locations of choice for anonymous accounts and other vehicles for international tax evasion, recent evidence instead indicating that large countries such as the United States and the United Kingdom instead serve this function.

Modern tax competition theories indicate that the low tax rates available in IFCs contribute to a form of tax competition that is likely to contribute to the efficiency of tax policies elsewhere, by distinguishing between highly mobile international investments that are very responsive to tax rate differences, and less mobile, more commonly domestic, investments that large countries are able to tax at high rates. By fostering this type of competition, and by not taxing income that is therefore available for others to tax, IFCs very likely enhance the ability of other countries to operate their tax systems efficiently.

IFCs as Pressure Valves There is understandable interest in the impact of international financial centres on other countries, and fortunately, there is extensive recent research that offers important insights into these questions.

The evidence indicates that IFCs contribute to financial development and stability in neighbouring countries, encourage investment, employment, and other aspects of business development in hightax countries, have salutary effects on tax competition, promote good government, and enhance economic growth elsewhere.

This evidence appears to be quite robust, and suggests a rather different interpretation of

the IFC experience than some that appear from more casual readings of the history.

The quantitative economic evidence of the impact of IFCs on other countries offers a useful reminder of two valuable propositions. The first is the benefit of diversity. Simply the fact that IFC policies differ from those of their high- tax neighbours does not imply that there is something wrong or undesirable about what it is that IFCs do. On the contrary, it is the difference between what IFCs do and what

Simply the fact that IFC policies differ from those of their high-tax neighbours does not imply that there is something wrong or undesirable about what it is that IFCs do. other countries do that makes IFCs valuable to other countries. All human institutions are fallible, including those that produce economic policies in high-tax countries.

IFCs play the important role of pressure valves, assisting the policies of their hightax neighbours by letting off economic steam when the pressure of constrained or excessive policies elsewhere becomes too great.

The second proposition is that there are no economic limits. Greater innovation, production and prosperity in one part of the world need not come at the expense of

the rest of the world; instead the opposite is the case, since there is always and everywhere scope for economic expansion with enlightened policies. It is simply misguided to proceed on the assumption that total world economic growth is limited, even in an era when environmental concerns and population pressures create their own challenges. As a consequence, the economic successes of international financial centres do not threaten the prosperity of other parts of the world, appearing instead, on the basis of considerable evidence, to enhance it. Š The Society of Trust and Estate Practitioners 2009.

First Published in Great Britain in 2009 James Hines teaches at the University of Michigan, where he is the Richard A. Musgrave Collegiate Professor of Economics in the department of economics and the L. Hart Wright Collegiate Professor of Law in the law school.

The Society of Trust and Estate Practitioners (STEP) is a unique professional body providing members with a local, national and international learning and business network focusing on the responsible stewardship of assets today and across generations. Contact: Artillery House (South), 11–19 Artillery Row, London SW1P 1RT, United Kingdom.

Tel: +44 (0)20 7340 0500. W: www.step. org. E: keith.johnston@step.org

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Comment

Blueprint for Change Aerial shot of George Town, capital of the Cayman Islands

The following is an excerpt focused on the financial services sector from a statement presented by the Premier, the Honourable McKeeva Bush, to the Cayman Islands Legislative Assembly during the presentation of the 2009-10 budget, 2nd October 2009. It constitutes a fascinating example spelt out in black and white of how one very successful traditional offshore jurisdiction aims to maintain prosperity and stay one step ahead of the momentous changes in the financial services industry. Though it refers to the Cayman Islands it represents a blueprint for change that in order to themselves survive many other jurisdictions will inexorably be compelled to implement to some extent. “…Last, but certainly not least, I turn to financial services.

Beyond a shadow of a doubt, the landscape of the financial services industry is changing – changing globally, changing radically, and changing for good. Much of this is due to factors beyond our control.

What we do have some control over is the way we do business – and there can be no argument that the way we are currently doing business must change.

Together, the G20 and organisations such as the OECD and FATF have permanently changed the structure of the financial services industry. Our ability to grow as an offshore financial centre must now take account of new political, economic and regulatory dynamics.

The Tax Information Exchange Agreements are clear examples of the network of compliance that will no doubt be increasingly expected. We must now re-evaluate our vision for the future of

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our country, if we want to continue to remain a prosperous nation; or perhaps I should stress, if we desire to attain real prosperity, in terms of the entire quality of life, for all of us.

“Our ability to grow as an offshore financial centre must now take account of new political, economic and regulatory dynamics.”

It is well known by now that this government took swift and decisive action to secure the immediate future of the Islands’ financial services industry, through successful completion of negotiations with several nations and signature of the required number of tax information exchange agreements. This ensured that Cayman was moved to the OECD ‘white list’ and re-asserted its positive international reputation.

As a result of our active participation, our jurisdiction has now been appointed as a member of an OECD steering group which will assist in restructuring policy for the Global Forum [on Taxation]. We will continue to work with the OECD and the G-20 to ensure that Cayman maintains the level of compliance necessary to hold up its position as a reputable financial services centre.

Our regulatory infrastructure has been made progressively more robust; government and its statutory entities have worked diligently to strengthen this regulatory regime, with the support and hard work of some of the more far-sighted members of the private sector. Yet in spite of all our rigorous efforts as a nation, and all our successes, we are being pushed hard yet again, from several external sources.

There can be no argument now that we need to plan, that we must plot a sustainable economic course for our country. The decisions we make must be

based on sound economic policies, and must also sufficiently differentiate us from our competitors.

It is often said: “Whenever the U.S. sneeze Cayman catches a cold.”...

So again I’m saying we must work towards the establishment of a sustainable path for the country...

There has been particular consultation with the financial services industry, as we have resisted great pressures to introduce direct taxes. However, in the present situation, some new and enhanced revenue measures are unavoidable.

Historically, the government has created the legislative and regulatory framework which allows this industry to prosper, benefitting the community as a whole – from the early days of the Banks and Trust Companies Law and Regulation, to the current TIEAs. In turn, this industry has a strong record of working with government and paying a share of the costs of keeping this system operating. This year is no exception.

Accordingly, after much consultation, revenue measures are being implemented, several of which directly touch on that industry. These include increases in:

•

company registration fees

•

mutual fund license fees

•

security investment business fees

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tax and trust undertaking fees

•

work permit fees

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exempted limited partnerships fees

Similarly, an annual business premises fee will replace the current stamp duty on commercial leases. The new fee will cover all occupied commercial property, a more even-handed approach than just capturing the premises which are leased.

Clearly these are measures which address the immediate situation...

It is my belief, that part of our strategic plan, ought to be the development of the Cayman Islands as a true international business centre, while preserving the necessary features of an offshore financial

center. In this regard, I can categorically state that no path we undertake will be based on compromising our commitment to uphold generally accepted international standards of practice or regulation.

with the private service providers – for instance, regarding how to respond to the EU Directive regulating Alternative Investment Fund Managers; and dealings with the OECD more generally.

As an international business centre, we will be able to attract large financial institutions such as fund managers, wealth management companies, broker dealers to set up and operate from the Cayman Islands – much like they have done in Ireland, Singapore and other such centres; many of which also benefit from various aspects of OFC status.

We plan to amend the Confidentiality Law as necessary to assist with promotion of Cayman as a leading international Business Services Centre.

A working group has been formed to develop strategies, with a view to attracting fund managers to establish a physical presence in Cayman. This is in keeping with a broad based marketing and public relations programme, to promote and protect our reputation as a jurisdiction.

“We must now reevaluate our vision for the future of our country if we want to continue to remain a prosperous nation.”

Specifically, we will monitor and stage appropriate interventions with regard to any prospective legislation by any foreign government that might serve to threaten our industry.

Approval has been given for the consolidation of all of government’s financial services agencies into a properly functioning Financial Services Secretariat, to support the Ministry.

Consultation with key stakeholders of the financial services industry, has provided support and confirmation that with minor changes to various parts of our laws and policies, and the introduction of strategic new laws, we can achieve this, and be well received in the global financial community.

As part of our effort to create the necessary framework as quickly as possible, we will seek to achieve the following in the short to medium term:

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Establish a Cayman derivatives exchange.

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Review the capacity of our regulatory regimes to sustain significant growth in the financial and business services sector.

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Assess the job opportunities likely to be created, and prepare Caymanians for those jobs through local tertiary institutions, as well as access to other training needed.

As one of its policy strategies, the new Ministry of Finance will work with the Ministry for Education, towards establishment of a training institute dedicated to financial services. This will align job skills with industry needs, and enhance opportunities for Caymanians.

A number of specific steps have been taken, or are planned, to promote and strengthen the sector: The Ministry has met with the new Financial Services Council, in keeping with our commitment to work closely

The Hon.McKeeva Bush, Premier of the Cayman Islands

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Photo: Tyler Durden / CC BY

Comment

‘Islamic Finance Becomes a Viable Component of Financial System’

by Mushtak Parker Sultan Omar Ali Saiffudin Mosque, Brunei

Zeti Akhtar Aziz, governor of Bank Negara Malaysia, the central bank, took the message of the Islamic finance proposition to the heart of continental Europe when she gave the inaugural global lecture at Goethe University following the opening earlier of the inaugural Official Monetary and Financial Institutions Forum (OMFIF) in early March 2010 in Frankfurt, Germany.

Germany, which ought to be the closest partner of Islamic finance because of its tradition of mutual savings societies and cooperatives, has been relatively absent from the Islamic finance space, allowing US, UK, French, Swiss and Japanese financial institutions to take the first mover lead.

This despite the fact that the German state of Saxony Anhalt, was and remains the first European entity to issue a sukuk.

Dresdner Bank when it took over Kleinwort Benson in the UK in the early 1990s, effectively downsized if not closed the latter’s thriving Islamic finance business, on the basis that Islamic finance was not a core business line. However, over the last decade or so Deutsche Bank has assumed a much higher profile in Islamic finance especially in asset management, project finance and in sukuk.

As the world emerges from the worst international financial crisis in decades, said Gov. Zeti, there still remain some unresolved issues that need to be addressed.

The recovery has prompted focus on exit strategies and on the search for more permanent solutions that will put the financial system on a more solid foundation.

“These issues are however being considered during a period of exceptional conditions.

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Of concern, is that this might significantly influence the direction of the reform agenda with its medium and long-term implications which could be counter to solutions that would lead us to a path of stability and sustainable growth,” she added.

...discussions have increasingly turned to the prospects of the potential role and relevance of Islamic finance in contributing to global financial stability and in support of overall economic growth.

Zeti highlighted three trends in the global financial system which she predicted are set to become significantly more pronounced in the aftermath of this global financial crisis.

These include the increasing significance of Asia in the global economy, the extensive international regulatory reforms that are being envisaged by the international

community, and finally the rapid growth of Islamic finance and its integration into the international financial system.

She was cautiously bullish about the potential role Islamic finance can play in contributing toward financial stability and sustained global growth. The largely uninterrupted expansion of global growth in Islamic finance has drawn significant interest from all quarters. Today, maintained Zeti, Islamic finance has evolved to become a viable and competitive component of the international financial system. Following the global financial crisis, discussions have increasingly turned to the prospects of the potential role and relevance of Islamic finance in contributing to global financial stability and in support of overall economic growth.

Islamic finance is based on the Shariah, the Islamic cannon law which requires that an Islamic financial transaction be supported by an underlying economic activity, thus ensuring that there is a close link between financial and productive flows. “This fundamental principle,” she explained, “is all about the basic banking function of providing financial services that adds value to the real economy. Financial flows in Islamic finance are therefore accompanied by

the expansion of genuine productive activity.

Under this arrangement it also avoids overexposure to risks associated with excessive leverage.”

Islamic finance is also based on profit sharing and therefore risk sharing. Islamic financial transactions clearly define the arrangements at the onset, and provide the incentive for the Islamic financial institutions to undertake appropriate due diligence to ensure that the profits are commensurate with the risks being assumed.

Aspects of governance and risk management are therefore strongly emphasized in the arrangements.

Islamic financial contracts, she stressed, “demand higher standards of disclosure and transparency to be observed which, in turn, act to strengthen market discipline and minimize informational asymmetries. There are also clear value propositions in Islamic finance for both investors and issuers. For investors, Islamic financial products offer portfolio diversification and new investment opportunities as they avail themselves to this new asset class. For issuers, Islamic finance allows access to a new source of funds and liquidity in addition to providing new risk management options.”

Gov. Zeti like many other participants in the $1.2 trillion global Islamic finance industry, lauds the increasing internationalization of Islamic finance over the last decade.

This expansion has been accompanied by new emerging global patterns of financial and economic interlinkages, as highlighted especially by the strengthening of ties in between Asia and the Middle East in trade and investments in a wide range of areas.

“Both Asia and the Middle East are increasingly recognized as dynamic growth regions in the global economy. The two regions have a history of strong trade ties that flourished on the old Silk Road, which served as a major global conduit between the ancient civilizations in the East and West until about the 14th century. Islamic finance today has revitalized these economic ties with the strengthening of the financial linkages between Asia and the Middle East, a

trend that will generate mutually reinforcing growth prospects. The emergence of these new financial centers in Asia and the Middle East and their increased integration has paved the foundations for a New Silk Road,” she added.

The good news is that the required regulatory and legal frameworks for Islamic finance have also been established in a number of countries in Asia and the Middle East, and also at the international level in Ireland, Luxembourg, the UK, France, and Malta.

Zeti highlighted the development of the Malaysian Islamic financial sector over the last three decades, which in the last years has seen a confident Malaysian market seeing aggressive financial liberalization initiatives to strengthen links with financial markets in other parts of the world. This has also been reinforced by the further liberalization of the capital account of the balance of payments and the implementation of tax neutrality measures.

There are...clear value propositions in Islamic finance for both investors and issuers.

For the emerging economies in Asia, the banking system remains the largest component of the financial system with greater financial integration taking place.

This financial integration will result in a more efficient recycling of Asian savings into investments within Asia, she maintained.

Asia is estimated to be investing about $8 trillion in infrastructure development over the next ten years.

The IMF’s projection is for growth in the advanced economies for the period 2009 and 2014 to be 1.3 percent per annum, which is half of what was registered during the period 2000 to 2008. The emerging economies, in general, and the Asian region in particular, have emerged with stronger growth.

Strong fiscal positions and Intra-regional trade in Asia has already risen from 32 percent of total exports in 1995 to an average of 50 percent in 2008. Rapid trade liberalization across Asia has improved market access. Rising incomes in the Asian region where more than half of the world population resides has generated a huge cumulative market. This increase in consumption demand has led to the development of an extensive modern retail sector across the region.

Supported by stronger economic fundamentals, emerging economies are expected to grow at higher rates over the next five years compared to the period prior to the crisis in 2000 to 2008. The IMF projects that emerging economies in Latin America, the Middle East, Africa and Asia will, on the average, grow by 6.1 percent in the period 2010-2014, higher than compared to the period 2000-2009.

Zeti highlighted the objectives of global financial reform - strengthening financial regulation; making the regulatory framework more responsive to risk; improving risk management in financial institutions, enhancing safety nets, in particular, in the liquidity support arrangements and deposit insurance; greater disclosure and transparency, particularly on off-balance sheet exposures; agreeing an appropriate incentive structure for financial institutions, and designing an institutional framework for financial stability. But she warned that there has to be a degree of balance of regulation.

Asia’s role in the global economy, the international regulatory reform agenda and the development and expansion of Islamic finance is likely to have a growing influence on the global economy and financial system going forward. “As we participate in this rapidly evolving environment, these new trends need to be taken into account in creating a global economic and financial order that is profoundly better than the one we have today,” she advised.

This article first appeared in Arab News

Jumeirah Mosque, Dubai

Photo: Paul Hart / CC BY

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Photo: Michael Bryan / CC BY

Comment

Why Consultants Work For many taking the consultancy approach has led to almost divine revelation

Whether you’re already offshoring or about to tiptoe overseas, using a consultancy service will save time and make money Even to seasoned financial players and accountants the world of offshore finance is complicated, multi-faceted and knotted with regulation. The most switched on of minds will be stretched to absorb all of the geo-political information that is necessary to make the most of the offshore markets and how they may benefit your business or personal finance. And it is for this reason that it is worth considering the consultancy route. In fact it’s imperative. Consultancy firms, especially large consultancy firms, offer more expertise, acumen and experience than can possibly be provided by even the most on-form business manager and team of accountants. When it comes to market analysis, strategic investment planning, and equity research, going down the consultancy route will ensure that due diligence is always followed every step of the way.

Capgemini for example employs more than 90,000 people and operates in 30 countries. When it comes to researching investment opportunities it’s the sheer volume of brain power it can bring to the table that will help to maximise your business returns. Capgemini states, ‘With extensive experience crossing all sectors and geographies, we can offer you the investment and business research services you need to remain competitive. Understanding that research requirements vary across different customer segments, we base our research on your specific needs. This can range from helping private equity firms evaluate investment opportunities, to working with

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institutional investors to identify fresh investment themes. Whatever your needs, we can address them with focused, timely research. Our structured approach to project management and client engagement ensures that you receive the highest level of service.’

Consultancy firms, especially large consultancy firms, offer more expertise, acumen and experience than can possibly be provided by even the most on-form business manager and team of accountants.

Big consultants help big business Of course this is compelling stuff but there is also a hint of suspicion with these consultancy services that it all comes at a cost to bottom line profits. You may see a good investment return but a large bulk of this will go to the consultants rather that your investors or shareholders. However if your business is a multinational big beast, it is big bucks that are going to be made by canny offshoring of services and financial investments. For this big consultancies such as Capgemini, Arvato, Accenture and

IBM really do provide the sufficient global vision to satisfy multi-frontier companies.

No more clearly is this synergy between big consultancy firms and big business firms more obvious than with Accenture’s client list. Accenture operates in 200 cities in 52 countries with 176,000 employees and its clients include 99 of the Fortune Global 100 and more than three-quarters of the Fortune Global 500. While of course impressive; even more so is Accenture’s and other large consultancies, ability to maintain their intrinsic bespoke service.

Get specific for medium sized business While the big names in consultancy would certainly encourage relations with small to medium sized businesses especially venture capitalists and private equity firms, SMEs might do well to investigate boutique consultancy. Certainly if you want specific country or area financial research approaching a consultants already infused with detailed local, rather than simply global, knowledge would be worthwhile.

Based in Singapore Healy Consultants, a firm that offers offshore financial services, international trading strategies and corporate banking, states that it has, ‘an unrivalled knowledge of Asia business set up.’ Such local knowledge is like gold dust for investors wishing to develop a strategic investment plan. And this really seems to be the key, if the consultants offer thorough and rigorous research into your investment requirements, then whether you go for big or boutique your business will thrive.

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Photo: Marilyn Jane / CC BY

Jersey Continues to Offer Key Advantages Post G20 and OECD “White List”

Established IFCs such as Jersey are well placed to withstand the storms predicted to continue to plague the sector

By Geoff Cook, chief executive, Jersey Finance Limited

Offshore jurisdictions are chosen as a centre to place international business for a host of inter-related reasons. These include the political, economic and fiscal stability of the offshore jurisdiction, the flexibility and speed of response made possible through an evolving legislative and regulatory programme, and the increasing levels of expertise and quality of the service provided from professionals in such locations.

In Jersey for example, the legal and finance specialists have, as a result of the Industry’s divergence across a range of niche areas, acquired a huge pool of knowledge in handling the financial planning needs of sophisticated private and corporate clients.

It is this depth of specialisation, combined with the commercial attractions of Jersey, which helps to attract quality international business to Jersey.

The nature of financial services business undertaken in a jurisdiction such as Jersey is, in many respects, broadly similar to that performed around the world in the major financial hubs in London, New York, Tokyo or Hong Kong. Together, onshore and offshore jurisdictions play an important part in facilitating international investment and the free movement of capital.

Diverse Services range from structured finance packages to support capital market activity and institutional funding, a range of global custody, treasury and money market services, through to the administrative services that support the funds sector, and

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in particular the market for alternative investment services such as hedge and property funds and private equity.

Funds has been the fastest growing sector in the jurisdiction in recent years following the introduction of the Expert Fund Regime in 2004, which enabled fund managers and other providers to have their fund vehicles approved through a streamlined and swift turnaround process. The later introduction of an unregulated category for high value, sophisticated investors completed the full suite of fund regimes designed to meet the requirements of different fund providers.

Together, onshore and offshore jurisdictions play an important part in facilitating international investment and the free movement of capital.

Jersey can also call upon the listing capabilities of The Channel Islands Stock Exchange, now firmly established with more than 3,500 listings. There are 25 countries represented on the Official List and more than 200 international issuers have chosen the CISX as the launch pad for the primary listing.

As well as providing an attractive jurisdiction for investors and for the administration

and domiciliation of funds, Jersey is also proving a favourable location for selected managers considering relocation from the major finance centres such as London and New York. Jersey has been obtaining increasing numbers of enquiries from hedge fund managers asking about the attractions of Jersey as a base for business and a number of fund managers have re-located to Jersey as a result.

For private clients and their advisers, leading offshore jurisdictions provide stable and secure environments in which to manage their financial affairs. Jersey has been one of the world’s leading trust jurisdictions for decades; the Hague Convention on trusts is based on Jersey trust law. In recent times, Jersey’s provision of wealth management services has been augmented by the introduction of the foundation vehicle, which adds to the entities on the statute for estate planning, thereby giving advisers greater choice when considering the most appropriate solutions for their clients.

Fiscal The fiscal benefits of using an offshore location are extremely diverse and depend upon the specific financial arrangements and structures that are required by the international investor.

In the simplest example, there are legitimate tax advantages for individuals who are living or working overseas if they open an offshore bank account or establish investments offshore. There is often no need to pay tax on the interest they earn offshore whilst they

are abroad, although interest earned must be declared once the individual returns to reside in their home domicile.

In the corporate sector, there are considerable administrative benefits of structuring transactions through a tax neutral jurisdiction such as Jersey to ensure the preferred investment vehicle is as tax efficient as possible for the investors.

Quality During the current global financial crisis, the quality of regulation and the role of offshore jurisdictions and their complementary relationship with their onshore neighbours, has been the subject of increasing analysis.

This has provided an opportunity for the authorities in offshore jurisdictions to explain the value that the leading offshore locations bring to the global financial system and the advantages that arise for economies world-wide from the working relationship between onshore and offshore.

In a recent report undertaken by HM’s Treasury, it was recorded that in one three month period alone in 2009, Jersey was a conduit for 200 billion dollars of international capital into the City of London, illustrating vividly the value of the relationship between Jersey and the City and the economic contribution that a finance centre such as Jersey provides to the UK. Jersey can also call upon strong, independent evidence to illustrate its robust

regulatory environment and co-operative stance in the international marketplace.

Jersey was one of the first jurisdictions to be placed on the OECD ‘white list’ for meeting required tax standards and it received the best report to date of any jurisdiction from the International Monetary Fund following a review of Jersey’s regulatory and supervisory capabilities in 2009.

… legal and finance specialists have, as a result of the Industry’s divergence across a range of niche areas, acquired a huge pool of knowledge in handling the financial planning needs of sophisticated private and corporate clients.

The Government of Jersey’s historic policy of always adopting international best practice standards, has given increasingly risk averse investment professionals greater confidence in Jersey as a place to do business. We believe that this competitive advantage is growing over time as more rigorous standards around the world reduce the ability of other smaller financial centres to compete effectively.

It is Jersey’s intention to build on its global recognition as a compliant and well regulated jurisdiction and to continue to provide the comprehensive range of banking, funds and wealth management services to financial intermediaries, lawyers, accountants, private clients and their advisers across the world.

During this period when the global financial markets are still recovering from the traumatic events of recent times, Jersey is well placed to remain a jurisdiction of choice in its key markets.

Geoff Cook, chief executive, Jersey Finance Limited

Photo: Marilyn Jane / CC BY

Jersey has much to recommend it so has little trouble in attracting top talent

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Advertorial

Samoa International Finance Centre

Photo: Neil Spicy / CC BY

Photo: Stephen Glauser / CC BY

Photo: Sarah Kelemen / CC BY

Samoa is a sovereign nation in the South Pacific founded on God. Hailed as a model state in the region by international organizations, the Polynesian nation has an excellent reputation in governance, enjoying political stability for over half a century with memberships in the UN, Commonwealth, IMF, World Bank, and ADB. The Samoa International Finance Authority (SIFA) has harnessed these attributes to cater to the requirements of the world of international finance. We offer security, independence, proficiency, and stability.

Photo: Neil Spicy / CC BY

SIFA is an independent statutory corporation, a one-stop regulatory shop headed by a Chief Executive Officer and overseen by a Board that includes the Governor of the Central Bank, the Attorney General, Chief Executives of the Ministry of Finance, and SIFA, plus three private sector representatives.

Enjoying close ties with the People’s Republic of China since 1948, SIFA has focused on the needs of the Asian investor by offering the registration of a company in Chinese language and with our time zone flexibility, registrations could be done yesterday! Our laws are founded on English common law governed by a Westminister-styled Parliamentary democracy. SIFA has memberships with regulatory groups like the International Conference of Banking Supervisors (ICBS), Offshore Group of Insurance Supervisors (OGIS), International Association of Insurance Supervisors (IAIS) and International Trade & Investment Organization (ITIO).

The pillars of Samoa’s international finance centre: The International companies Act 1987, the equivalent of the international business corporation legislation in the Caribbean remains Samoa’s most popular product. A Samoan international company can be established in a matter of hours for a modest fee; only one director, who may be corporate, needs to be appointed and there is no requirement for a resident director. The act permits companies limited by shares, by guarantee, or limited both by guarantee and shares (hybrid) as well as US-style limited life companies.

The International Banking Act 2005 allows three types of bank licenses, A, B(1) or B(2), which are issued subject to international standards of best practice in banking. All holders of international banking licenses must establish an office in Samoa, have at least two directors who must be individuals and employ at least one person.

The International Insurance Act 1988 is the licensing regime for four categories of insurance licenses, namely general, long term, reinsurance and captive.

The International Trusts Act 1987 governs the registration of international trusts. The Trustee Companies Act 1987 is the licensing regime for trustee companies. A trustee company must be incorporated first as a domestic entity before seeking a license.

The Segregated Fund International Companies Act 2000 is based on the Guernsey protected cell legislation. It is regarded as a single legal entity, which has the ability to create one or more segregated funds. The assets and liabilities of a segregated fund are ring fenced from other segregated funds.

All entities registered under Samoa’s international finance laws are subject to provisions of the Money Laundering Prevention Act 2000 Prevention & Suppression of Terrorism Act 2002.

In December 2009 the OECD placed Samoa on its esteemed White list. Ushering in the Year of the Tiger, Samoa boldly looks to the future with vigour and confidence, maintaining partnerships and graciously welcoming new business to our shores.

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Comment

Photo: © Chad McQueen

Credit crisis: impacts on transfer pricing

by Jobst Wilmanns, Christian F.A. Jacob and Manuel Imhof/PWC AG WPG, Germany

The current economic environment presents not only major commercial and financial challenges for many multinational enterprises but also increases the focus on transfer pricing arrangements. From a management perspective, the focus during this crisis is on managing the downturn of the entire enterprise. The measures available to management vary significantly with respect to their extent and range, from rather straightforward cost reduction approaches to a global realignment of the enterprise’s value chain. From a transfer pricing perspective, the challenge is to closely monitor and review the impact of these abnormal market conditions and the measures taken by management on the assumptions embedded in the transfer pricing systems.

The recent economic crisis does, however, provide a unique transfer pricing planning opportunity to revisit current arrangements and consider amendments for the future. The areas or intercompany transactions within this focus vary among different industries and multinationals. The following highlights some issues applicable to most industries.

Review of intercompany agreements Intercompany agreements should be reviewed as to whether the terms and conditions still comply with the arm’s length standard, particularly intercompany loan agreements with respect to the interest rates. The recent increase in credit margins and the continued uncertainty of the credit market should be reflected in the interest rates and might require intercompany lender and borrowers to adjust their agreements.

In addition to the interest rate adjustments multinationals should consider changing their intercompany lending/borrowing policy, providing them with the necessary flexibility to cope with unpredictable

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financial market development in the future, e.g. agreeing on shorter terms or including early repayment clauses.

Managing losses – risk realignment Profitability across all industries decreases during a recession while particular industries or enterprises may experience significant losses e.g. due to a sharp decline in customer demand. From a transfer pricing perspective, it is essential for the taxpayer to analyse and document the economic and/or commercial reasons for the drop in profits contemporaneously to prevent tax authorities scrutinising the transfer pricing

Transferring IP to an IP holding company in a favourable tax jurisdiction... could be beneficial in more than one way. policy. Because the taxpayer’s influence to minimize losses arising from overall economic developments is generally limited, managing the loss utilisation within the group becomes crucial. Managing losses effectively requires careful planning with respect to the jurisdiction the losses incur, the amount of losses and the possibilities to utilise these losses in the future.

The taxpayer might be required, in addition to preparing a contemporaneous transfer pricing documentation, to amend the risk allocation among entities. This could be the case if the decrease in the profitability of certain entities is due to the bearing of risks for which they are currently not being remunerated, e.g. local entities bear downsizing costs due to a decline in local demand. The taxpayer needs to ensure that the transfer pricing policy appropriately

reflects the risk allocated to group entities, i.e. entities bearing certain risks have to be compensated for the assumption of these risks. Aligning the risk allocation might require the conversion of fully fledged entities in low risk entities or vice versa.

Transfer of intangible property Multinationals may consider using the decrease in profitability to transfer intangible property (IP) among related parties. Transferring IP to an IP holding company in a favourable tax jurisdiction, or as part of a value chain restructuring in the current market conditions, could be beneficial in more than one way.

Firstly, the decrease in profitability leads to a lowered valuation of the IP compared to “normal” market conditions and hence, to a lower transfer price. Secondly, the lower valuation will equally affect the basis for the determination of capital gain tax in the location the IP was previously located, thus reducing potential capital gain or exit taxes payable. Lastly, the transfer of IP or an entire business function presents a tax planning opportunity for multinationals to utilise losses accumulated in a specific jurisdiction. The capital gain realised through the IP transfer or the taxation of a business function’s hidden reserves can offset losses previously incurred in this jurisdiction, while depreciation potential is created in the new jurisdiction.

Effectively managing the economic and transfer pricing challenges of the recent recession will be the focus of many multinationals in the short and mediumterm future. Understanding the impact of the worsened economic conditions on existing transfer pricing arrangements and intercompany transactions is essential for multinationals to successfully manage the risks and exploit the opportunities.

Photo: Ryan Lackey / CC BY

Ras Al Khaimah

Adriaan Struijk, Chairman of the Freemont Group explains why Ras Al Khaimah (RAK) is fast becoming one of the world’s foremost tax free jurisdictions for operating a business with a minimum of red tape and government interference.

RAK offers a combination of both onshore and offshore solutions. Located a 45 minutes drive north from Dubai positioned at the most northerly point of the United Arab Emirates, Ras Al Khaimah Free Trade Zone (RAKFTZ) is one of the fastest growing free trade zones in the UAE, with more than 5,000 registered companies set up by clients from 106 countries around the globe.

The advantages the UAE freezones have in common are as follows;

•

100% tax exemption;

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100% foreign ownership allowed;

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100% capital & profit repatriation;

•

No import (as long as the goods do not leave the freezone) duties and no export duties.

The UAE does not levy any VAT or sales tax and plans to introduce one have been shelved.

A restriction all have in common is that goods and services may not be supplied by the freezone company to the UAE market directly; in order to sell locally it is required to use a local authorized agent which should be a national (or company 100% owned by nationals).

RAKFTZ was set up in the year 2000 and is comprised of three areas – the Business Centre, Industrial Park, and the Technology Park. The areas have been set up to attract

different types of businesses and to provide services and an infrastructure most appropriate to these types of business.

1) The Business Centre The Business Centre is located in the central business district of Ras Al Khaimah. It offers furnished, fully-functional and ready-to-use offices, flexi-offices (shared office) and flexidesks (shared desks available for a limited number of hours per week). It is ideal for providing services to a global market.

2) The Industrial Park The Industrial Park is located approximately 15 km north of the city, approximately 6 km from Saqr Port, covering an area of 300 hectares. Saqr Port is close to the main shipping lane traversing the Straight of Hormuz. It is developed to accommodate heavy industries and warehousing.

The facilities include on-site employee accommodation, a customs office, and a centre to provide administrative and support services.

3) The Technology Park This is situated in a rapidly expanding area south of the city and is devoted to accommodate light industrial companies.

Setting it apart from other freezones, RAKFTZ’s marketing efforts are focused to attract small and medium enterprises (SMEs). Consequently 95% of the clientele of RAKFTZ is comprised of SME’s.

RAKFTZ offers these features which compare favourably with other freezones:

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The simplest and fastest application procedures;

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Comparatively low capital to be paid up: Dhs 100000;

•

e cost for setting up business is very Th competitive.

RAKFTZ was recognized as “Best Emerging Free Zone” by Middle East Logistics Awards for two consecutive years.

The emirate sets itself apart by a determined policy of creating an environment conducive to entrepreneurship. It appeals to business owners seeking refuge from excessive taxation elsewhere and it prides itself on creating a pro-business environment with minimal red tape, an open door policy, no trade barriers, easy licensing procedures, and no restrictions on hiring expatriates or other restrictive employment regulations.

With its population of only 200,000 people the lifestyle on offer will for some be more attractive than the big city life of Dubai. It offers less congestion, a cooler climate, lower costs of living, and with the Hajar mountains as a backdrop to the city a more beautiful natural scenery. Yet it offers top notch amenities: golf courses, health facilities, luxury freehold apartments and villas, shopping malls, and even a micro-light flying school.

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Comment

Photo: © Chad McQueen

Working Offshore

Life working within the offshore community offers enormous advantages not least the opportunity to live elsewhere. Joanna Gray examines the highlights of life in three low tax jurisdictions

If you work for an international bank, hedge fund, building society, accountants or lawyer firm it is likely that at some point in your career you will work overseas for lengthy periods or ultimately relocate to a different country entirely. Working within the offshore financial world increases the likelihood no end. By their very nature however the prospect of moving to a low tax jurisdiction is more often than not an appealing, rather than off-putting one

Switzerland Switzerland is of course the most prominent low tax jurisdiction within Europe and as such has over 400 banks within its borders.

As a result it has fine tuned the art of high end ex-pat living to a fine degree. The international schools are first rate, the ex-pat community is so well established that you will feel that you are living in a genuinely global, or at the very least European community surrounded by multilingual colleagues and national borders are ephemeral.

As Charles Emmerson, an Australian who worked in Geneva for three years explained, ‘In spite of its straight-laced reputation Geneva was one of the most dynamic cities I have ever worked in thanks mostly to

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the enormous variety of extremely well educated and qualified people I was working with. On top of this the country itself is so meticulously run, in terms of cleanliness, manners and services, that it was a real pleasure to work there. And because of its very active democracy I wasn’t left with an uncomfortable feeling of guilt that the Switzerland I enjoyed was only a facade – it certainly was not. I haven’t even mentioned the skiing, walking or scenery.’

Rental prices in the centre of Geneva are high and availability limited, so many people live in France, on the South side of Lake Geneva, and commute over the border to work However, with recent tax hikes in the UK and elsewhere, Geneva is not just a vital destination for the financial community at large but also individuals and companies wishing to seek more benign tax regimes. As a result a scramble for decent properties and

schools is ensuing. Added to this Geneva is the fourth most expensive city in the world in which to live according to the Mercer report.

However, while you may need to work in Switzerland you could consider living in France. David Anderson, solicitor and chartered tax adviser at Sykes Anderson LLP Solicitors and Chartered Tax Advisers. www. sykesanderson.com, tells Business Annual Offshore Guide, ‘anecdotal evidence of the shortage of places in international English speaking schools and the demand for high value residential property with good access to Geneva airport is widespread. Rental prices in the centre of Geneva are high and availability limited, so many people live in France, on the South side of Lake Geneva, and commute over the border to work’.

The attraction of Switzerland now extends to people with high incomes who may not have the capital usually associated with the profile of people relocating to Switzerland. It is doubly attractive for such people who often run their own businesses with international links as Switzerland has an extensive double tax network and corporation tax rates in some cantons are very attractive. Unlike most other countries, the Swiss property market has continued to enjoy price growth over the past year with house prices in

Photo: Alex Jagendorf / CC BY

Switzerland 4.3 per cent higher than a year ago. This growth has been helped by demand from foreign residents, which looks set to continue. The difficulty for investors is that property purchases in Switzerland for non residents are notoriously difficult with ownership of residential property usually only possible in designated tourist areas, making a buy to let in say the centre of Geneva impossible. For people working in Geneva the costs of residing there are high and for the cost of a daily commute a more desirable property in France can be had.

Either way an option is to buy in France within commuting distance of Geneva.’

Belize From beautiful Alpine scenery to tropical paradise a move to Belize not only offers Caribbean climate but also the reassurance of a country with a very stable political and business structure. The Belize High Commission explains, ‘Belize has a subtropical climate, virgin rainforest, unspoilt beaches and spectacular barrier reef and friendly people. Furthermore, Belize is strategically located next to Mexico and Central America, near the US and the Caribbean islands, rich in natural resources with a stable and supportive economy, bilingual [English and Spanish] workforce and established infrastructure’. That Belize only received independence from Britain in 1981 explains its rich British colonial heritage and the fact that it feels more American (or at least Central American) than straight Caribbean.

Julian Mitchell, a Thailand based financier who spent a year working in Belize City would recommend the experience to anyone.

‘Personally I’m very interested in Mayan History so I relished the opportunity to

work there and enjoy the ruins, as well as the beach. Belize City is not especially stunning but the diversity of its populations from Creole to German Mennonites more than made up for that.’ With a population of just over 300,000 and the fact that there are only five international banks in Belize, you are guaranteed an intimate stay. In addition, there is a well established financial ex-pat as well as retiree community from America and Canada. Julian Mitchell continues, ‘If I had scuba-dived I don’t think I would ever have left Belize; its coastline was simply breathtaking and the majority of corporate hospitality involved catamaran cruises and poolside barbeques.’

In much the same way as Geneva attracts the crème de la crème of European financiers, so too does Singapore draw in the elite of Asian finance

which to live, this compares favourably with Japan (where Tokyo and Osaka steal the top two places).

What Singapore offers in high end expat living can be diminished by its slightly isolated nature. Aidan Healy, an Irishman and Managing Director of Healy Consultants explains that working within the upper echelons of the finance industry in Singapore can leave you somewhat ‘insulated’ from the population at large. The city is so immaculate, services so extremely reliable, streets so famously chewing gum free that one occasionally wonders what lies beneath.

However, Aidan Healy cites the ‘weather’ as being a huge plus point and of course missing his ‘friends and family’ in Ireland as the major downside to living in Singapore.

If eating is your thing then there can be no downsides to living in Singapore, its street food and restaurant scene is hard to beat in South East Asia and just to inhale chicken congee is enough to hold that city dear forever.

Singapore If you are invited to work in Singapore you will experience probably the best aspects of life from the West and East. The country is a compelling combination of thrusting western commercialism and vastly different eastern culture. In much the same way as Geneva attracts the crème de la crème of European financiers, so too does Singapore draw in the elite of Asian finance. Though the Mercer report places Singapore as the th 10 most expensive country in the world in

Photo: Sebastian Mary / CC BY

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Asia-Pacific

Cook Islands Photo: Robert Young / CC BY

The Cook Islands is a self-governing English speaking Commonwealth country in free association with New Zealand which uses the New Zealand Dollar as its currency.

It has positioned itself as an IFC since the early 1980s, and has been proactive in bringing in legislation that reflects the ever changing demands of its global client base.

It is the International Companies Act 1981-2 and its later amendments that have given rise to the most widely used business entity; that of the IBC. In most cases this low fee corporate structure calls for little administration, affords significant flexibility and anonymity, and enjoys exemption from taxes and stamp duties. In addition, minimum share capital is not an issue while redomiciliation is permitted.

Furthermore, the Cook Islands offer the allure of no exchange controls and no restrictions on the repatriation of capital or earnings.

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with the International Trusts Act 1984 requiring that all international trusts have non resident beneficiaries and a resident licensed trustee, although scope remains to structure so that executive authority remains overseas.

...the Financial Sector Development Authority...should... act as a catalyst for this surprisingly unheralded jurisdiction to assume its rightful place.

status as world frontrunner in the formation of asset protection trusts which originated in the jurisdiction and which are distinguished by allowing for great protection from creditors claims and the settlor of a trust permitted to be named as a spendthrift beneficiary, as well as a statute of limitations on any fraudulent transfer claims, a concept that saw the Cook Islands’ trailblazing asset protection legislation being much aped by other jurisdictions, while further recent LLC legislation looks set to keep the jurisdiction popular in this regard for some time to come.

In June 2009 the Financial Sector Development Authority was established which should act as a catalyst for this surprisingly unheralded jurisdiction to assume its rightful place.

Other key legislation includes the Banking Act of 2003 which strengthened and enhanced an already healthy offshore banking sector, as well as the Insurance Act of 2008 which brought greater discipline to that area.

It is a flexible piece of legislation that enshrines the confidentiality concept subject to instances where there is strong evidence of criminal activity, the onus being on creditor to provide this.

It is in the trusts realm where the Cook Islands has perhaps excelled most, however

Of specific note here is the Cook Islands’

All this and still the Cook Islands has managed to keep on the right side of the ever watchful international watchdogs, even managing to extract praise from the FATF back in 2005 for its effective implementation of anti-money laundering measures.

The Cook Islands Forget What You’ve Heard, This Is Who We Are:

stability. innovation. service.

Ideal Location. Strong Legislation. Outstanding People.

jdavis@fsda.gov.ck

Asia-Pacific

Hong Kong Photo: Jim Trodel / CC BY

Hong Kong is considered the top asset management centre in Asia, as well as the world’s most active warrants market and also as an international capital raising centre.

The banking sector enjoys pre-eminence in the region with sound regulation and a high degree of liquidity on the markets, while Hong Kong’s attractive geographic location

cements its status as a leading English speaking international financial hub and low cost tax efficient conduit into China and the wider Asia Pacific region. Moreover, added legitimacy is now being bestowed on the jurisdiction as a result of its recent proactive policy of negotiating DTAs.

income such that the concept of an entity’s

Taxes are only levied on Hong Kong sourced

on dividends or an individual’s estate.

residency or otherwise is not a factor. Even then these amount only to taxes on profits (16.5%), salaries (15%) and property with a notable absence of taxes on sales tax, withholding tax, capital gains tax and taxes

Speech by SFST at the LegCo Finance Committee Special Meeting (Financial Services) March 22 (news.gov.hk) Following are extracts from the English translation of the speech by the Secretary for Financial Services and the Treasury, Professor K C Chan, at the Special Meeting of the Finance Committee (Financial Services) Key Areas of Work in the Coming Year As in the past years, we will implement our measures in the coming year with two main policy objectives in mind: (1) promoting market development; and (2) optimising the regulatory system and protecting the interests of stakeholders, especially investors.

(1) Promoting Market Development (a) Developing Offshore Renminbi (RMB) Business On promoting market development, I would like to highlight the measures to develop offshore RMB business and to promote the development of asset management business.

Developing offshore RMB business in Hong Kong is the best option for promoting the use and circulation of RMB outside the

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Mainland in an orderly manner. Together with the Mainland authorities, we will continue to pursue further refinements to the RMB trade settlement services and promote the expanded use of RMB outside the Mainland. We will also further develop the RMB clearing platform in Hong Kong, facilitating Hong Kong’s development as a regional RMB settlement centre.

We also hope to further promote the development of RMB bond business in Hong Kong. This includes expanding the issuance size of bonds and increasing the types of bond issuers and the classes of qualified investors. Last year, the amount of RMB bonds issued in Hong Kong reached RMB16 billion, including RMB6 billion of sovereign bonds launched in Hong Kong for the first time. The issue of RMB bond was warmly received by investors. We hope that RMB sovereign bonds will be issued on a regular basis in Hong Kong and that RMBdenominated investment products will be developed, thereby promoting the further development of RMB business in Hong Kong. (b) Promoting Asset Management Business To further promote our asset management business, the Financial Secretary proposed in his Budget Speech to introduce three

tax measures, which include extending the stamp duty concession in respect of the trading of exchange traded funds (ETFs) and optimising the tax arrangements for qualifying debt instruments and offshore funds under the Inland Revenue Ordinance.

(2) Refining the Regulatory Regime to Protect Stakeholders (a) Establishment of an “Investor Education Council” (IEC) and a “Financial Dispute Resolution Centre” (FDRC) (b) Disclosure of Price Sensitive Information (c) Deposit Protection Scheme (DPS) (d) Revamp of the Companies Ordinance (e) Review of the Trustee Ordinance (f) Establishment of an Independent Insurance Authority (g) Establishment of a Policyholders’ Protection Fund (h) Anti-money Laundering

Photo: Daniel R. Blume / CC BY

Labuan L abuan IBFC expected to benef it from new products and services Malaysians able to do more business through Labuan IBFC Kuala Lumpur, Wednesday, 3 March - Labuan International Business and Financial Centre’s (Labuan IBFC) competitive edge in international financial arena is expected to be further enhanced with the recent enactment of new laws governing the jurisdiction.

“Labuan IBFC has always been a well regulated jurisdiction with a robust financial services industry adhering to stringent compliance parameters, and these changes will further enhance the value proposition of Labuan IBFC,” said Dato’ Azizan Abdul Rahman, Director-General, Labuan Financial Services Authority (Labuan FSA) at a media briefing here today.

He added that the introduction of this new regulatory framework will also provide a more robust, transparent and accountable framework for the Labuan FSA to regulate and supervise the financial institutions and licensed entities operating from the jurisdiction.

“Another key element of the new legislation is that Labuan IBFC is now more open to Malaysians. Prior to this, any allowance to use Labuan IBFC’s products and services by a Malaysian, generally required specific approval for that particular transaction,” said David Kinloch, CEO of Labuan IBFC Inc., the marketing arm of Labuan FSA. “Malaysians with foreign assets or foreigners with Malaysian assets are now able to structure their investments via Labuan IBFC. This allowance is made even more attractive

by the new trust and estate management products also introduced by the new legislation,” he added.

He went on to say that with the growing international asset base held by Malaysians, Labuan IBFC is well poised to become their jurisdiction of choice for wealth and estate management.

This international financial services centre, off the coast of Sabah, Malaysia is...a hub for Islamic Finance.

“Labuan IBFC is an effective and user friendly jurisdiction and these new provisions will make it possible for us to attract and welcome many new categories of client.”

The new laws came into effect on 11 February 2010. A total of four new Acts were enacted as well as comprehensive amendments made to four existing laws.

These changes also provide for the introduction of new products, which include the following investment and business vehicles: * Limited Liability Partnerships * Malaysian International Shipping Registry * Foundations

* Private Trust Companies * Protected Cell Companies * Labuan Special Trust * Takaful Captives

About Labuan IBFC Labuan International Business and Financial Centre (Labuan IBFC) offers global investors and financial service providers all the benefits of being in a leading business and financial centre, as well as access to Malaysia’s vast network of double-taxation treaties with 69 countries.

As an integrated financial services centre, Labuan IBFC is increasingly becoming a jurisdiction of choice for investment holding companies, and offers a wide range of products such as captive insurance, trusts, foundations, fund management, leasing, international banking, estate planning and wealth management.

Investors can enjoy the benefits of Labuan’s cost-efficient and market friendly business environment, supported by professional service providers specialised in all aspects of international tax, trust and law.

This international financial services centre, off the coast of Sabah, Malaysia is also a hub for Islamic Finance, especially in areas of Sukuk issuance and listing, takaful and retafakul, syariah-compliant captive structures and Islamic trusts.

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Asia-Pacific

Marshall Islands Kwajalein Atoll, Marshall Islands

Photo: Matt Kieffer / CC BY

The English speaking Republic of the Marshall Islands lies roughly halfway between Hawaii and Australia and is chiefly known as a ship and yacht registry. It boasts a young fleet and is now considered the third largest and fastest growing open registry in the world with over 50 million gross tons and in excess of 2,000 registered vessels.

The Registry boasts a long standing pedigree going back over 60 years such that it has now fine-tuned its offering to qualifying parties dealing exclusively with qualified intermediaries and offering in the process a decentralized global network of offices to serve specific regions more effectively. It is administered by International Registries, Inc. (IRI) with whom the Marshall Islands have an exclusive franchise arrangement.

Benefits of using the yacht registry include being able to charter out any registered private yacht for up to 84 day/yr thus affording owners the opportunity to claw back some of the not insignificant costs associated with yacht ownership.

Corporate legislation pays homage to both Delaware and the UK and in the form of the Associations Law sets out the jurisdiction’s tax-efficient ambitions incorporating the Business Corporations Act (BCA), the Limited Partnership Act, the Limited Liability Company Act and the Revised Partnership Act. Such structures

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facilitate not only ship and yacht registry but statutory exemption from taxation on income and assets for non-resident domestic corporations. As elsewhere the legal brakes are applied to banking and insurance activity, but apart from this business entities can

The Registry boasts a long standing pedigree going back over 60 years such that it has now fine-tuned its offering to qualifying parties dealing exclusively with qualified intermediaries and offering in the process a decentralized global network of offices to serve specific regions more effectively. be used for everything from holding to real estate investment, joint venture, trust and estate planning, public offering and not least asset management purposes with each form of entity having its unique attributes dependent on requirements e.g. LLCs offer

great flexibility and liability protection and can be particularly suitable for passive investors.

In terms of the Republic’s relationship with the rest of the world to date there are no double taxation treaties, one functioning TIEA (with America with which it has a ‘Compact of Free Association’) and more to come via the Marshall Islands’ involvement in the OECD’s multilateral TIEA scheme.

Yet with the best will in the world without considerable speculative investment and a fundamental sea shift in outlook to the point where ‘the product’ is changed beyond all recognition, it’s hard to see how full contiuned compliance to the ever more stringent criteria to be included on this list or that can be viably maintained, and as such the Marshall Islands could see fit to pursue a policy of putting its investors’ needs first.

Apart from a continued commitment to confidentiality, perks include straightforward administration in the form of minimal filing and no annual audit being required, bearer shares being allowed, minimum number of shareholders and directors being one, as well as Chinese company names being permitted. To entice interested parties there also exists the opportunity for free corporate redomiciliation with the original dates permitted to remain intact.

Samoa Photo: Neil Spicy CC BY

Located between Hawaii and New Zealand and well served by air routes Samoa is big in the areas of banking, insurance and trust management and despite the recent devastation wrought by the tsunami of 2009, it’s ‘business as usual’ in the finance sector. This terrible event has even perhaps inadvertently created a blank canvas of fresh inward investment potential.

English speaking and politically stable Samoa can lay claim to being one of the world’s fastest growing financial hubs not to mention one of the South Pacific’s preeminent offshore force and this is largely thanks to a proactive yet fiscally disciplined government that has responded to ever changing international trends and that encourages capital investment, particularly in hotel development.

Many are surprised to learn that this far flung nation is economically buoyant with sound future prospects. Yet factors such as sound IT infrastructural development and prudent commercial strategic alliances such as the Polynesian Blue airline venture bringing together the government and Virgin Airlines has helped to keep this jurisdiction relevant and connected, inflation down and a lid on foreign debt. Moreover the

CIA World Factbook identifies the flexibility of the labour market as a prevalent indicator for continued economic advances.

In late 2009, the OECD placed Samoa on the White List of jurisdictions that have ‘substantially implemented the international standards of transparency and exchange of tax information’ which included TIEAs with onshore big hitters such as Australia, and so able to hit back at critics who say it’s just a mutual appreciation society for traditional ‘offshore’ jurisdictions.

Samoa is located just east of the International Dateline which means that for Asia based clients, when it comes to incorporating a company if you ‘want it done yesterday’, well...it can be.

A raft of noteworthy legislation initially came along in 1987 which included the International Trusts Act allowing for the exemption of trustees and beneficiaries from tax, duty or exchange control.

In 2005 the Samoa International Finance Authority (SIFA) was formed under an Act of the same name with a view to promoting Samoa as an offshore centre worldwide.

It monitors and supervises the conduct of international finance services provided within Samoa, as well as protecting and maintaining Samoa’s reputation as a centre for international finance services.

A keystone of the corporate vehicle offerings to investors are of course the international companies and perhaps most notable of these is the LLC which is based on the US State of Wyoming LLC Act. The idea is that the IRS will interpret it as a transparent entity for investment both from and into Samoa.

More recently, and adding to strengths in banking, insurance and trust management Samoa has begun to gain for itself a reputation in the funds sector encompassing both segregated funds and international mutual funds.

It is interesting to note that Samoa is located just east of the International Dateline which means that for Asia based clients, when it comes to incorporating a company if you ‘want it done yesterday’, well...it can be.

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Photo: Phillip Capper / CC BY

Asia-Pacific/Caribbean

Vanuatu Port Vila Waterfront, Vanuatu

Yet, this is a time of great flux for Vanuatu

The answer may lie in what looks to be, if

and only time will tell whether this currently

the recent legislation is anything to go by,

OECD grey-listed jurisdiction will invest

an attempt to position Vanuatu as the South

its limited resources of time and money

Pacific’s pre-eminent Captive Insurance

into strict compliance or conclude that

domicile allowing for growth via a sector

the benefits of maintaining the status quo

that remains vibrant and looks set to

outweigh the disadvantages. With money

continue to offer the prospect of significant

laundering and anti-terrorism measures

new business. Moreover, with the right

already in place that supersede any claims

legislation in place such growth could be

to secrecy some would say they have already

delivered legitimately with the blessing of

illustrated their allegiances.

the international financial monitors.

Photo: Pocket Wiley / CC BY

Whilst Vanuatu’s status as an International Finance Centre goes back to the early 1970s it was really only through the International Companies Act of 1992 and a raft of legislation pertaining to insurance etc in the mid 2000s that it became a force to be reckoned with. These days, despite its farflung location it can boast an internationally competitive business environment with noteworthy strengths in banking, insurance and trust management and no direct taxation with Government revenue instead derived from duties, fees, VAT and a tourist turnover tax.

Anguilla Temenos Golf Club, Anguilla

This small Caribbean UK overseas territory is notable for its wide spread of product offerings, its substantial claim to genuine tax neutrality and its focus on attracting quality sustainable business.

Traditionally trusts and banking have constituted the cornerstone of financial services in Anguilla with a commitment to quality evident through an absence of brass plate banks. Yet, in recent years legislation such as the insurance Act of 2004 has seen the jurisdiction successfully expand its offering such that captives and foundations are now commonplace.

The respected ACORN online registration system meanwhile allows quick and easy company incorporation and administration 24/7 and is set to be upgraded to become

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ACORN 2.0 in 2010.

2010 has also seen a new government take office. Ultimately answerable to the governor it nonetheless retains a high degree of autonomy and has embraced the principle of tax transparency. Not a moment too soon some might say with international watchdogs, that allow little room for manoeuvre nor have much patience for tardiness on the TIEA front, quick to turn the screw on Anguilla.

Legislation such as the IBC Act and more recently the Foundation Act of 2008 have, however re-affirmed Anguilla’s commitment to tax neutrality such that there is no income, capital gains, estate, profit or any other direct taxes on either individuals or corporations, regardless of whether or not

they are resident in Anguilla while there are also no exchange controls. Rather, government revenue is sourced from accommodation fees, import duties, licence fees and company registrations.

Available corporate structures range from ordinary companies, IBCs, LLCs and partnerships dependent on specific circumstances and requirements, but it is the key trusts sector which in many people’s eyes Anguilla remains synonymous with. It has recently been overhauled to bring greater flexibility and allows for the setting up of commercial or charitable purpose trusts, unit trusts, spendthrift trusts and asset protection trusts, as well as the almost ‘bespoke’ variant trusts.

Anguilla British West Indies

British Overseas Territories: Same Regulatory Oversight

Anguilla

Bermuda

� Accessible � Efficient

Turks and Caicos

� Competitive

Caymans

British Virgin Islands Anguilla Montserrat

More Accessible:

Contact the Registrar or Director of Financial Services directly info@fsc.org.ai Financial Service: fsc@anguillafsd.com

More Efficient:

ACORN online Corporate Registry Electronic Filing 24 hours / 7 days per week / 365 days per year

More Competitive:

Free continuance into the jurisdiction and one low fee for incorporation and annual returns regardless of share capital.

Anguilla Commercial Online Registration Network “The future is online” For more information please visit www.axafsc.com or contact: Commercial Registry - PO Box 60 - The Secretariat The Valley - Anguilla BWI. Tel.: 1 (264) 497-3881/5478 - Fax: 1 (264) 497-8053 - email: anguillafsd@anguillafsd.com

Photo: D’Arcy Norman / CC BY

Caribbean

It is a new dawn for Antigua & Barbuda following the Allen Stanford scandal and consequently it is small wonder that both government and the private sector have pooled resources to increase levels of regulatory control such that it remains an international private banking, wealth management, pension funds management and private family foundations force to be reckoned with, as well as somewhere exhibiting prowess in the international insurance and gaming sectors.

All offshore entities have tax exempt characteristics as well as enjoying minimal administration demands with IBCs the preferred company type, although LLCs can also be formed.

On the trusts front local companies are spared taxes on inheritance, profits, income, capital gains or appreciations or interest paid out by an IBC as a trustee on behalf of a non-resident for 20 years from incorporation.

One of Antigua and Barbuda’s key strengths is in the private banking sector where investors are offered strong fixed income returns while in another example of private and public policy complementing each other, the international banks are also found to be supportive of local real estate and tourism projects.

Private trust companies which are used by HNW families for wealth management purposes are entitled to manage up to three related trusts, while in terms of asset protection international insurance legislation has done away with the rule against perpetuities as well as disregarding foreign judgments and forced heirship provisions, while the onus to prove intention to defraud is placed firmly on the creditor. Moreover, the principle of confidentiality is still held in high regard, subject to anti-money laundering and terrorist suspicions, and illegal disclosure is looked upon very dimly.

Meanwhile in terms of establishing an international bank in the jurisdiction, licenses are granted to an IBC by the Financial Services Regulatory Commission (FSRC) subject to the appointment of an auditor and the maintenance of a physical presence on the islands.

Photo: Manoel Lemos / CC BY

The gaming sector in particular offers a high volume of trained labour, good telecoms and IT infrastructure and Trade Zone classification where operators benefit from fiscal incentives including not having to pay corporate income tax as well as being spared any duty being levied on essential capital items.

Antigua & Barbuda

Apart from its long standing strengths in banking, insurance, mutual funds and trust management where it could well be considered the original modern IFC with a history stretching back to the 1930s, the Bahamas also boasts an increasingly important ship registry that is the world leader for registering cruise ships. With its close cultural and geographical ties to the US it is perhaps no surprise that the financial services infrastructure is considered excellent and that political stability is a given.

Furthermore, the jurisdiction has been decidedly proactive on the compliance front such that it should be well positioned to lead the way in the aftermath of the clamour for increasing transparency, with growing number of DTAs in place with a significant volume of the world’s key onshore and offshore economies. It notably held its nerve in the

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Bahamas relevant negotiations such that it remains tax neutral with no income, capital gains or inheritance taxes nor stamp duty on security transactions, though the concept of nonresidency or otherwise is moot since everyone is treated equally in the eyes of the law.

The Bahamian Foundation is a flexible vehicle that can be used for private, commercial and charitable purposes with redomiciliation permitted, while since there are no direct taxes in the Bahamas, they are ideal for cross border transactions and international estate and inheritance planning.

Traditionally in the IFC community investment fund projects have been made to fit pre-defined classes. However, with the introduction of the SMART Fund such predefining specific criteria have significantly been done away with.

The number of investors or minimum value of investment has been replaced as a determining factor by applicants only needing to demonstrate to the regulator that the structure is an appropriate use of an investment fund, and although conditions require that administrators of a Bahamas-based fund must have a physical presence in the Bahamas, certain tasks can be outsourced by mutual agreement.

For current and future estate planning needs the Bahamas Private Trust Company affords the opportunity for HNW families to establish a bespoke structure so long as it involves a Bahamas based ‘registered representative’.

It is a vehicle that can be used by a large number of family members for their own estate planning purposes with the client having full autonomy to appoint the board of directors.

Barbados has been uniquely singled out for praise among independent Caribbean nations by the OECD for its proactive stance on the compliance front, and is well positioned to lead the way in the aftermath of the clamour for increasing transparency, having DTAs in place with a significant volume of the world’s key onshore and offshore economies. Well constructed legislation such as the International Financial Services Act of 2003 ensures almost all camps are left satisfied and has led to Barbados becoming something of a powerhouse in fields such as insurance where it is considered a leading captive and reinsurance domicile. Other principal strengths are in trust management and shipping registration while the jurisdiction also constitutes a well regarded mutual funds domicile. Moreover it has a thriving international banking sector which ensures that if the criteria can be met and an application is approved the benefits of operating an international bank in Barbados can be manifold

Barbados offers a range of tax-efficient vehicles through which investors can conduct international business and protect assets, yet it is perhaps in the international trusts arena where the biggest impression has been made.

Belize’s pulling power lies in its offerings relating to insurance, mutual funds and trusts as well as its role as a ship registry.

The jurisdiction has strong links with its compatriots in the Commonwealth, neighbours in the Caribbean and the region’s powerhouse, the USA, and offers a unique blend and understanding of both English and Spanish speaking worlds. It possesses a sound financial services infrastructure well able to respond to high end private banking, asset management and investment requirements and a banking sector that’s

noteworthy in having very high levels of liquidity ensuring peace of mind in troubled times. .

The key 1990 IBC formation legislation and recent amendments such as the amended Trusts Act of 2007 afford both institutional and private investors opportunities to limit tax exposure and protect assets.

There are three types of trusts in Barbados; offshore, international and domestic but for non-residents the most obvious advantages are considered to come from international trusts as governed by the 1995 Act of the same name.

These provide exemption from exchange control restrictions and protection of trust assets from forced heirship provisions that may prevail in other jurisdictions and from creditors who have three years to set aside the terms of a trust on the basis they can establish intent to defraud.

The chief conditions concern residency whereby the settlor and beneficiaries must be non-resident in Barbados, although this does not necessarily exclude Barbados

IBCs are easy and low cost to form and administer and offer exemption from exchange controls and all forms of local taxation including stamp duty

offshore entities like IBCs from being beneficiaries. At least one trustee meanwhile must be resident, while trust assets must not include any local real estate. Such trusts can lead to significant opportunities for tax mitigation such as no withholding tax on distributions to non-resident beneficiaries.

It’s also worth noting that redomiciliation in/out of Barbados is permitted.

Barbados also has a growing and reputable low cost ship registry encompassing everything from tankers to yacht with a range of corporate structures allowing for ownership and operation of ships offering various exemptions and concessions.

In essence Barbados constitutes a stable jurisdiction of some pedigree boasting a sound financial services infrastructure. It is internationally well regarded yet nonetheless offers protection and potential tax advantages to international investors who traditionally have chiefly come from Canada and the US.

The key Trusts Act of 1992 offered great protection from foreign claims and also allows for the creation of spendthrift trusts with the settler permitted to be the beneficiary. A 2007 amendment provides for compulsory registration of all international trusts.

Belize’s ship registry meanwhile is also well regarded such that it qualifies for the coveted US Coastguard ‘Qualship 21’ status with a worldwide supporting infrastructure of General Safety Inspectors and Deputy Registrars.

31

Caribbean

British Virgin Islands Photo: Jared Benedict Christopher Columbus discovered the British Virgin Islands in 1493.

The British Virgin Islands are one of the last vestiges of what was once the British Empire. These days they are classified as an ‘overseas territory’, though in practice despite having a legal system based on the British one, they decide much of what they do for themselves.

In recent years they have prospered through the enactment of innovative legislation to become one of the world’s leading offshore financial centres, enjoying full autonomy from the UK as an international financial centre.

The islands boast one of the highest incomes per capita in the Caribbean and the status as the world’s biggest incorporator of offshore companies. In fact, for those looking for an attractive offshore destination as part of their managed wealth portfolio, it has a lot going for it. The massive volume of offshore companies, trusts, insurers and mutual funds on the islands are testament to this, attracted by the absence of corporate, income and capital gains taxes, exchange controls or restrictions on movement of funds within the jurisdiction.

However, the BVI is very much aware that as governmental revenues fall across the globe thanks to the worldwide credit crunch and some high profile corporate collapses connected to opaque offshore dealings, the financial eyes of the world have turned to all such jurisdictions regardless of track record demanding greater transparency concerning all financial activity.

As such the BVI has been proactive through the enactment of the Anti-Money Laundering Regulations, 2008 and the AntiMoney Laundering and Terrorist Financing Code of Practice, 2009. This ensures that the already reputable financial services providers who constitute the engine room of the BVI ship are bound to perform due diligence to clarify the identity and legitimacy of a client and the origin of the relevant funds.

Consequently, you won’t find the BVI on any blacklists, since through its proactive activity it has remained compliant and in some cases exceeded the respective international requirements In another riposte to critics it is hard to argue with the ‘force for good’ credentials of

32

its international companies that constitute a medium through which the BVI has pumped huge levels of foreign direct investment (FDI) into locations such as China where it has fuelled economic growth.

Key Legislation It was the International Business companies (IBC) Act of 1984 that set the wheels in motion for the economic and financial development of the BVI. Straightforward and linked to a stable political structure it was used as a template by many other jurisdictions and held sway for some twenty years until it was superseded by the BVI Business Companies Act of 2004 which prevails to date.

The IBC Act of 1984...set the wheels in motion for the economic and financial development of the BVI. This latter piece of legislation reflected the increasing scrutiny jurisdictions such as the BVI have found themselves placed under whereby it spelt out the permitted scope of a company’s activities, its members’ and directors’ responsibilities, as well as the rules governing distributions and dividends, liquidation and other processes, complete with details of penalties for non-compliance.

However, it was also an innovative act since it abolished the concept of authorised capital and rules relating to share premium where companies could purchase, redeem, or acquire their own shares either under a statutory regime or in accordance with its own articles. In addition, it became

unnecessary to state the objects or purposes of a company in the M&A. Moreover, there became a wider selection of corporate vehicles to choose from, tailored to specific requirements with growing volume of expert service providers to assist and advise in the formation and administration of those most pertinent for respective corporate or personal circumstances.

Along with The Virgin Islands Special Trusts Act (VISTA) of 2003, the 2004 BCA Act has succeeded in cementing the BVI’s reputation as one of the world’s principal offshore corporate domiciles.

Specifically, the aforementioned VISTA legislation has made the BVI a commercially sound proposition for the holding of longterm assets in situations where private family trusts don’t offer a good fit.

It does this by allowing a shareholder to establish a trust of his company that removes from the trustee the traditional monitoring and intervention responsibilities, permitting the company and its business to be retained as long as the directors deem it prudent, thereby ensuring a more likely and efficient carrying out of stated wishes when it comes to succession.

By being legislatively proactive the BVI has shown it has nothing to hide and has allowed it to maintain cordial relations with onshore jurisdictions, international NGOs and regulators such as the FATF (Financial Action Task Force), IMF (International Monetary Fund) and the OECD (Organisation for Economic Co-operation and Development).

Moreover, the principle of confidentiality very much persists, with disclosure only ever being made on instruction from the BVI Court with accompanying evidence of criminal activity.

This policy amounts to prudent long-term thinking and should see the BVI retain its status well into the future.

Advertorial

Photo: Kathleen Conklin

British Virgin Islands A well respected centre for international finance

By Sherri Ortiz, Executive Director, BVI International Finance Centre The BVI welcomed the increased scrutiny of the international community over the last year – we have long been focused on maintaining a robust regulatory standard.

We strike the right balance between meeting the business and financial needs of the international community and maintaining regulatory and corporate governance policies that meet, and in many cases exceed, international best practice standards. This approach continues to give the BVI a number of clear advantages for the international business community including:

•

enduring political and economic stability

•

a business-friendly operating environment

•

efficient company formation and administration processes

a pool of knowledgeable and qualified business and legal professionals

• • • •

a well developed infrastructure, including excellent telecommunication services

no currency exchange controls and the use of the US Dollar as the official currency

a commitment to enact legislation that meets business needs and protects the integrity of the BVI and a strong partnership between the public and private sectors.

The BVI is on the so-called “white list” of those jurisdictions that have substantially implemented the internationally agreed tax standard as set by the Organisation for Economic Cooperation and Development (OECD). We have surpassed the requirements set by the OECD having signed 17 TIEAs and we expect to sign further agreements over the course of this year.

We place great importance on the standards of our regulation. As with all advanced financial centres the BVI maintains an independent regulator, the

Financial Services Commission. In addition, at the end of 2008 the BVI received a very positive report from the Caribbean Financial Action Task Force on its efforts to combat money laundering and terrorist financing.

The BVI has a full range of financial services offerings:

Business Companies The BVI Business Companies Act, 2004 has received positive reviews for its flexibility from legal practitioners around the world. Five different types of companies can be incorporated under the Act. BVI companies can also list on worldwide stock exchanges including LSE, AIM, NYSE, NASDAQ, ISE, TSX, BOVESPA and HKSE. Mutual Fund Registration, Management & Administration The BVI Mutual Funds Act, 1996, allows for three categories of funds (professional, private and public) to be established, whilst providing for investor protection commensurate with their level of sophistication.

Captive Insurance Management The British Virgin Islands has developed into a major international insurance centre in recent years. The growth in stature of the BVI as an international captive insurance jurisdiction has also been aided by the strong presence of complementary service providers such as internationally renowned law firms and accountancy practices.

Trust Settlement The Virgin Islands Special Trust Act, 2003, (VISTA) the British Virgin Islands has consolidated its position as the location of choice for international trust settlements

and operations. VISTA has generated a substantial amount of interest from legal and corporate professionals and business entrepreneurs alike.

Accounting and Legal Services The world’s foremost accountancy firms all have a presence in the BVI and there are clear signs of a growing demand for their services, particularly in the areas of mutual funds audit and insolvency practice. In addition, legal services are growing on the Island with the recent influx of several prominent law firms including in 2009 the international law firm Withers.

Conclusion The BVI is a globally integrated and transparent jurisdiction. Whether it is through tackling financial crime, through robust regulation and enforcement or the provision of fiscal transparency through adherence to internationally agreed standards we continue to demonstrate our commitment to being a financial services centre with the highest of standards.

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Jobson’s Cove, Bermuda

This long established financial centre with its UK Overseas Territory status is politically stable and proactive on the compliance front with rigorous anti-money laundering measures and ‘know your client’ due diligence as standard policy. Also, through the actions of the independent Bermuda Monetary Authority it is well regarded from a regulatory perspective with the 2006 Investment Funds Act for example drawing a clear line between retail and institutional funds.

Bermuda has in fact a thriving fund administration sector with other notable strengths in reinsurance, ecommerce and ship registration, while it offers a range of business structures to suit ranging from exempted partnerships, limited duration, permit and exempted companies. The partnership in particular has proved to be a

popular form of collective investment vehicle as in many onshore jurisdictions such as the US and UK it is considered transparent as tax is levied at partner level.

It is a jurisdiction that can lay claim to over 1500 hedge fund and pooled fund vehicles while in its associated financial services infrastructure built up over many years it boasts skilled strength in depth in the form of funds administrators, clearing brokers, custodians, auditors and legal practitioners as well as extensive modern banking facilities.

Many are attracted by Bermuda’s tax efficient credentials with no income, profits, capital gains, interest, dividends, withholding or inheritance tax currently levied, while there is also no estate duty nor stamp duty payable by a fund on the issue, redemption or

transfer of units or shares.

In the e-commerce sector Bermuda hosts all requisite infrastructure and ISPs and payment solutions providers abound such that the jurisdiction can justifiably lay claim to being pre-eminent in this field.

In the insurance sector Bermuda appears to have ridden out the worst of the global financial crisis remarkably intact. It has for many years been at the forefront of the captives and excess liability insurance scene with the majority of the Fortune 100 companies having a Bermuda captive insurance presence. More recently the jurisdiction has become a hub for the creation of catastrophe reinsurance companies after a tumultuous decade that brought an influx of capital to the jurisdiction.

Jamaica

Ocho Rios, Jamaica

Photo: Christopher Thomas / CC BY

The imminent establishment of the International Financial Centre in Jamaica will likely see the country focus its energies on developing niche areas within the insurance, mutual funds, and trust sectors. There is also talk of the development of a one-stop-shop maritime centre encompassing promotion of an international ship registry with further suggestions that the jurisdiction will aim to capitalise on its existing and historical entertainment and sporting pedigree in looking to attract a specific

34

related market sector utilising its incumbent well developed legal and financial infrastructure, and making the most of its proximity to key markets.

It is Jamaica’s very blank canvas status that is arguably its greatest asset, and this very lack of a track record means it isn’t associated with any ‘black lists’, or otherwise, and can therefore start out as it means to go on i.e. fully compliant in accordance with the prevailing winds of the day without fear of haemorrhaging business or having to

relentlessly amend existing legislation.

The Jamaican authorities have brought in a number of consultants to get the offer just right and are making no excuses about taking its time before entering the busy IFC marketplace, yet with strong links to the US, Commonwealth and wider Caribbean all the ingredients are there for it to make a serious impact and carve a unique place for itself.

Watch this space.

Photo: Kansasphoto / CC BY

Bermuda

Panama Photo: Randal Sheppard / CC BY

Panama offers zero tax on all foreign sourced income, has the world‘s largest ship registry and has carved out a role for itself as the international banking leader in Latin America. It also displays strengths in the captive insurance and mutual funds fields, and of particular note is its Private Interest Foundation vehicle offering advantages in relation to family estate planning and asset protection and which affords significant privacy.

Panama Canal

These factors combined with a sound financial services infrastructure and low level of bureacracy are cementing Panama‘s reputation as a key tax efficient hub Panama has a stable economy marked by having purely market driven money supply due to having no central bank or monetary authority and having the US Dollar as its de facto currency so that there are no restrictions on money passing in and out of the country while it and its corporate structures are generally protected from

the worst ravages of the fluctuating world economy.

Even in Panama there is inevitably these days greater implementation of the ‘know your customer’ strategy relating to origin of funds as a result of Panama’s commitment to international standards designed to combat money laundering and terrorism but the basic commitment to the principle of confidentiality is one that is held dear and which is legislated for.

St.Kitts Fort Brimstone, St. Kitts

Photo: Jeremy Hetzel / CC BY

Amongst other things St. Kitts is something of a hub for foundations and captive insurance.

St. Kitts foundations came about as a result of the Foundations Act 2003. They are marked by having low fees and no minimum capital requirements as well as affording strict anonymity and privacy to the beneficiaries.

On the captive insurance front St. Kitts offers the opportunity to establish small companies with lower annual premiums and minimum capital requirements than normal captives.

Trusts meanwhile come in the form of charitable, unit, protective or common and can be established by any individual or body corporate so long as at least one of the trustees is based in St. Kitts. The settler or trustee can also be beneficiary, while there are strong asset protection provisions relating to legal protection from creditors and forced heirship claims from other jurisdictions.

Offshore entities are exempt from all income, capital gains and withholding taxes relating to transactions outside St. Kitts,

and no auditing is required, although records must be kept if required for inspection.

Redomiciliation meanwhile is permitted.

With regard to compliance at the end of March 2010 with its twin jurisdiction Nevis and along with St Vincent and the Grenadines and Anguilla, St. Kitts concluded multiple TIEAs to ensure inclusion on the OECD’s list of territories that have substantially implemented the internationally agreed standard on transparency and tax information exchange.

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Caribbean

Nevis Photo: Ed Yourdon / CC BY

The principal piece of Nevis corporate legislation is the Nevis Business Corporation Ordinance implemented back in 1984, which although subject to some amendments since, nonetheless remains a flexible vehicle with few restrictions save those relating to banking and insurance, trading within Nevis or the ownership of real estate there.

Groundbreaking 1995 Limited Liability Company legislation allowed for owners and members to operate just as it said on the tin, i.e. shielded from legal liability providing to this day an efficient structure with which to purchase real estate outside Nevis to protect assets and for estate planning purposes, as well as to structure non US joint venture agreements.

Nevis boasts strengths in insurance, mutual funds, foundations and banking, yet it is in the trusts arena that the jurisdiction has really marked out its own territory. The Nevis International Exempt Trust Ordinance of 1994 governing trusts recommends itself in promising simple set up and admin procedures allowing for example the settlor, beneficiary and protector to be the same person and specifically excluding forced heirship rules.

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Offering exemption from all income, estate, inheritance, succession and gift tax, stamp duty and exchange controls providing the trust’s income comes from outside Nevis it’s small wonder it has proved popular.

In the face of... sudden intense scrutiny Nevis has remained more resolute than most.

The 1994 Act together with the Nevis International Exempt Trust (Amendment) Ordinance, 2000, which addressed concerns relating to fraud and other criminal activity succeeded in cementing Nevis’ reputation as a potent tax efficient jurisdiction.

More recently there has been a great clamour for transparency and divulgence of information on demand; a policy promoted by bodies such as the IMF and FATF. In the face of this sudden intense scrutiny Nevis

has remained more resolute than most.

While Nevis is committed to assisting in the combating of money laundering and terrorism the authorities there have made it clear it is Nevis law that prevails over any foreign judgements. It is a cornerstone of the nation’s pulling power that the confidentiality and privacy of an International Trust is enshrined in legislation and this principle continues to be held in high regard.

The Nevis Island Administration acknowledges increased competition as Asia and South America continue to raise their game and is committed to pursuing new markets as a way of consolidating the territory’s status as a premium international financial services player in this new more crowded IFC environment where only the strong will survive. It has also stated it is looking into outsourcing the Registry and to having representation beyond its borders as a means of increasing efficiency.

Other areas earmarked for growth include insurance, intellectual property and ship registration.

Discover the ease of doing business in Nevis QUALITY

|

EFFICIENCY

| INNOVATION

|

INTEGRITY

Corporate Services include: • International Business Companies • Limited Liability Companies • International Exempt Trusts • International Insurance • Multiform Foundations • Mutual Funds • Offshore Banking

In Nevis, you can take comfort in knowing that your business will be conducted with the highest degree of efficacy. There are over 60 qualified Registered Agents with expertise in law, banking, finance, tax planning and asset management. To complement this sophisticated professional infrastructure, we are committed to providing a strong regulatory framework, 24-hour incorporations, innovative laws and competitive fees.

Think Business...Choose Nevis!

Nevis Financial Services Development & Marketing Department P.O. Box 882, Rams Complex Stoney Grove, Nevis.

Phone: (869) 469-0038 Fax: (869) 469-0039 Email: info@nevisfinance.com

www.nevisfinance.com

Advertorial

The Nevis Limited Liability Company

Photo: Robert S, Donovan / CC BY

In 1995, the Nevis Island Assembly enacted the Nevis Limited Liability Company Ordinance. Although the first limited liability company act appeared in Wyoming in 1977, Nevis is the first offshore financial center to have enacted such legislation.

The Nevis Limited Liability Company Ordinance of 1995 offers many advantages to those wishing to incorporate an LLC in Nevis.

which may find it necessary to amend its articles of association.

(h) is exempted from all taxation in Nevis once it does not do business in Nevis

(e) shield its owners or members from legal liability

Section 83 of the Ordinance states as follows;- ‘ Any limited liability company subject to this Ordinance which does no business in Nevis shall not be subject to any corporate tax, income tax, withholding tax, stamp tax, asset tax, exchange controls or other fees or taxes based upon or measured by assets or income originating outside of Nevis…’

The advantages of a Nevis LLC Members are shielded from legal liability.

A Nevis LLC:(a) may be speedily incorporated It is possible to incorporate a Nevis LLC within twenty four hours. (b) may be incorporated for any lawful business purpose A Nevis LLC may be incorporated and utilized for just about any purpose. In accordance with section 12 of the Ordinance, a Nevis LLC may be organized ‘for any lawful business purpose or purposes, including without limitation, the rendering of professional services by or through its members’, and is the ideal approach to structuring joint venture agreements between parties in different countries worldwide. (c) has broad powers By virtue of section 13 of the Ordinance, a Nevis LLC has the same powers as an individual to do all things necessary in furtherance of its purposes (d) is not restricted to its articles In section 13 of the Ordinance, it is stated that the Nevis LLC is not limited to the purposes set out in its articles, as corporations usually are, thereby providing the LLC with potentially a great deal more flexibility in this regard than a corporation

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Section 18 of the Ordinance states that a ‘limited liability company shall be a legal entity with separate rights and liabilities, distinct from its members or managers.’

Furthermore, section 19 states that ‘the limited liability company shall be solely liable for its own debts, obligations and liabilities.’

Additionally transfer of domicile of a Nevis limited liability company to and from Nevis is easily effected.

(f) allows its owner(s) or member(s) to act as manager(s) of the limited liability company while shielding the owner(s)/manager(s) from legal liability

The Many Uses of a Nevis LLC

Section 2 of the Ordinance describes a manager as ‘ a person or persons, whether or not a member, designated and authorized in the operating agreement to manage the limited liability company or to otherwise act as agent of the limited liability company’ while section 19 (2) of the Ordinance states that ‘…no manager, officer, member, employee or agent of a limited liability company…shall be liable for limited liability company debts…’. (g) may be incorporated with only one member, whether personal or corporate, from any country worldwide Section 21 states that ‘ One or more persons, without regard to his, their or its residence, domicile, or jurisdiction of organization, may form a limited liability company under this Ordinance.’

A Nevis LLC can be used to:(a) acquire and manage real estate in the United States or elsewhere. (b) structure estate plans for families, whether or not used in conjunction with a Nevis International Trust (c) form part of an asset protection plan (d) structure joint venture agreements with non-U.S investors in non-U.S. projects Conclusion The Nevis Limited Liability Company has developed as an important asset protection and estate planning tool mainly because of its flexibility which enables it to adapt readily to most circumstances.

Caribbean

St. Lucia

Photo: Thomas Duff / CC BY St. Lucia has kept a fairly low profile on the IFC front with principal activity revolving around banking, mutual funds, insurance and trusts.

This isn’t to say that its financial services sector isn’t successful, however as at the latest count it boasted some 6 international banks, 25 international insurance companies, 8 private mutual funds and 2 public mutual funds.

The popularity of the St. Lucia IBC stems from the 1999 IBC Act which affords both flexibility and confidentiality not to mention low fees and little administration. Such IBCs are exempt from income, withholding and capital gains tax as well

Photo: Alex Groundwater / CC BY

as stamp duties and exchange controls, although they can elect to have a tax of 1% levied on profits and gains.

The International Banks Act dictates that all international banks must be incorporated as IBCs, whilst the International Mutual Funds Act 2006 permits private and public funds to be constituted as either IBCs or unit trusts. Similarly the International Insurance Act determines that insurance companies engaging in the captives and reinsurance sector must trade through an IBC as well as having both registered agent and office where records are maintained in St. Lucia.

However, perhaps the key piece of legislation is the International Trusts Act which allows for asset protection and facilitates the establishment of protective, charitable and non charitable or ‘purpose’ Trusts.

Key attributes include the non-recognition of forced heirship claims and the settlor being able to exercise a fair degree of control including the power to revoke or amend the trust as well as the power to appoint and direct the trustee and the protector. Moreover, identities remain confidential, while there exists a choice of law for the trust.

St. Vincent & The Grenadines

As an IFC providing attractive investment opportunities St. Vincent and The Grenadines looks to have raised its game in recent times and is set fair to capitalise further on the interest it has generated for its IBCs, international trusts, international insurance companies and mutual funds. This proactive government support is manifested through the Invest SVG agency.

The jurisdiction also represents an excellent conduit into the wider North American region for investors from further afield, and in particular those from the increasingly significant BRICs economies.

In March 2010 it concluded multiple TIEAs and is now considered to have substantially implemented the OECD internationally agreed standard in transparency and tax information exchange.

Furthermore, St. Vincent has also in the past inspired praise from the FATF for its efforts on the

anti-money laundering front, while on a separate note amendments to the Banking Act brought control of international banks under the auspices of its regulatory body, the International Financial Services Authority (IFSA).

St. Vincent’s key piece of legislation is perhaps the IBC Act which affords a great degree of flexibility and freedom from filing requirements as well as exemption from personal and corporate income, capital gains and withholding taxes, while among other features it has no minimum capital requirement and permits redomiciliation.

The International Trusts Act meanwhile affords sound asset protection from creditor challenges and forced heirship law with the St. Vincent legislation taking precedence over any foreign judgements, although registered trustees are subject to binding anti money laundering directives.

St. Vincent has also earmarked the international insurance sector as one of its key growth areas offering insurers a choice of five classes of international insurance companies, thus allowing for maximum diversity with individual capital requirements for each class dependent on the level of risk involved.

Another lynchpin of the IFC is the mutual funds sector where both private and accredited and public fund licenses are issued, although it is a prerequisite that administrators prove competency to ensure the integrity of the jurisdiction is preserved.

St. Vincent also has a thriving maritime services sector offering low cost ship registration and no restrictions or taxation on the sale, transfer or mortgaging of St. Vincent registered ships, one condition being the appointment of a registered St. Vincent agent.

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Caribbean

Turks and Caicos Islands Photos: The Turks and Caicos Tourist Board

the huge popularity of the Turks and Caicos exempted company which does away with the need to obtain a business license, has minimal filing requirements, and offers scope for exemption from potential future TCI taxes for 20 years. They are used for everything from financing to investment holding so long as the lion’s share of business isn’t conducted in TCI itself.

Despite the British Government last year suspending the administration in its Turks and Caicos Islands (TCI) overseas territory following the findings of a Foreign Office commission of enquiry it is testament to the jurisdiction’s solid legislative foundations and product offering that these political upheavals have had no noticeable detrimental effect on the jurisdiction’s standing as a trusted international finance centre such that in this sector it’s very much ‘business as usual’.

It is in the fields of banking, insurance (esp. captives) mutual funds and trust management that TCI has been most successful and it is assisted in this in having a framework which affords investors the opportunity to take advantage of no exchange controls, corporate, capital gains or inheritance tax offering great flexibility in terms of defining capital structure and members rights and liabilities.

TCI’s IFC status effectively reaches back to 1981 with the enactment of the Companies Ordinance which allowed for the formation of a number of business entities and led to

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...it is testament to the jurisdiction’s solid legislative foundations and product offering that..political upheavals have had no noticeable detrimental effect on the jurisdiction’s standing as a trusted international finance centre.

Also of note are Exempt Limited Partnerships which so long as their business is conducted outside TCI can apply to the Governor for a 50 year exemption from any tax on gains that may come to be levied there.

Turks and Caicos Islands trusts meanwhile have long been in vogue, and some would say for good reason. They are formed either via a Deed of Settlement which identifies

the Settlor or alternatively by a Deed of Declaration of Trust, in which they remain anonymous. A chief condition is that assets transferred must be unencumbered from the settlor’s net estate which gives rise to the relevant Trusts Ordinance legislation providing protection from forced heirship claims which may prevail in an alternative jurisdiction.

Other strong areas include the captive insurance sector which is also noted for its flexibility offering the potential to cover against even the likes of industrial action and losses related to conflict, while there are also a growing number of TCI mutual funds which can be structured as a company, partnership or alternatively as a unit trust.

Investment agency TCInvest generally represents the first port of call for interested and qualifying parties and will advise, assist and refer as appropriate. They can also alert investors to the not insignificant prevailing financial breaks available for backers of government approved development projects, particularly those on the less well known and developed islands.

Europe

Andorra © Chad McQueen

Located between France and Spain Andorra’s speciality is high end banking.

It certainly has pedigree in this field with a solvent and liquid banking sector and associated infrastructure built up over 70 years thanks to the implementation at the very outset of a policy of high capitalization.

Traditionally, Andorra has been something of a closed shop to outsiders with the banking sector’s principle of privacy enshrined in law, with other strict laws governing foreign ownership of all enterprises, and only limited initiatives such as the coveted

and expensive Passive Residence Permit affording qualifying HNW candidates the opportunity to bypass the long stay residency criteria and so take advantage of the favorable tax climate. That said, with a view to diversification a recent key piece of legislation the Foreign Investment Law is opening up the country allowing 100% foreign ownership of companies in some 200 economic sectors.

While Andorra still offers more confidentiality than most, the prevailing climate has meant that even here some things have had to give. There remains to

all intents and purposes an alluring absence of income, wealth, inheritance or corporate taxes, while no official currency means no capital or exchange controls. Yet, there are various fees, albeit they won’t break the bank, and also now capital gains liabilities implemented with a view to regulating the property market. Moreover, here as elsewhere the EUSD has inexorably been adopted, while to appease the international watchdogs TIEAs are now being signed, with DTAs at time of writing notable only in their absence.

Gibraltar Photo: Allie Caulfield / CC BY

Gibraltar is a self governing British overseas territory at the southern tip of Spain.

With the ever greater competition from both onshore and traditional offshore jurisdictions, Gibraltar is in the process of successfully re-positioning itself as a highly skilled niche finance centre placing much emphasis on private equity and property funds and making the most of its unique status. It is a status which gives it direct access to EU markets on its doorsteps and allows it to passport its financial services across Europe. The other noteworthy growth area has been Captive Insurance linked to

the Protected Cell Companies Act. Compliance-wise, white list status has been achieved without considerable sacrifice through the introduction of a 10% corporate tax levied across the board, the implementation of the EUSD, and the signing of a large number of TIEAs which are now entering into force through the Tax Information Act. Meanwhile, however an absence of VAT or capital gains taxes ensures it can still lay claim to being a genuine low tax jurisdiction.

Gibraltar’s Experienced Investor Funds regime launched back in 2005 offers low cost easy to set up unique advantages to qualifying candidates including HNW individuals, professional investors and those with investments above €100,000.

Boasting a sound regulatory environment, low level of bureaucracy and high concentration of service providers, it’s small wonder Gibraltar is now synonymous with top quality fund domiciliation and administration.

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Europe

St. Lazarus Church, Larnaca, Cyprus

Cyprus

Photo: Christian Stock / CC BY

Cyprus’ low cost strategic position in the SE Mediterranean means it is considered the gateway to the EU and somewhere that acts as bridge between east and west, thereby ensuring it is popular as a conduit for investment both in and out of the EU. It is also generally considered to be a well regulated administration with a sound infrastructure and an abundance of skilled labour.

regional Adriatic and Black Sea markets.

Cyprus is in fact ideally positioned to take advantage of the main north-south and eastwest shipping routes.

The shipping registry has a solid reputation and is marked by its competitiveness such that it boasts a merchant fleet of nearly 2000 vessels constituting some 16% of the EU fleet.

In addition Cyprus can lay claim to a thriving international trusts sector which offers the enticing prospect of tax exemptions relating to dividends, interest and other income, while the jurisdiction also represents an advantageous domicile for holding companies.

It is noted as having one of the largest ship management centres in the world and as being a major transshipment centre for Asia Pacific trade with Europe, as well as somewhere offering excellent access to the

Since accession to the EU Cyprus has had to comply with new European requirements yet has distinguished itself by creating an IFC climate which offers the lowest corporate tax rate in Europe of 10% and which has a

Interested parties can now contact the Cyprus Investment Promotion Agency (CIPA) which represents the natural first port of call for potential investors.

very extensive array of DTAs with over 40 countries at time of writing.

Matterhorn, Zermatt, Switzerland

Switzerland

Photo: Martin Abegglen / CC BY

Federal Council sets the course for future financial market policy Bern, 16.12.2009 - The Federal Council has set the course for the future of Switzerland’s financial centre. The Federal Council is thus responding to the upheavals in the global financial architecture. The Federal Council is committed to a strong financial centre

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in the interests of the entire Swiss economy. The report entitled “Strategic directions for Switzerland’s financial market policy”, which the Federal Department of Finance (FDF) prepared in consultation with financial market players, defines goals and measures to further strengthen the Swiss financial centre. The responsibility of the Confederation is limited to the creation of an appropriate regulatory framework. The financial market players themselves are responsible for sector-

specific policy. The dialogue with the financial sector will continue in order to ensure the coherence of the regulatory framework and sector-specific policy. To implement its financial market strategy, the Federal Council is appointing an interdepartmental task force under the leadership of the FDF. Moreover, the creation of a State Secretariat focusing on FDF affairs relating to international financial matters and fiscal policy will further strengthen Switzerland’s efforts at the bilateral and multilateral level.

The worldwide financial crisis has led to major changes that are directly affecting Switzerland’s financial centre and its economy as a whole. Against this backdrop, the Federal Council has reviewed the strategic positioning of the financial centre and set the course for future financial market policy. The report entitled “Strategic directions for Switzerland’s financial market policy”, which the Federal Department of Finance prepared - also in response to a postulate submitted by Konrad Graber, member of the Council of States -, is broadly based and shows how the strengths of the Swiss financial centre can be preserved and its weaknesses eliminated. The financial market policy of the Federal Council serves the interests of the economy as a whole: in 2008, the financial sector generated about one tenth of Switzerland’s overall value added and contributed nearly 6% to total employment. It is thus one of the most important economic sectors in Switzerland.

Swiss financial centre in global competition Competition among states is increasingly also taking place at the level of financial centres. The cross-border asset management business is becoming tougher; other financial centres - some of them new - are catching up with Switzerland. Switzerland must sustain and further expand its position in the face of international standard-setting and market foreclosure. In this regard, the state can influence the framework conditions especially in financial market supervision and regulation as well as in the design of the tax system. The report proposes a whole series of measures to improve the regulatory framework of the financial sector.

Switzerland will henceforth also further enhance its contributions to international bodies that set standards for regulation and supervision and will increasingly help shape these standards. Switzerland is especially engaged on behalf of adequate monitoring and a level playing field worldwide in regulation and supervision.

The Federal Council rejects the protectionist tendencies of numerous countries. The Swiss financial centre offers broad market access to foreign financial market players. In future, however, Swiss providers should also be able to freely export their services and products. The Federal Council is therefore strengthening its efforts to ensure market access.

Photo: Jakob Montrasio / CC BY

Dealing with risks The ability of the financial sector to resist crises is of the utmost importance to a national economy. Only a stable financial market can reliably fulfil its responsibilities with respect to credit supply and ensuring payment transactions. In comparison with other countries, the Swiss financial centre is characterised by very high market concentration. The dominance of major financial institutions harbours risks for the entire national economy. For this reason, the vulnerability of systemically important institutions to crises must be reduced.

Here again, the Swiss financial centre finds itself faced with conflicting demands. As much as the major financial institutions harbour systemic risks, they contribute substantially to the international importance of the financial centre. An expert group is considering this challenge in depth.

Reputation risks are among the greatest risks for a financial centre. The good reputation of a financial centre and its international acceptance are shaped in part by its stability, its predictability, its integrity and its political environment.

Focus on protection of privacy

Photo: Jeffery Pang / CC BY

In tax matters, the Federal Council wants to reconcile the interests of states wanting to enforce their tax laws with the long-term interests of Switzerland. The declared goal of the Federal Council is to ensure protection of client privacy. It continues to reject the automatic exchange of information. It is willing, however, to expand existing cross-

border cooperation within the framework of bilateral negotiations. The precondition for this is, however, that it is linked to better market access and the regularisation of existing accounts with respect to the tax authorities of the state in question, with no repatriation obligation. In return, the Federal Council is willing to consider the introduction of a final withholding tax and the conclusion of a services agreement with the EU, as well as other measures that promote fiscal honesty among bank clients (e.g. introduction of a self-declaration).

The report entitled “Strategic directions for Switzerland’s financial market policy” was prepared by the FDF in collaboration with FINMA and the SNB. These bodies were accompanied in their work by a task force which also included representatives of the main private-sector associations (Swiss Bankers Association, Swiss Insurance Association, Swiss Funds Association and SIX Group). To further ensure broad support for the strategy, hearings were also conducted with various representatives of the affected sectors.

Creation of a State Secretariat To implement its financial centre strategy, the Federal Council has appointed an interdepartmental task force under the leadership of the FDF: the dialogue with the financial sector will continue. Moreover, the creation of a State Secretariat focusing on FDF affairs relating to international financial matters and fiscal policy will further strengthen bilateral and multilateral efforts.

The establishment of the State Secretariat will proceed swiftly.

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Europe

UK Crown Dependencies

Guernsey

Jersey St. Aubin, Jersey

Isle of Man Isle of Man TT, 2008

Guernsey has adopted a proactive position on the compliance front with a growing volume of TIEAs and DTAs, apparently deciding that the move towards an era where IFCs find themselves under greater scrutiny is an inexorable development. As such by not burying its head in the sand in the main it has garnered a solid international reputation for legitimacy.

Jersey is big in banking where only the

The Isle of Man is one of the world’s largest

world’s top banks are permitted to operate

offshore life assurance jurisdictions with

under the auspices of the well respected

total funds under management of £37

island regulator, the Jersey Financial

billion, and is also a recognised captive

Services Commission. The other two key

domicile.

The Jersey Trusts Law gives jurisdiction to

a major centre for international pension

It is in the areas of banking, captives, trusts, investment funds and asset management where Guernsey has excelled and where it offers expertise in abundance. The banking sector for example has matured over many years such that by the end of 2009 deposits in the 44 Guernsey banks stood at £117bn.

In the captive insurance sector Guernsey is considered the European leader having introduced the very concepts of the protected cell company and incorporated cell company.

the trust savvy Jersey Courts in the event of

administration affording flexibility sufficient

any litigation thereby providing reassurance

to create bespoke schemes that reflect multi-

to settlors and beneficiaries.

jurisdictional needs.

The funds sector meanwhile has grown since

Modern legislation, most recently in the

the 1960s and is now valued at over £240

form of the Isle of Man Companies Act 2006

billion, these days directing its energies

has led to a vehicle that ideally lends itself to

towards institutional, specialist and expert

asset holding.

The jurisdiction also holds more than £300bn worth of assets in trust focusing on both the preservation of institutional as well as individual and family wealth and assets and is already synonymous as a leader in the emerging family office market.

In 2008 a raft of new legislation saw developments such as the permitting of perpetual trusts and the abolition of the liability of directors of corporate trustees, as well as the introduction of a new Companies Law and Company Registry.

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Photo: Jonathon Camp / CC BY

Photo: Marilyn Peddle / CC BY

Photo: Jo-H / CC BY

UK Crown Dependencies offer investors a stable political climate, a GMT time zone, sound legal and regulatory infrastructure and a strong associated financial services infrastructure They also offer the option for individuals to pay a retention tax on the income earned on their savings (currently 20% but due to rise to 35% in July 2011) in lieu of disclosure to their domestic tax authority under the EU Savings Directive, assuming of course that authority has signed up to the directive. The jurisdictions are reviewing their tax regimes, and there is speculation the zero-ten corporate tax systems they currently operate could be scrapped due to external pressures.

areas are trusts and funds.

It has furthermore become established as

investors with the jurisdiction having attracted a significant number of venture capital, private equity, mezzanine, real estate

The Isle of Man is also something of a trusts hub and is interestingly seeing an increase in

and hedge funds.

popularity of the private trust company by

Jersey has also carved out a name for

professional trustees and requires only that

itself through its ship registry, particularly popular with superyachts and is assisted in this in having an extensive marine services infrastructure, while Jersey’s blend of non EU status yet possession of a European postcode and membership of the Red Ensign Group only serve to add to its cachet.

wealthy families which bypasses the need for the administrator is regulated.

HNW and UHNW individuals are also tempted to the island by a lower rate of 10% and an upper rate of 20%, combined with generous personal allowances and reliefs, and a personal tax cap of £115,000 per annum, per individual.

Liechtenstein

Photo: Rainer Ebert / CC BY

Liechtenstein is implementing its ‘Futuro‘ vision for the principality which through reform aims to ensure sustainable growth over the long term to preserve and consolidate its eminent private banking and asset management position and status as a key holding company and trusts hub as well as home to some 360 investment funds.

The jurisdiction has been singled out for criticism but legislation such as the 2008 TIEA with the USA and Liechtenstein Disclosure Facility with the UK in 2009 is going some way to addressing concerns of the cash strapped exchequers of some of the major global economies while there have

also been revisions to family foundations, considered to be according to Futuro ‘the heart of the financial centre‘ with a view to meeting international standards.

Nonetheless, it’s clear that the principle of confidentiality has remained foremost in the minds of the Liechtenstein authorities.

There has also been diversification into captives and collective investments while Liechtenstein remains an excellent location in the very centre of Europe for cross border operations.

There have been other reforms of the tax system such as the implementation of a

withholding tax on returns as in many other IFCs, although this does not seem to have dented its international reputation for competitiveness, nor discretion.

Recently the country has adopted the OECD-compliant Law on Administrative Assistance in Tax Matters providing for information exchange upon request, though there are definite prohibitions on automatic exchange of information and fishing expeditions, while there is no compulsion for the authorities to cooperate on the back of data that has been illegally acquired.

Photo: Wolfgang Staudt / CC BY

Luxembourg

Luxembourg is the largest fund domicile in Europe and number one worldwide for crossborder distribution of funds.

purpose is to acquire, hold, manage and sell financial assets rather than to undertake any commercial activity.

European captive domicile scene by volume offering expertise in a sector that has been established for over 25 years.

It is the leading domicile for Undertakings for Collective Investment in Transferable Securities (UCITS) which are pooled investment schemes otherwise known as investment or mutual funds. They enjoy a popular reputation built on the high levels of protection they afford investors, as well as the ready recognition they receive from regulators in other jurisdictions and the fact that they are accepted for distribution in their relevant markets.

In 2004 Luxembourg came up with a tailor made investment vehicle for the private equity and venture capital sectors known as a SICAR which is restricted to qualified investors and which complements the regime on UCITS. It has proved very popular to date

Perhaps, however the most popular vehicle in Luxembourg has been the Specialised Investment Fund (SIF) for which in recent years the eligibility criteria has been relaxed such that it is reserved for institutional and professional investors as well as any individual who invests a minimum €125,000 or those who have had their investment expertise confirmed by a trusted financial institution.

The Family Wealth Management Company (SPF) is designed for the management of private wealth on behalf of individuals.

It is noted for its simplicity in that its

Historically Luxembourg has additionally been a jurisdiction of choice for Real Estate Investment Funds (REIFs) with the majority being regulated UCITs, while their popularity has grown in part thanks to a corresponding increase in appropriately experienced service providers.

Meanwhile, Luxembourg also leads the

SIFs are notable for their flexible quality and are permitted to invest in assets ranging from equities, bonds, derivatives, structured products, real estate, hedge funds and private equity investments.

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Botswana

As one of the world’s fastest growing tax efficient hubs Botswana offers much to the African and global financial trade.

Botswana is at pains to point out that it is not a tax haven and has no intention of becoming one. It is not listed on the OECD’s list of tax havens and as such poses an interesting prospect to African and indeed international investors. It does however offer exciting and tax efficient investment prospects. For example, companies registered with The Botswana International Financial Services Centre are offered competitive packages including a reduced corporate tax rate of 15 percent and exemptions from value added tax and capital gains tax. There are no foreign exchange controls and you are allowed to choose your currency, allowing businesses to move money easily across borders and offering a cushion against losses owing to exchange rate risk. According to Standard & Poor and Moody’s, Botswana is the best credit risk in Africa with an ‘A’ rating. This country offers interesting investment potential

Political Thanks to its small domestic market for financial services and its concern with overreliance on diamond and recently uranium mining, its financial services centre has been successfully nurtured within international regulations. An economic success story since its independence in 1966 Botswana has in fact maintained one of the world’s highest economic growth rates (on average 9.2 percent growth) in spite of the recession where growth fell below five percent in 2007-8. This general economic success is in part on account of its open but well regulated banking system that makes a point of being as transparent as possible.

In addition it is one of the most politically

46

stable and democratically viable countries in Africa; small wonder then that this tax efficient hub is growing.

Economic Indeed, Botswana has been consistent in its adherence to international regulations and frameworks. It has signed up to the Basle Statement of principles, the IMF Financial Action Task Force (FATF) and the UN Geneva Convention all of which aims to eliminate money laundering. Botswana is also active in freezing assets owned by terrorists and their associates as demanded by the UN Convention on the Suppression of Financing of Terrorist Activities Resolution.

An economic success story since its independence in 1966 Botswana has... maintained one of the world’s highest economic growth rates.

In fact much of the efforts to demonstrate financial transparency came from within the country rather than as a result of external pressure. The 1999 Collective Investment Undertakings Act saw the Bank of Botswana assume responsibility for the supervision of IFSC companies and of undertakings for collective investment which come under the IFSC regime. The 1999 Income Tax Amendment Act and Bank of Botswana Act presaged the constitution of the IFSC in 2003 and all the belt and braces regulation that that brought with it. That companies such as Standard Bank’s African Banking

Group have set up administrative operations in the IFSC is a testament to Botswana’s transparent and competitive banking system. In addition Botswana has Double Tax Treaties with numerous countries including the UK, India and France and is currently negotiating one with Russia, while there are said to be more in the pipeline.

Insurance is also well regulated and a growing concern thanks to the passing of the 2005 International Insurance Bill and the 2007 enactment of the act which regulates the offshore insurance industry ensuring that insurance services operate within a regulatory authority.

As a financial concern Botswana is a member of the Southern African Customs Union (SACU) an economic grouping free of tariffs that also includes South Africa, Namibia, Lesotho and Swaziland. Its situation helps place Botswana as an efficient tax conduit for the wider region, stimulating business across borders.

Geographic It is in no small part thanks to Botswana’s close working partnership with South Africa and its geographical situation that offers sound financial structure and breeds economic success. With eight daily flights to Johannesburg at only an hour away, Botswana’s time zone is also a mere GMT+2 which helps make the country viable for businesses outside the African continent. In addition the ‘Fairgrounds’ area of its capital Gaborone contains a burgeoning cluster of well integrated banks, insurances and businesses, making doing business here an invigorating experience.

Photo: Joachim Huber / CC BY

Africa

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Photo: Karen Horton / CC BY

Africa

Liberia The idea of Liberia as a tax effective corporate domicile may seem incongruous to some given the political upheavals seen there in recent years, but this perception couldn’t be further from the truth

For the purposes of incorporating a NonResident Corporation there are the usual restrictions on not trading within Liberia or undertaking banking or insurance activities, but otherwise it is entirely straightforward and affords a high degree of flexibility with minimal administration.

The efficiencies are those you would come to expect from the US, while naturally all documentation is in English.

Depending on requirements many other Liberian corporate vehicles also exist.

Limited Partnerships, UK style Registered Business Companies, Austrian style Private Foundations and the U.S. State of Delaware style Limited Liability Companies (LLCs) are free of taxation on operations and profits if non-resident and are used for all manner of purposes. Moreover and significantly, Liberia is to be found on the right side of institutions such as the OECD thanks to its proactive subscription to all international standards.

Historically, Liberia’s ship registry status has set the jurisdiction apart. Attracting owners from across the developed world, the registry flourishes due to its cost and

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tax-effectiveness and flexibility combined with its high levels of efficiency, ship safety and security and customer service - a reputation that has been built over a period of more than 60 years. The ship and corporate registry’s reputation is enhanced through LISCR’s significant investment in new computer and communication technologies such that in August 2009

Significantly, Liberia is to be found on the right side of institutions such as the OECD thanks to its proactive subscription to international standards Photo: America.gov / CC BY

Not only is the country benefitting from fresh FDI thanks to a new found political stability which should enable it to begin to take advantage of its rich natural resources, but in fact the ship and corporate registers are administered under an exclusive agreement between the Republic of Liberia and US owned and operated Liberian Ship and Corporate Registry (LISCR), and consequently have been wholly unaffected by any politics or conflict. As such Liberia has remained one of the world’s foremost corporate and ship registries.

US Secretary of State Hillary Clinton with Liberian President Ellen Johnson Sirleaf

the Liberian senate adopted and President Ellen Johnson Sirleaf (Africa’s first woman head of state) signed into law a 10-year pact to extend the existing contract with them.

In maritime circles Liberia is a highly respected signatory to the major international conventions and works in close co-operation with the class societies to ensure compliance and enforcement of the international rules and codes. Moreover, the registry maintains a global network of Liberian authorised nautical inspectors and harmonises annual safety, international safety management and ship security inspections. Meanwhile, the professional seafarers themselves, despite not being subject to any citizenship requirements, must comply with rigorous and exacting Liberian certification standards.

Over the last 60 years, the ship registry has taken the lead in creating a safety and security culture resulting in a present strength of over 3,100 ships of 90 million NRT coupled with an industry lead based on its ‘white listed’ port state reputation.

However, it is during this same time that Liberia’s strength as an offshore corporate registry has grown most strategically.

While use of the traditional Liberian corporation remains extremely strong, the Liberian corporate registry continues to expand with the adoption by Liberia of the new series of business entity laws referred to above (including Foundations, RBC and LLCs). These laws, as augmented

by Liberia’s adoption of sophisticated Electronic Transactions and Anti-Money Laundering Laws have solidified Liberia as an offshore corporate market leader.

Photo: Mathias Ott / CC BY

Mauritius has become an extremely popular trade and investment conduit into India due to its location and incentivising DTA with that country.

Its status in this respect is enhanced by pertinent legislation such as the Financial Services Act 2007 which liberalised the international ‘Global Business Companies’ regime, the Securities (Amendment) Bill which expanded trading opportunities and the Insurance (Amendment) Bill which encouraged foreign insurers to operate in Mauritius and brought with it increased flexibility.

In the last decade Mauritius has committed itself to complying with

Mauritius OECD standards in an attempt to position itself as a modern respected international finance centre such that it has the requisite number of TIEAs, and an unusually extensive network of DTAs. ‘Global Business Companies’ are those most frequently used by international investors and come in two categories; GBC 1 and GBC 2.

GBC 1s are considered resident and so enjoy perks encompassing exemption from stamp duty, land transfer tax, and capital gains taxes, access to foreign tax credits and access to Mauritius’ extensive DTA network. Moreover, there are no withholding taxes on dividends or other payments issued to non-resident shareholders.

GBC 2s meanwhile can be 100% foreign owned, have no minimum capital requirements and are not subject to tax on income derived from outside Mauritius. Importantly, however they cannot take advantage of the many DTAs in place.

Mauritius is also known for its trust management sector with offshore trusts taxed in similar fashion to GBCs, as well as its captive insurance domicile status (both public and private) where both rent-a-captives and protected cell companies are permitted. On the investment front meanwhile it boasts over 500 funds with NAV of approx USD50 billion.

“Mauritius is…not a tax haven” – Vice PM Sithanen New Delhi, Jan 19 (IANS) Mauritius should not be singled out by India in its attempt to curb tax avoidance as the African nation’s image as a financial haven is ill-placed, according to its Vice Prime Minister Ramakrishna Sithanen.

“Mauritius is definitely not a tax haven,” Sithanen, who holds the portfolios of finance and economic empowerment, told a business roundtable to forge trade and economic ties with India.

“Financial services form just 12.5 percent of our gross domestic product,” he said, also seeking to dispel the notion that his country’s tax holiday policies were being used to re-route money and save on taxes in third countries.

“We have suo moto tried to prevent round-

tripping. To date no case of round-tripping has been brought forward and proved,” said Sithanen.

Round-tripping refers to the practice of investing capital in one country through a subsidiary, which at a later date is then brought back into the original country in the guise of foreign direct investment, which is deemed illegal by many territories.

Sithanen also urged India not to single out Mauritius while proceeding with tax treaty reviews aimed at curbing tax evasion.

“India should not single out Mauritius in the tax treaty review. We would like the footprint of Indian companies to increase.”

Sithanen met with Finance Minister Pranab Mukherjee, key ministers and policy-makers during his three-day stay in the national capital.

In the last decade, India received over $80 billion as foreign direct investment, of which more than 40 percent or $35.18 billion came from Mauritius, mainly because it is a “routing point” for foreign companies to avail better tax benefits.

The major foreign investors in India include Singapore, the EU, the US, Japan, Cyprus, and the United Arab Emirates, apart from Mauritius.

Like Mauritius, Cyprus too is a routing point for overseas firms.

India is planning amendments to the Double Taxation Avoidance treaty with Mauritius to prevent its misuse.

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Africa

Seychelles

La Digue, Grande Anse, Seychelles

The Republic of Seychelles is a relatively new IFC kid on the block but this jurisdiction has already made an indelible mark with the IBC Act of 1994 providing for a vehicle that has since proved particularly popular with merits including low license fees fixed for life. Recent legislation has further cemented the Seychelles’ reputation as a highly flexible cost-effective, efficient corporate registry, and somewhere with noteworthy strengths in the fields of insurance, mutual funds, banking, trusts and as a ship registry.

The Securities Act of 2007 meanwhile is another piece of legislation that only adds to Seychelles’ growing list of credentials since it has made for greater fairness and transparency in the trading of foreign and Seychelles securities and has attracted rather than scared away business as the interests of the investor have clearly taken precedence with for example strict licensing requirements for advisers and dealers.

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Another thriving sector is that of offshore banking where the Financial Institutions Act, 2004 allows for no corporation tax, withholding tax, customs duties, stamp duty or exchange controls. The bank for its part must have minimum paid up capital of USD2million and be either limited by shares or an overseas company registered under the domestic Companies Act

The jurisdiction also boasts one of the world’s fastest growing Free Trade Zones which is in large part attributable to proactive support at governmental policy level as outlined in the International trade Zone Act of 1995.

The argument is a persuasive one; no taxes, license fees that are fixed for life, 100% imported labour permitted and ready access to key markets,

Photo: Alexander Mussard / CC BY

The Mutual Funds and Hedge Funds Act of 2008 for example allows funds to be administered in a recognised foreign jurisdiction not only in the Seychelles.

Funds range from professional funds restricted to professional investors, individuals and bodies corporate, with minimum USD100,000 investment, private funds such as unit trusts with no more than 50 investors, public funds for retail subscription and exempt foreign funds which allows for them to be without a Seychelles licence so long as they are licensed in an approved jurisdiction and managed by a Seychelles licensed administrator.

Photo: Didier Baertschiger / CC BY

Apartments on Eden Island, home to some of Seychelles richest ex-pats.

This support is also manifested through the absence of taxes being levied on all foreign source income serving to consolidate the impression of the Seychelles as a well located, well regulated increasingly important player on the international financial scene, and a prime conduit for investment into the wider Indian Ocean Rim region and further afield.

Moreover, DTAs are on the rise including those struck with some key global players such as China and the U.A.E.

A further big success story is Seychelles role as a yacht and ship registry, as governed by the Merchant Shipping Act of 1992 where low fees, an excellent location, solid support, signatory status to the most highly regarded international maritime conventions, and the new Eden Park marina built on reclaimed land near the capital Victoria make this Indian Ocean Republic an obvious candidate for luxury yacht owners.

Trusts for their part are governed by the International Trusts Act of 1994 and boast protection from forced heirship, no income restrictions, entitlement to be settlor or trustee as well as beneficiary, while they also allow for ownership of and trading in other shares, not to mention the operation of bank accounts.

Meanwhile, the Insurance Act of 2008 adds to Seychelles’ pulling power in exempting all licensed offshore insurance companies from Seychelles taxes and duties for 20 years from the date of that license.

© Chad McQueen

Article 26

EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2.

2. Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the

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OECD MODEL TAX CONVENTION ON INCOME AND CAPITAL information in public court proceedings or in judicial decisions.

3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation:

In no case shall the provisions...impose on a Contracting State the obligation: to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State. a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State; b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public).

4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information.

5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.

The recession has forced countries to deal with their deficits by raising taxes. Joanna Gray asks whether the current global trend for higher taxes will benefit off shore financial markets rather than domestic tax revenue There is serious unease in America that Barack Obama is going to increase the tax burden of the ordinary American family.

So concerned are they that more than 750 tea parties to protest against tax increases were held across the country as a symbolic reminder of the event in Boston in 1773.

And history shows that the protestors are right to worry; high tax whether it be corporation or income, does not benefit a nation in the long term. During the 1970s the median family paid as much as 25 per cent tax on dollar earned which is 10 per cent higher than they do today. While it might not appear a great deal, the high taxes contributed to anti-growth, inflation and regulation, and co-incidentally marked an increase in offshore financial traffic. When Reagan unleashed regulations and lowered taxes the American economy began to move again.

It therefore appears strange that to claw their way out of the recession major economies are again deploying tax increases.

At present Mexico with an income tax rate of up to 29 per cent, Canada with a top rate of 29 per cent and of course America taking 35 per cent of income, are all examining raising taxes. For the average family there is little that can be done but for high net worth individuals there are real benefits to considering offshore financing. In Britain, the last western nation to emerge from recession, the Prime Minister has already

raised the top rate of income tax to 50 per cent. What is happening there is indicative of what might happen if other nations follow suit. Quite simply rich individuals are leaving, from artist Tracey Emin to the financier Guy Hands who owns the EMI record label, moving to France and Guernsey respectively. To Richard Teather, Senior Lecturer in Tax Law from Bournemouth University, this is no surprise. He explains why to Business Annual Offshore Guide,

High tax whether it be corporation or income, does not benefit a nation in the long term.

‘Other than Scandinavia, 50 per cent will be the highest income tax rate in Europe [Denmark’s rate is 63 per cent]. Many people (such as hedge fund managers) are already looking at their options for leaving Britain to escape it, and wealthy people from elsewhere will be less likely to come to live there. It is highly likely that this tax will lose the Treasury more than it gains – the people who will be hit by this tax currently pay nearly a quarter of total income tax, so the risk is huge. But even worse, many of them

are company directors. Companies have already left the UK because the corporate tax is one of the highest in Europe. It is stupid to risk all of this for a tax that will, at the most, raise less than 0.4% of government spending.’

While what is happening in Britain should be a warning to other nations, there are countries that will benefit. Most notably those that offer zero per cent income tax.

According to Rhiannon Davies, Director of www.ShelterOffshore.com offshore financial institutions will benefit. She explains, ‘Even though the entire offshore world as we know it is under threat from the likes of the OECD, the G20 and the European Union who are forcing damaging disclosure policies on all international financial centres, there are certainly nations that will come out winning. There are interesting models operating in Malaysia and Belize that offer a lower income tax rate to residents who fulfil certain criteria – such as those who do not earn an income from the local economy, but who reside in that nation. Such individuals will then perhaps be taxed less on their worldwide income and gains.’

Quite simply, if taxes rise in America or elsewhere in spite of anti-tax tea parties, then countries such as Belize and Guernsey should be holding celebratory low tax parties.

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Comment

Clearer Tax

D

© Chad McQueen

Jeffrey Owens, Director OECD Centre for Tax Policy and Administration* In February 2009, Singapore and Hong Kong, China undertook to bring tax transparency up to international standards and relax bank secrecy laws for tax purposes. Hot on the heels of these announcements were others from the Cayman Islands, Jersey, Andorra and Liechtenstein, and more recently we have seen Austria, Belgium, Luxembourg and Switzerland signing up to the OECD standard on exchange of information.

Why is this happening now? World leaders meeting in London on 2 April called for new controls over tax havens and strict bank secrecy jurisdictions as part of the G20’s response to the financial crisis. But despite the welter of recent commitments to improve tax information sharing, there are still plenty of voices calling for the havens to be left alone, on the grounds that the advantages they offer to business and private investors are irrelevant to the financial sector reforms called for by the crisis.

So is this simply a case of bullying and buck-passing on the part of the large and developed economies, or is there a genuine

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need to tackle what many economies increasingly see as a key faultline in the global financial system? Improved sharing of tax information is essential in a reformed global financial system. It is not that the taxation-even non-taxation-regimes of havens and secrecy jurisdictions have contributed disproportionately to the causes of the current financial crisis and economic downturn.

Tax secrecy can tip the balance between an unattractive, taxed investment and one which is only attractive on the basis of non-taxation What is at issue is the shielding of business and private investor transactions from legitimate tax scrutiny in their home country. Recent financial-sector deleveraging

has been sharp and painful. Secretive tax driven arrangements were partly to blame for the gearing up that brought about that pain. Circular, “double-dip”, financing arrangements that give companies fiscal advantages both at home and offshore ensured that normal tax benefits for debt financing were magnified out of all proportion to any conceivable tax policy justification, resulting in tax subsidies for excessive debt as well as for high-risk investments that would otherwise have been unviable.

Tax savings for borrowing engineered through such artificial and circular transactions clearly boosted financial sector balance-sheet and share values. But they added no real value to the global economy and served simply to further inflate global asset bubbles. Governments have long been alert to tax-avoidance opportunities from what is euphemistically known as “structured finance”, but the involvement of secretive jurisdictions in complex chains of structures and transactions has often hampered their attempts to counter this

distortive scandal. Tax havens are also home to the majority of the funds-mutual funds, hedge funds, private equity funds-investing in high-yield securities and highly leveraged shareholder investment that drove the precrisis credit boom. Investors in offshore funds are of course responsible for reporting their offshore income and gains to their own tax authorities, and there are of course reasons other than tax minimisation for locating funds offshore.

But tax secrecy can tip the balance between an unattractive, taxed investment and one which is only attractive on the basis of non-taxation. Some would argue that tax is inherently distortive, and that all tax systems are far more complicated than they should be. It’s true that most countries’ tax systems have an inbuilt bias to companies financing themselves with debt. It’s also true that complexities and differences between many countries’ tax systems offer opportunities for tax arbitrage that can distort investment decisions, irrespective of the level of transparency. And it may be that administrative burdens, complexity, or perceived ineffectiveness of some tax

systems encourage taxpayers to evade or avoid tax, with or without the use of tax havens.

There are of course reasons other than tax minimisation for locating funds offshore.

However, if so many countries are now signing up to OECD’s tax information exchange standards, it is because they recognise that with the privilege of participation in the global financial market comes the responsibility of cooperation and transparency-not just for the benefit of the tax revenues of other countries, but also for the stability of the financial sector as a whole. All countries have a responsibility to use their tax systems to promote, and not distort, sustainable economic growth, and

to bear down on tax-driven distortions in the economy, while addressing local public expenditure needs.

That is a tall order for any country, even within its own tax system. At an international level, it calls for an open, cooperative approach. It is inconceivable that any country could be part of a future stable, global financial market without a clear commitment to that approach. This is the message that came out clearly from the G20 summit, and that the OECD will continue to promote. *The views expressed in this article are those of the author and do not necessarily reflect those of the OECD or its member countries.

Visit: www.oecd.org/tax Visit: www.oecd.org/finance Jeffrey Owens, Clearer tax, OECD Observer No. 273, June 2009, www. oecdobserver.org

Foreword from the Final Report of the Independent Review of British Offshore Financial Centres

by Michael Foot The three Crown Dependencies and six Overseas Territories within the scope of my Review are facing the worst global economic downturn for over 60 years and intense international focus on the operation of their respective financial centres.

The smallest economies are particularly exposed to the downturn, but none of the nine jurisdictions I have reviewed can afford to be complacent. Most are heavily reliant on financial services and tourism for economic output, government revenue and employment.

jurisdictions which are not under immediate fiscal pressure may wish to consider whether existing tax regimes expose them to international pressure which might ultimately have a material impact on their economic sustainability whilst potentially also reducing their ‘tax take’ more than necessary.

Meeting international standards on tax transparency, financial sector regulation and financial crime is an absolute must if the jurisdictions wish to continue to hold themselves out as internationally active financial centres, but international pressure must also be maintained on competitor jurisdictions to raise their standards.

It was clear early in the Review process that economic decisions taken by some of the jurisdictions during the long period of economic growth had weakened their resilience in a downturn. Events have proved this to be the case.

A number of the jurisdictions I have reviewed have a good story to tell, but there is no room for complacency. Others have more to do, particularly on regulation and tackling financial crime.

Some now face difficult decisions and will need to look afresh at options for controlling public expenditure and increasing revenue. Even those

Some will need technical assistance to help with the fight against financial crime, but the local governments must first demonstrate that they

are committed to taking the action necessary to secure the benefits of this assistance in the longterm. There can be no second chances.

At a domestic level, the jurisdictions must take all possible steps to prevent the collapse of financial institutions of systemic importance to the local economy and have workable resolution plans if a collapse cannot be prevented.

The recommendations in my Report addressed to the jurisdictions provide benchmark standards against which each can assess itself. I invite the jurisdictions I have reviewed to consider what action they may need to take to achieve these standards.

I also invite the UK government to discuss and consider governance arrangements with the jurisdictions to ensure that there is a shared understanding of respective responsibilities and expectations. © Crown copyright

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Comment

Industry Experts Predict Greater Market Discipline and More Due Diligence in 2010 Walkers Seminar Offers Perspective from Regulators and Investment Managers

Joel Press, Managing Director of Morgan Stanley’s Prime Brokerage Division, Todd Groome, non-Executive Chairman of the Alternative Investment Management Association (AIMA), and Gregory Zuckerman, author and special writer with The Wall Street Journal were among the experts who offered their predictions for 2010 at a seminar for more than 300 members of the financial industry in New York hosted by international offshore law firm Walkers. The experts’ predictions included greater market discipline from investors and an increased focus on due diligence by providers and custodians.

Greater allocations to hedge funds were anticipated at the expense of equities, while the latest regulatory waves and the next likely bubbles in the market were also debated.

“In today’s environment, there can no longer simply be a checklist to confirm a process.

Potential investors must look at what motivates and drives the relevant provider,” said Ingrid Pierce, Partner with Walkers and head of the firm’s Cayman Islands Hedge Fund practice. “Custody diligence is very much at the forefront of people’s minds. Key

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questions include whether counterparties have the ability to move or re-hypothecate assets and whether contracts will hold up in an insolvency.”

Investigative diligence, which looks in a very detailed way at precisely what various providers do, not just what they say they do, has also become a key focus as investors and other players ramp up their policies in this area, according to Ms. Pierce.

“Investors are asking for greater transparency.

They want to use the transparency to create a more idiosyncratic contract for their particular situation and a particular strategy.” – Todd Groome, AIMA “It is important for both funds and investors to work out well in advance exactly what their exit strategy will be and how the provisions in the fund’s documents will actually work,” Ms. Pierce said. “The

heightened levels of diligence we have seen throughout the investment process are not going to diminish anytime soon. All participants, including legal counsel have to increase our awareness of the issues and address key areas of risk with our clients.”

Highlighting some positive trends in hedge funds, AIMA’s Todd Groome pointed to new allocations going to a variety of strategies.

For example, managers in Asia are seeing 75% of net new allocations coming from the United States, primarily from pension funds.

He also noted the launch of new hedge funds represents a clear increase in confidence.

“Market discipline from investors is back with a vengeance,” said Mr. Groome. “Investors are asking for greater transparency. They want to use the transparency to create a more idiosyncratic contract for their particular situation and a particular strategy.”

On the regulatory front, in this current challenging policy environment, Mr. Groome said things will take time and require considerable coordination among financial leaders, policy makers, and investors.

Photo: Francisco Diez / CC BY

Joel Press of Morgan Stanley offered his personal insights on what can be expected in the hedge fund market going forward.

He anticipates hundreds of smaller start ups in 2010 and said that seeding is more important than ever. With inflows still coming into the market, Mr. Press predicted that the industry will be worth US$3 trillion four years from now, compared to the current estimated value of US$1.8 trillion.

“There is no need for hedge fund fees to go down,” Mr. Press said. “If you look at long-term investing, hedge funds are absolutely performing better than any other investment vehicle. Investors are looking to replace equities with hedge fund allocations and hedge funds are increasingly being used as an equity substitute.”

The seminar also featured an in-depth examination of the role of fiduciaries, notably issues of responsibilities and accountability, from Guy Locke, Partner and Joint Head of the Corporate and Financial Restructuring Group at Walkers and Scott Lennon, Senior Vice President at Walkers Fund Services.

“It is a brand new world for hedge fund directors. Questionnaires are more extensive and elaborate and people want to know that manuals have been fully tested,” Mr.

Lennon said. “With changing standards of care and liability caps for auditors and other service providers, managers are in a tough negotiating environment. It is important to understand the whole picture of risk and where it will fall if things go wrong.”

Hedge fund financing was addressed by Philip Paschalides, a Walkers Partner and

Gregory Zuckerman from The Wall Street Journal said we are in an age of bubbles, citing housing, energy, Asian currencies and technology stocks as examples of bubbles the market has experienced over the past decade. head of the firm’s Finance and Corporate Group in the Cayman Islands. Mr. Paschalides said that the banking team in Walkers’ Cayman office had its busiest year ever for hedge fund financing, suggesting that leverage may not be a thing of the past.

“Lenders are generally quite savvy about the hedge fund world,” Mr. Paschalides said.

“They keep databases, look at redemptions and gates and will lower borrowing bases to account for liquidity and concentration issues.”

Gregory Zuckerman from The Wall Street Journal said we are in an age of bubbles, citing housing, energy, Asian currencies and technology stocks as examples of bubbles the market has experienced over the past decade.

“The next bubble may be emerging markets, Brazil, China, or pockets of real estate in Asia or Australia,” Mr. Zuckerman said. “Everyone is worried about the next investor. There is an incentive to increasingly pile on trades and now it is much easier to express trades using ETFs, synthetic CDS and other types of derivatives. Managers today are fully invested and talking about adding leverage, but they don’t really believe in the long term nature of these investments. It might work out in the short term but long term you wonder if they can all get out.”

The New York event was part of the ‘Walkers Fundamentals’ series designed to bring discussions of key financial issues to the world’s investment capitals. Video highlights of the seminar will be posted to Walkers’ website at www.walkersglobal.com

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Comment

History of offshore finance The advent of tax havens on the world financial scene was largely as a result of the First World War and resultant European tax hikes. Joanna Gray considers their history and glimpses at what the future might hold.

The First World War, killing eight and a half million men, was not only the first war of global proportions but also resulted in the first, faltering steps to economic globalisation – it laid the smallest foundations for the global village that we now inhabit. And in doing so directly influenced the evolution of tax havens: from Guernsey and the Isle of Man in Britain to Switzerland and Liechtenstein in Europe and Bermuda and The Bahamas in the Caribbean.

The sheer enormity of the conflict and the terrific financial cost (approximately $200,000,000,000) to all the countries involved meant that taxation would never be the same again. So financially crippled did countries become that their leaders were forced to tax the survivors to boost treasury coffers. On top of this a wave of Fabianism was taking over the western world, after the colossal efforts of ordinary men, no longer were the landed elites simply able to abandon them to their fate – a massive programme of ‘welfare’ was set into being, which of course had to be paid for. Across the world taxes rose and across the world, the wealthy looked for ways of avoiding their full impact. City of London insider and financial analyst James Smith said, ‘Before The First World War there was absolutely no need, or place for tax havens; taxes around the world were generally low. With the two world wars, the welfare state and then the Western battle against the Communist bloc, taxation increased then opening the way for countries to offer tax competitiveness.’

If we take Canada as an example of how one country dealt with the financial impact of The First World War we will be able to understand how that country’s financial and taxation policies directly affected the growth of the Bahamas as a tax shelter. By 1915 military spending alone equalled the entire government expenditure of 1913, causing a budget deficit to grow to 15 per cent of gross national product. Previous to the war the main source of revenue was tariffs on imported goods. However this was simply not bringing in the bucks. So the government imposed taxes on tobacco, alcohol, transport tickets and patent medicines but also most crucially the Business Profits War Tax Act of 1916 which required all Canadian corporations with $50,000 or more in capital to file a yearly tax return. By 1917 income tax was introduced as a temporary measure but so enormous was government debt that after the war it became a permanent feature of the Canadian economy. While Canada, to this day, always strives to lower taxes, this sudden taxation shock forced businesses and wealthy individuals to seek ways of protecting their earned income. Patriotism and support for your government during a war only lasts so long.

Further south of the American continent the financial life of The Bahamas was taking a different turn. Still part of the British Empire, The Bahamas had made what money

Photo: Adam Pniak / CC BY

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The First World War directly influenced the evolution of offshore jurisdictions

The First World War...resulted in the first, faltering steps to economic globalisation. it had in a variety of rackety trades, from privateering in the eighteenth century to bootlegging in the early twentieth century. During The First World War the country was still desperately poor with its population living a subsistence hand to mouth existence. However one visionary, an American railroad and shipping tycoon Henry M Flager set up a hotel in Nassau and established steam ship links with Florida. The Canadians followed the lead and became the first foreign bank to set up shop here in 1908. At this stage there was no concerted effort to become a tax haven but through the years with the early Canadian support, The Bahamas began to support its financial services as much as their burgeoning tourist industry. While Europe was heading

to another war Canada had been quietly building up financial links with The Bahamas. With a small, dispersed population, not being burdened with paying off war debts and still able to rely on customs duties, fees and fines, there was no need to introduce an income tax in the Bahamas which by the 1930s the Canadians were able to take advantage of. As the Canadians were taxed on residency many spent six months and one day in The Bahamas and returned to Canada free to avoid income tax.

In fact it was the later arrival of high profile, high net worth individuals that began to fully position countries like The Bahamas as upfront tax havens.

One of the most prominent men to maximize The Bahamas taxation system and glorious climate was Axel Wenner-Gren. One of the richest men in the world in the 1930s, the owner of Electrolux fled Europe before the outbreak of the Second World War. With the rumour of a friendship with Goring and his established friendship with the islands’ then Governor-General, The Duke of Windsor, Axel Wenner-Gren’s fame helped establish The Bahamas as a destination of choice for those with wealth, and even reputations to protect. Others who joined him

were Sir Harry Oakes, a famous American prospector, Sir Victor Sassoon a bon vivant financier who helped protect Jews in the Shanghai ghetto, Pan Am fonder Juan Trippe and Canadian beer manufacturer EP Taylor.

Meanwhile in Europe another war had further shattered old world economies. Another world war less than 20 years after the first was naturally followed by hefty taxation. It was during this period that countries such as The Bahamas entrenched their financial systems ensuring that they would be viewed as legitimate countries contributing to tax competition.

When The Bahamas was granted self-governance from 1964 and then full independence from 1973 it allowed the country to firm up its legislation. The 1965 Banking Act was particularly relevant.

So successful did this become that offshore financial services now accounts for 20 per cent of GDP and its institutions are all geared up to ensuring the highest of standards with regards to legislation and compliance.

While this example offers an illustration of how two countries, The Bahamas and Canada offered each other mutual benefits, not

Some offshore dominions can trace their genesis to the Norman Conquest

Countries that have the oldest claims to be tax havens also have the most complicated definition of what it is to be a ‘country’ and thus exploited their anomalous position on the world financial stage. all tax havens developed in this manner. Thanks to its neutrality in the First World War, Switzerland was not saddled with the weighty tax burden of its European neighbours and refugees fleeing from conflict ridden Germany and Russia enjoyed taking advantage of its low tax rates. However, though probably the most well-known tax haven, Switzerland or even Liechtenstein cannot take credit for being the first tax haven. In fact such endeavours into this field are relatively recent; other dominions can trace their genesis to the Norman Conquest.

Countries that have the oldest claims to be tax havens also have the most complicated definition of what it is to be a ‘country’ and thus exploited their anomalous position on the world financial stage. The most obvious examples are the Channel Islands that, whilst traditionally part of the Duchy of Normandy since 1204, were governed as separate possessions of the English crown. Today Jersey and Guernsey are British crown dependencies but not part of the UK. The history of the Isle of Man is similarly confused, passing between the Welsh, the Vikings and the English. The Isle of Man and the Channel Islands thus became adept at using their thin ties to mainland Britain and independent legal systems to offer havens from the

Photo: Webjan / CC BY

Comment

heavy tax burdens of their larger neighbours.

That both areas are islands accounts for the phrase ‘offshore’ coming into being. No fixed date can be given for their official establishment as tax havens but mercenaries, privateers and legitimate traders have certainly been making use of their lower tax rates for centuries.

What started out as places of refuge for individuals, offshore centres are increasingly, and in some cases, predominantly dealing with corporate tax avoidance.

With the full establishment of global companies, globalization of talent and operations, companies are increasingly looking to lodge their finances off-shore – their global reach genuinely leaving little allegiance to any one country in particular. However, President Obama has recently pledged to end accounting practices favourable to large multi-national companies. Indeed, the G20 and G8 have promised to ‘clampdown’ on tax havens claiming that they shield billions of dollars of legitimate tax from domestic countries.

In fact Christian Aid’s latest campaign is against tax havens, rather sensationally claiming that they cost the lives of 1,000 children a day.

We’ll come on to whether such opprobrium is deserved later.

In many island nations withdrawal of play in the offshore world will again leave small and remote countries to the vagaries of agricultural cycles and periodic devastation from natural disasters.

However, not all charities that work to alleviate poverty are behind this move; there is real concern in the aid world that limiting the viability of tax havens will have devastating consequences for those countries that have little else in the way of money making industry. While areas such as Switzerland, Singapore, Hong Kong for example have well established institutions, legal frameworks and position within the international community, other countries with low tax regimes look pretty sparse without the wealth that their financial activities bring. To understand how beneficial offshore finance is to certain countries, look no further than the example of The Cayman Islands. Tourism accounts for 70 per cent of GDP but offshore services are also crucial. The CIA World Factbook notes, ‘More than 68,000 companies were registered in the Cayman Islands as of 2003, including almost 500 banks, 8,000 insurers and 5,000 mutual funds…The Caymanians enjoy one of the highest outputs per capita and one of the highest standards of living in the world.’ The link is obvious. In many ex-British empire South Pacific island nations withdrawal of play in the offshore world will again leave small and remote countries to the vagaries of agricultural cycles and periodic devastation from natural disasters. The Cook Islands for example lacks natural resources, has poor infrastructure and its manufacturing activities are chiefly fruit processing and handicrafts. If the financial world, in terms of offshore activities, is closed to countries such as these, poverty may well take hold again.

Since talk of the ‘clampdown’, jurisdictions involved have been working diligently with the OECD to ensure that they implement the OECD’s standards of transparency and exchange of information. Indeed so successful have these efforts been that there is no longer a blacklist of uncooperative tax havens. As well as offering shelter from overbearing tax, these countries are now viewed as acting as efficient and beneficial conduits for driving wider investment into developing countries such as China and India. So rather than hindering development, tax havens do much to drive it.

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Lifestyle

Golf Simulators ‘Virtual rough’ is as bad as it gets when using a golf simulator

Golf simulators offer a pressure and green fee free instant gratification playing environment, and for those who find themselves city bound or turned off by inclement weather they ensure this is no longer a barrier to enjoying a round, thereby allowing players to keep their skills honed even in the depths of winter, or in the middle of the night for that matter.

They work by either tracking ball flight or club head motion typically via wavelength sensors and afford the opportunity to play all manner of famous courses at the drop of a hat - albeit virtually. The software enables detailed analysis of each shot so allowing for the ironing out of any issues with your swing and thus improvement of your game.

Increasingly found in hotels and de rigeur on cruise ships they serve as an entertainment and practice facility for guests, while they are also much in evidence at trade shows and conferences challenging all comers to ‘get closest to the pin’ or to ‘hit the longest drive’.

There are a number of suppliers out there with the market leaders tending to combine pedigree with a refusal to rest on their laurels.

It’s an industry reliant on technology which being constantly subject to improvement requires them to have their finger on the pulse and so upgrade product on a regular basis.

ProTee United, ProShot Solutions, Full Swing Golf and Easy Play are just some of the key players in the market offering a range of sale and rental opportunities to suit.

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www.marcoexpert.com Pat Wilkins 847 N. Collier Blvd.

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Lifestyle

Contemporary Art

Photo: Richard O. Barry / CC BY

Photo: Rory Hyde / CC BY

While the contemporary art market is by no means impervious to global financial meltdown there are still ways for investors to enjoy art and make money, they just have to look in different places says Frances Law The modern and contemporary art world breathed a collective sigh of relief in February 2010 when Sotheby’s sold Giacometti’s statue of an emaciated pedestrian, ‘L’Homme Qui Marche 1’ (‘Walking Man 1’) for £65million. It was a bright light of hope for art investors the world over; the art market was not going the same way as the stock market during the dark days of the recession. Sure, the Mei Moses index reveals that there was a 23 per cent decrease in the art market during 2009 but the fourth quarter figures show a 13 per cent increase, pointing to an upsurge in interest in art as financial asset. Indeed the recession did much to stimulate auctions with various institutions and individuals selling off assets to mitigate stock market hits or as a result of commercial mergers.

For example, ‘L’Homme Qui Marche 1’ came from the collection of Dresdner which was bought by Commerzbank AG in January 2009. That the work was a sculpture does support the old adage that when finances are tight stick with paintings and sculpture especially if contemporary and modern.

However such extraordinary sums as Damian Hirst achieved during those heady days of 2008 when one sale netted £95million are now unlikely to be repeated. Giacometti fans excepted, investors have sobered up and are now less likely to part with seven or eight figure sums for works by ‘brand name’

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contemporary artists. What they are doing instead is looking to mid-career artists who, what they lack in ‘brand recognition’ they make up for in talent.

...the recession did much to stimulate auctions with various institutions and individuals selling off assets to mitigate stock market hits or as a result of commercial mergers.

Harold Offeh, artist and Associate Senior Lecturer in Contemporary Art Practices at Leeds Metropolitan Universirty explained, ‘The question of how different levels of the contemporary art market have withstood the recession is an interesting one, for what has been a detrimental sloping off of interest in high end modern art has reaped great benefits for mid-career and emerging artists. Damien Hirst and other high-end modern artists have certainly had a knock as collectors are no longer willing to pay such sky-high prices but they are still interested in art so look downwards to artists who are midway through their career. Sophie Von

Hellerman for example is an established artist whose career is now really flourishing.’

This is an interesting example as the German painter Sophie Von Hellerman has already exhibited at Lombard Freid, New York, The Pompidou Centre, Paris and the Saatchi Gallery in London. Already establishment but yet to transcend the public imagination in the way Tracey Emin does for example, with a boost from new investors her star may well keep rising. That contemporary art of this level is growing is proven by the fact that the well respected contemporary art Halcyon Gallery in London’s Mayfair is expanding.

Confidence in the market is clearly strong.

Harold Offeh also cites emerging artists as benefiting from nascent interest from art investors. ‘Emerging artists are always hungry, both physically and metaphysically.

For very little money investors, who genuinely have an interest in the artistic process can nurture a talent and reap great rewards, financial and otherwise. From an artistic point of view, times of financial hardship often provoke great works of art as artists are grappling with and trying to interpret changing circumstances and experimenting with different media if funds are tight.’ It is here that the lines blur slightly between using art as an investment and simply using patronage for philanthropic purposes. In this economic climate however, such motivations should not be mutually exclusive.

Lifestyle

Yacht Ownership Needn’t be Taxing Photo: John Haslam / CC BY Dockyard Creek, Grand Harbour, Valletta, Malta

Corporate ownership of yachts offers buyers a higher degree of confidentiality since one’s name does not appear on any documentation and can afford the opportunity to mitigate transfer taxes and effect a speedy sale by merely transferring shareholding of that sole asset company to the new owner. This also has the potential of limiting liability in the event of any incoming claims. Others take advantage of potential inheritance tax benefits by having the assets of the company transferred to a discretionary trust fund.

Meanwhile, some who are in a position to do so prefer the route of incorporating a tax exempt company in a favourable jurisdiction to provide charter services, with the result that the subsequent income is free of local taxes.

It must also be said that in certain waters flying the flag of an offshore jurisdiction with its lack of strong associations that some other flags have may in fact ensure much safer passage – something to be particularly mindful of currently.

Some predicted that in the yachting world the economic downturn would lead to a flurry of interest activity in fractional ownership deals, yet this has not proved to be the case. Yacht owners tend to want things a certain way and the idea of compromising on decor or which weeks of the year you can and can’t use your yacht is anathema to them. As such,

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buying or leasing a yacht for exclusive use is still the preferred option.

It is important to identify not only how much money you have to allocate to a yacht, but also what are the most important criteria for you; performance , luxury, reliability?

– probably an element of all three, but the latter is especially important. After all, what’s the point employing a revolutionary new technology if the payoff is an unseaworthy vessel on a day to day basis and

... in certain waters flying the flag of an offshore jurisdiction... may in fact ensure much safer passage. long periods with your vessel out of action.

Advances in technology in recent years e.g. GPS plotting devices and powered winches have meant that quite ambitious sailing plans are now within reach of many more owners without the need for a professional crew though it is advisable to know one’s limits and not shy away from additional tuition. Moreover satellite communications mean that owners can keep abreast of their business affairs no matter where they are, not to mention the obvious safety advantages this brings.

Yacht management allows owners the freedom to enjoy their yacht while someone else takes the strain. This either manifests itself in the form of a turnkey operation where everything is taken care of, or one where the service is tailored to specific requirements such as recruiting a crew, or registering the yacht in the most appropriate jurisdiction – and there are numerous to choose from here - affording security of title and allowing the yacht to be operated in accordance with the owner’s needs.

Even when you administer everything yourself it’s worth remembering that no yacht owner is an island. For example, in terms of after sales servicing, quite apart from issues relating to routine maintenance, warranties, damage repairs and refits, it’s imperative to have an arrangement in place with an outfit who not only hold detailed records of your vessel, but who also have strong pre-existing relationships and a network of contacts across the globe. Thus, when things go awry thousands of miles away from your home port they can initiate assistance with appropriate sub-contractors and suppliers. In cases like this there’s no doubting that seasoned operators with a proven track record are those most likely to not only provide piece of mind and sound advice, but also get you out of a tight spot.

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