International Business Review by DanielSeal

horizons

forum

insights

focus

business 20:20

Providing a macro overview of International Finance Centres

Showcasing differing views from leading industry experts and encouraging debate around the topic

Focusing on the key drivers, stories and trends in International Finance Centres

Discussing the relevant companies and organisations related to International Finance Centres

Providing an inside track from industry leaders

international BUSINESS review

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global analysis, local perspective

israel edition

September 2013

special report on international financE centres

Islands of

FINANCE Against a background of globalisation and economic resurgence, this edition of the International Business Review takes a look at International Finance Centres, and their strategic importance to the Israeli economy and business community.

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horizons

The modern face of

oFfshore finance

This is, of course, nothing new – international finance centres (IFCs), perhaps more commonly known as ‘offshore’ centres (see box on page 5 for a definition), have been providing a broad variety of financial services to businesses and wealthy individuals outside their borders for some considerable time. With the onset of the financial crisis and the stinging downturn that followed, client demands have changed dramatically.

Those with assets to manage, be they personal or corporate, are seeking security, transparency and a strong track record more than ever before. And this is good news for IFCs that are able to deliver on those demands. Jersey, as a prime example, has a 50-year track record of servicing such clients and has broadened its offering and its global scope during that time. So let’s break down how IFCs may prosper as the world gets smaller. First of all, there is the handling of personal wealth. IFCs offer a range of products and services, from trusts and foundations to hedge funds and family offices that can help an individual build and protect their assets. Such offerings have been around for quite some time, but have traditionally been the preserve of wealthy Westerners. These days, however, it’s the emerging economies in Africa, Asia, the Near, Middle and Far East, and Latin America that are producing greater fortunes

for wealthy families and ambitious entrepreneurs, and for many of these people there’s no greater priority than to protect their wealth by putting it somewhere out of harm’s way. It would be no surprise to see an entrepreneur from Nairobi who’s built a fortune in telecoms seeking to set up a trust package in a distant jurisdiction, providing it has a long-standing reputation for transparent and robust processes.

From personal to business More often than not such packages come with a tax management angle too. IFCs, as a rule, provide a low-tax or tax-neutral environment, free of taxes such as capital transfer tax, capital gains tax and corporation tax. So not only will such wealth be protected, it will be handled in a financially prudent manner. On the downside, it can take a lot of faith for someone from a remote culture to buy into, for example, the common law concept of trusts, which essentially

Not only do such companies – be they large or small – benefit from access to the vast amounts of capital floating about on London’s markets (and beyond), but there is the added flexibility and freedom from many UK regulatory restrictions that come with going through an IFC. Plus, again, it’s tax-neutral too.

involves handing over your family’s fortune to the control of an organisation on an island on the other side of the world. Trust is indeed the operative word. Again, it helps if the jurisdiction in question has a track record that can appease anyone wary of corruption. The role of the IFC also extends beyond private wealth to the corporate sphere. As well as providing safer vehicles for inward investment to developing economies, IFCs are being used by expansionist businesses to gain a foothold in global markets. This could be a Swiss commodities giant like Glencore, which floated with a Jersey holding company on the London Stock Exchange (LSE) in 2011. At $10bn, it was the largest ever capital raising by an international company in London. But it’s equally becoming the preserve of companies from emerging markets seeking exposure in the West. It could be a relatively small Israeli technology company such as Starcom (see page 11),

DANIEL SEAL, CHIEF EXECUTIVE, ANTHONY BEILIN, CHIEF OPERATING OFFICER, ANNA ORCEVA, OFFICE MANAGER, JASON PEARLMAN, EDITOR, NICK KIRBY, CONTRIBUTOR, DENNIS SPENCER, CONTRIBUTOR, SARAH MANUEL, CONTRIBUTOR, SEAN DAVIES, CONTRIBUTOR, MARIA HUGGINS, CONTRIBUTOR, SAM SMITH, CONTRIBUTOR. DESIGN & LAYOUT, GRAPHICAL AGENCY, LONDON.

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And it’s not just the newspaper readers who are struggling for cash and are drawn to tax stories. As international governments become increasingly desperate too, IFCs are finding themselves under greater pressure to become more transparent in regard to their clients and their activities. The hope, with the introduction of laws like the Foreign Account Tax Compliance Act (FATCA) in the UK and US, is that governments can weed out illicit cross-border capital flows and recoup outstanding tax money ‘hiding’ in overseas accounts.

IFCs certainly boast a wide and varied source of business that means they can prosper even as the global economic picture shifts and finds new shape. But while IFCs may be in high demand in the current trading climate, they’re not immune to the financial pressures that are weighing down the rest of the world. First, take the mainstream media. Money is an emotive subject when many round the world are struggling to find it, so it’s easy for a sensationalist press to lump IFCs together under a generic ‘tax haven’ umbrella, to create a global bogey man. If money is kept offshore, it’s universally painted in the mainstream press as a bad thing, with no distinction made between

In a post 2009 economy client and corporate governance are more key than ever to doing business anywhere in the world. Wealthy individuals and corporations will still be looking to benefit from IFCs but, given the importance of reputation in the current climate, they’ll need to make sure they’re working with an IFC that’s on top of its game.

these days there’s a whole planet-worth of routes your money may take. It seems capital really doesn’t care for visas and boundaries.

shalom tel aviv We fly to the UK up to 11 times a week. Direct flights depart daily from Tel Aviv to London and Manchester.

Easyjet advert It’s just another example1/4 of how we’re making travel easier and more affordable for everyone.

Global Financial centres index (GFCI): 1. London 2. NYC 3. Hong Kong 4. Singapore 5. Zurich

€110

1. jersey 2. guernsey 3. gibraltar 4. cayman islands 5. Isle of man

Money is an emotive subject when many round the world are struggling to find it, so it’s easy for a sensationalist press to lump IFCs together under a generic ‘tax haven’ umbrella, to create a global bogey man.

one way pp based on 2 people flying

Jersey, according to the Global Financial Centres Index, is at the head of the pack when it comes to offshore finance.

*Passengers travelling on the same booking. Prices correct at 09/09/2013. Additional charges for credit card payment and baggage. For travel from now until 15/06/2013. We fly from Tel Aviv (TLV). We fly to Gatwick (LGW) and Manchester (MAN). See easyJet.com

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international business review an executive summary

jason pearlman, editor

offshore centres index:

from

THE INTERNATIONAL BUSINESS REVIEW IS PRODUCED & PUBLISHED BY ACREWHITE WHICH TAKES SOLE RESPONSIBILITY FOR ITS CONTENTS.

tightly regulated IFCs, and places with somewhat ‘looser’ regulation.

However, many IFCs have found that, while signing up to such new legislation demonstrates that they can stand up to the highest levels of scrutiny, it only further proves something that they have actually been able to prove for years, thanks to measures they put in place themselves – that their financial services sectors already comply with the highest of international standards.

setting the standards

As the world becomes more globalised, international finance centres have a significant role to play in handling personal wealth and helping businesses expand. So just what is the state of play right now?

hey say that money makes the world go round. But it’s also true that an increasingly globalised world is making money go round too. Whether you’re a privately wealthy entrepreneur in Kenya looking to safeguard your savings from an unstable domestic regime, or an Israeli technology group seeking to raise capital by listing overseas, these days there’s a whole planetworth of routes your money may take. It seems capital really doesn’t care for visas and boundaries.

which listed (via Jersey) on the Alternative Investment Market (AIM), London’s fast-growth market, raising £14.5 million in the process. Or a metals explorations and development company, such as Orsu Metals, which operates in Kazakhstan and in July this year listed on AIM and the Toronto Stock Exchange through the British Virgin Islands.

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It is a bizarre fact that the media in Israel often treats business news as ‘soft news’, and I suppose in a volatile region, it can be considered as such. However, the result is that while the media looks the other way, tremendous economic progress and industry expansion is taking place every day. With more and more startups and new technologies creating new wealth and opportunity, Israeli companies and individuals are increasingly playing a greater role on the international business scene, and the Israeli market has become a key area of potential for international financial service providers. While Israel in the most part weathered the global financial meltdown, Israeli companies big and small must be ready for the economic resurgence, in order to benefit fully from the new international growth and investment. In this edition of the International Business Review, distributed with the Jerusalem Post - the leading English language daily in Israel - we take a look at the opportunities afforded by offshore jurisdictions and the attraction of Europe - against a background of ongoing economic uncertainty. “Jersey, in particular have led the way in partnering with Israeli companies, and offering top of the range financial services, as well as a ‘live test bed’ for new technologies.” We also look forward to the Innovate Israel conference taking place in London in December 2013. The event is a showcase for Israeli innovation and a true market building opportunity for Israeli start-ups, especially in the fields of mobile communications, e-commerce and cyber-security.

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horizons

Meeting the

challenge of new legislation

Changes to the way in which crossborder wealth is reported means new procedures for financial centres around the globe, with offshore centres coming under particular scrutiny. But for many, international compliance is something they have been achieving for years.

ith the onset of the financial crisis and the subsequent downturn, the usual front-page tales of political wrangling and reality TV suddenly had to battle for column inches with a subject that isn’t generally seen as ‘sexy’ enough to sell papers – tax. Yet how those in the spotlight manage their finances, whether it’s a multinational corporation like Google and Starbucks, or a high-profile individual like comedian Jimmy Carr, has become a highly emotive, oftensensationalised issue.

The key piece of legislation to be introduced in recent times is the Foreign Account Tax Compliance Act (FATCA) – brought in by the US in the wake of the UBS tax evasion scandal of 2008/9, which proved beyond doubt that its citizens were using overseas vehicles specifically to avoid paying tax. Wounded by the revelations, the US government slapped UBS with a $780 million fine and developed FATCA, an act designed to keep US persons from hiding income and assets overseas. In a nutshell, FATCA requires financial institutions around the world to improve their due diligence procedures, in order to identify US citizens among their clientele, and to report this back to the US.

And it’s far from merely a media obsession. Since 2008, cash-strapped governments around the world have been introducing laws to combat tax evasion and recoup The three UK Crown Dependencies ‘tax dollars’ from wealthy individuals with – Guernsey, Jersey and the Isle of Man – funds beyond their borders. For many signed up to FATCA earlier this year, only IFCs, this means struggling with new for the UK government to implement its and exacting standards of disclosure and own version in an attempt to boost its own transparency. For many, however, this new ailing coffers. The Crown Dependencies climate has also been a chance to show they quickly signed up to this act too, so they have been acting with integrity all along. will be working with new laws for UK

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resident-but-non-domiciled individuals and utilising, where appropriate, a disclosure facility to enable UK taxpayers to regularise any financial affairs in their jurisdiction.

Doing the work

Silver lining So if the jurisdiction is already up to speed on everything, then in theory it has nothing to worry about, right? Not quite. The cost of such extra compliance can be crippling, and this will naturally translate to higher prices – all for the privilege of reporting on things that aren’t happening there anyway.

FATCA is a sweeping change, but the implications have often been misinterpreted. “Mainly it’s just a huge “The Channel Islands have very strong anti pain in the backside,” says Tony Mancini, money-laundering laws, and there simply Head of Tax at KPMG in Guernsey. “It isn’t that big bulk of money sitting there takes lots of work to introduce the systems untaxed that the governments are hoping,” and procedures to even identify the US says Richard Brooks, Head of Tax for the citizens who are our clients, then to report British Isles at RBC Wealth Management. the right information on them and their “The question you have to ask is to what income to the tax office. And it covers extent are we responsible for policing trusts and companies we administer. We people in other states? How much burden have to put the procedures and systems in can they keep piling onto the Channel place to do that every year, and then you Islands?” need new procedures around taking on new clients, as you need different information. It seems that’s a question for which ‘they’ And now we have to do that for UK haven’t found an answer yet – the level customers too.” of compliance legislation keeps getting higher. But there are some positives from And it’s not just IFCs that have suffered – all this for IFCs that are up-to-speed with larger economies are having to comply with all the latest legislation. It means that any US FATCA as well, with Denmark, Mexico, individual wanting to use an IFC knows Ireland, Spain and Germany among those from the outset what is expected of them, that have already concluded agreements and also that with a compliant jurisdiction with the United States. they’ll be operating somewhere that has a greater history of applying the highest All of this extra procedure is in the interest standards. of disclosure. It won’t necessarily change much regarding the money being kept in any well-regulated, well-monitored Jersey has very strong jurisdiction. In most of the headlineanti money-laundering grabbing cases, like Carr’s use of a Jersey laws, and there simply vehicle to ‘avoid’ tax, the tax management isn’t that big bulk of itself is actually legal, and it will remain so under the new laws. Only now the financial money sitting there institutions involved have to say what untaxed that the they’re up to. This may seem a lot of extra work: most IFCs have already signed tax information exchange agreements with other countries, demonstrating that they are operating in a transparent and legitimate fashion – Guernsey, for instance, has 44 in place at the time of writing, Jersey has 31 (with 13 in progress), the Cayman Islands have 31 signed and British Virgin Islands has 19. It is arguable that these Tax Information Exchange Agreements (TIEA) make the regulatory structure of such jurisdictions more rigorous than not only other offshore centres but, ironically, even those nations that are clamping down with the new legislation. “The mainstream press gives no differentiation between these ‘tax havens’, which is a massive frustration,” says Geoff Cook, CEO of Jersey Finance. “You get good and bad performers in any field, and international finance is no exception. These days the focus is on sound corporate governance, and we’re already signed up to everything regarding transparency, from OECD to FATCA. The US and UK are only now looking to start keeping a record of asset ownership information, but we’ve been doing that for years. And our trust industry is rare in that it’s all regulated and subject to random checks.”

What is an IFC? There is no consensus on what constitutes an ‘international finance centre’ (IFC). The term is interchangeable with ‘offshore centre’ and IFCs are referred to in some quarters by the pejorative ‘tax haven’, owing to the fact that they provide low-tax or tax-neutral environments for individuals and corporations. In a 2007 IMF paper, economist Ahmed Zoromé proposed a new definition: ‘A country or jurisdiction that provides financial services to non-residents on a scale that is incommensurate with the size and the financing of its domestic economy’. This, however, would include not only smaller centres that are typically identified as being IFCs, such as the Channel Islands, Bermuda, British Virgin Islands and the Cayman Islands, but also the United Kingdom and Singapore.

Conference sees step-up in tax information exchange

governments are hoping,” says Richard Brooks, Head of Tax for the British Isles at RBC Wealth Management.

Take Jersey, for example. As one of the few jurisdictions that regulates trust providers, it is streets ahead of other centres which don’t have the structures that both clients and global governments now deem as necessary. “Jersey has to operate in a professional environment and be open and honest and assist in the collection of taxes where they are actually due, and it does that anyway,” says Brooks. “Jersey is a very compliant jurisdiction. We see it first-hand from working here, and the financially-informed politicians in the UK realise this is the case.” The challenges facing IFCs may in fact prove positive for places such as the Channel Islands, who are leaders in offshore finance. If every jurisdiction plays ball and signs up to FATCA, then each will be subject to the same extra hurdles as those that have already committed themselves. It will be a more level playing field, with factors such as transparency, reputation and track record carrying more weight.

nternational cooperation on tax regulation was the name of the game at this years’ Society of Trust and Estate Practitioners (STEP) conference in Israel.

Assistance in Tax Matters as a legal basis for this increase in regulation and the development of a single international standard on taxation and asset reporting.

Speaking at the conference in Tel Aviv’s Dan hotel, Israel’s Tax Authority head Moshe Asher told the attendees that, “The authority is pushing forward legislation on the automatic exchange of information with countries that don’t have a tax covenant with Israel, and promoting information transfer procedures as part of the US FACTA Foreign Account Tax Compliance Account.”

Meanwhile, the conference heard how Israel, due to the relative stability of the economy, and due to the increase in tax agreements with foreign jurisdictions, was becoming a greatly desirable location for foreign residents and new immigrants – principally among the Diaspora Jewish community looking to relocate to Israel.

Delegates at the conference heard that the new approach by the authorities in Israel very closely echoes moves by the OECD, tasked by the G8 nations to ensure better transparency and free flow of information to prevent offshore assets evading taxation. Moreover, the OECD had pointed to the increase in countries joining the Convention on Mutual Administrative

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Moreover, the same factors were raised as being key to the international tax planning for high tech companies, many of whom were based or founded in Israel, as well as for real estate companies and family investment offices. The conference also addressed issues surrounding private banking and the management of trusts and trustees.

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international business review september 2013 7

Forum

Expert opinion

The ultimate conundrum: increasing returns without extra risk

Listing in london: how to solve the settlement issue

Avram Kelman, Partner, Fladgate LLP t. +44 (0) 20 3036 7352 e. akelman@fladgate.com w. www.fladgate.com

Many foreign companies (including companies incorporated in Israel) find the London Stock Exchange an appropriate place to come to for the purposes of raising capital and increasing the visibility of their companies. Elsewhere in this supplement, the issues surrounding a listing in London have been discussed. There is an easily overlooked but critical point that has to be considered when listing in London - the electronic settlement system by which shares on the London Stock Exchange are traded. To gain a London listing, shares must be eligible for electronic settlement unless the London Stock Exchange agrees otherwise. The problem for foreign issuers is that shares or other securities issued by companies from jurisdictions other than the UK or Ireland cannot be directly held in

or traded through the electronic settlement system used by the London Stock Exchange, known as CREST. To solve this problem and provide shareholders the benefit of electronic trading, a foreign issuer must create securities eligible to be admitted to CREST that mirror the underlying securities of the company. Such companies appoint a depository (typically, the company’s registrars) which becomes the registered holder of the shares. The depository then holds the shares on trust for the shareholders. The depository can then issue a depository interest, which is a UK security, to the shareholders and these represent the underlying security on a one for one basis. These depository interests are an English law instrument

and trades in them can be settled through CREST just like a regular share. Through the depository arrangements, the holders of depository interests retain full economic and voting rights over the underlying shares. If you are a foreign company that wants to have its shares traded on the London Stock Exchange, your UK based lawyer will be able to assist you with the paperwork necessary to set up the depository interests so that this can be achieved.

The State of Israel’s economy has shown itself to be remarkably robust and well managed over the last few years, boasting a growth rate higher than most Western or ‘developed’ economies.

Fladgate LLP is leading London law firm with an acknowledged expertise in acting for Israeli companies seeking to expand into the overseas market.

all is not lost: recovering investments if things go wrong Since that fateful Autumn day in 2009, when the financial world ground to a screeching halt and billions of investment dollars disappeared into nothing, investment opportunities have been approached with tremendous caution and circumspect.

Carl W Linde, linde krost law t. +972-9-9629100 e. enquiry@lindekrost.com w. www.lindekrost.com

Today prudent investors are wary, and a trend has developed where it is better to “do nothing’’ rather than risk investment altogether. The result of this has been that in an ailing private equity and investment market, many great ideas never see the light of day. For the lucky few who do still attract investment, the prerogative is now with the investors to make sure that proper due diligence is undertaken to mitigate their risk and exposure. When negotiating a deal the investor’s aim is to ensure that any money put into a business will provide a solid return on investment. Investors need to be sure of the facts and confident that they are making a wise decision, especially in the current market environment. Due diligence is that assessment process. More than that, due diligence is also a reality test — a test of whether everything is as it seems. It allows investors to take a look “under the hood of the car’’ to expose any problems, verify information and assets, and ensure that the factors driving the deal are real. All too often, however, investors neglect this process, and expose themselves to unnecessary problems. Whether it is reading a prospectus or subscription documents, which are often assumed as “non-negotiable”, or identifying bank account details and the movement of investment money, there should be no stone left unturned. Investors should not

be scared to ask questions and make sure the money is in safe hands. Most commonly, investors fail to assess where their money is going to be kept, and how it is going to be transferred. This is particularly vital for safeguarding an investment, as tracking the path of an investment at the time it is made allows for the removal of recovery obstacles, and the establishment of safeguards such as “stop loss” and money monitoring. Overall the due diligence process when done properly can, at times, be frustrating and time-consuming. Yet it is a necessary prerequisite to a well-planned acquisition, and it can be quite informative in its analysis of the target company as well as its measures of the costs and risks associated with the transaction. Buyers should resist the temptation to conduct a hasty “once over,” either to save costs or to appease the seller. Like any audit, a due diligence process is designed to answer the important questions, and ensure with reasonable assurance that the seller’s claims about the business are fair and legitimate. Effective due diligence is both an art and a science. So too is the process of asset recovery – getting back your investment when things haven’t gone as planned. The skill in the recovery process is the ability to identify the “target” through which assets may be recovered and being able to move swiftly on that target without negatively affecting the investors recovery prospects. When undertaking asset recovery on behalf of an investor the lawyer assisting the client needs to piece together information obtained from the following sources:

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Human Intelligence – information pertaining to individuals involved, including background checks, personal asset statements, relationship between one another and with third parties, corporate directorships, professional qualifications and regulatory memberships. Financial Intelligence – information regarding bank accounts, expenditure, use of investment proceeds, placement of funds, reserve deposits, offshore and onshore accounts, capital asset purchases, debts and mortgages and the inflow of other sources of money. Publicly Available Intelligence – information sourced from company registries, land and deed registries and internet sources. Data Sources – including the prospectus for the investment, subscription agreement, promotional materials and correspondence between the investor and those proposing the investment. With the assistance of the courts and law enforcement agencies, action can be taken to freeze assets and prevent the further dissipation of investor funds, while caution must be exercised to ensure that the investor’s rights and entitlements are not infringed. The recovery process is often lengthy but getting back even 50% of what could have been lost is better than writing off the investment altogether.

Linde Krost is regarded as a leading, multinational firm in the area of private capital, tax, real estate and trusts.

Israeli investors are seemingly no different from their European or American counterparts when it comes to stocks and shares. Many ‘retail’ investors remain sceptical about the volatile nature of the global equities market, inconsistent returns and consequently, the safety of their capital. Notwithstanding the potential for real above inflation growth and higher returns over the long term and despite the return to normalcy in the markets over the last 18 months, many investors have not shifted gear. They are still choosing to hold much of their savings in cash deposits or Government guaranteed assets, such as bonds, solely for peace of mind and security. Retired investors in particular are tolerating low yields, causing a marked negative impact on their standard of living. For example, one year deposit rates being offered by Israel’s top 4 banks, Leumi, Hapoalim, IDB and Mizrachi currently stand between 0.25% – 1.11% for deposits

over 500,000NIS. Investors can be secure in the knowledge that their capital is safe (subject to the banks remaining solvent), but with inflation currently at 2.20% in Israel, the real value of their money is eroded while held on deposit.

don’t stock pick or advise our clients to hold individual assets, but believe in diversifying risk across asset classes, whilst always ensuring that our clients’ portfolios are tailored to satisfy their individual requirements.

Here’s the problem - while the current rates of interest from deposits and yields from Government bonds remain so low (a 1 year Government Bond is currently yielding 1.274%), how can you maximise the potential return from investments without having to compromise on safety?

Our clients will typically hold a portfolio with underlying assets spread across a range of corporate bonds and government debt, well diversified equities and international property – all in funds that can be traded daily. We have a well developed and tested methodology for choosing the right funds to use and take advantage of technology to provide us with core data to make our choices from the thousands of funds available. Most importantly, our pro-active approach and the very low cost of fund switches on the platform we use enables us to pursue higher returns from the low risk funds in which we specialise. We prefer to underpromise and over-achieve, consequently our investment return target for a low risk portfolio is 5-7% per annum after fees.

This is where HBFS can really help. Over the last decade we have built our expertise and excelled in the provision and management of low-risk investment portfolios. Using predominantly bond, equity and mixed asset funds, our strong performance history is a testament to this. We work closely with individuals, companies, charities, pension funds and trusts in both Israel and the UK. We

Just made Aliyah or thinking about it? If you are thinking about finally making that move to the Holy Land or have recently made Aliyah and are still holding assets outside of Israel, there are some significant tax benefits available. The Israeli Government currently gives you a 10 year grace period to bring assets into the country with no local Israeli income tax liability. This gives you a great opportunity to grow a low risk portfolio in one of our Offshore Wrappers for the next 10 years and then take it into Israel, free of any tax. If you are fed up with earning very little on your deposits and would like to learn more about how HBFS may be able help you get higher returns from a low-risk portfolio, please get in touch with one of our Consultants for a no-obligation chat.

For further information, please contact Moshi or Saul on +44 208 953 3444 or alternatively send an email to moshi@hbfs.co.uk or saul@hbfs.co.uk

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www.hbfs.co.uk

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international business review september 2013 9

insights

A world of

ofFshore finance

Businesses and individuals around the globe are looking beyond their shores to ensure that their finances are run as effectively as possible. Here are the financial jurisdictions that are leading the way…

Jersey

luxembourg

bermuda

curaçao

shanghai

Offshore centre: 1 GFCI: 28 Areas of expertise: Banking, trusts, foundations, capital markets, philanthropy Key global markets: UK, Europe, Gulf States, Russia, China, India, Israel Notes of interest: Jersey’s authorities have signed 39 international tax agreements to date

Offshore centre: N/A GFCI: 18 Areas of expertise: Investment funds, private banking, reinsurance Key global markets: Europe, Asia, Notes of interest: Luxembourg is the world’s second-largest investment fund centre after the US

Offshore centre: 7 GFCI: 49 Areas of expertise: Captive insurance, shipping registry Key global markets: US, UK Notes of interest: Bermuda is the world’s third-largest reinsurance market

Offshore centre N/A GFCI: N/A Areas of expertise: Family office, IP licensing, funds, captive insurance Key global markets: Latin America, US, Europe Notes of interest: Curaçao benefits from its status as part of the Kingdom of the Netherlands, which boosts its legal position and links to the EU

Offshore centre: N/A GFCI: 24 Areas of expertise: financial derivatives, bonds, Yuan trading Key global markets: US, Asia, Europe Notes of interest: The Chinese government has launched a concerted drive to make Shanghai a top global finance centre by 2020

guernsey

monaco

malta

Offshore centre: 2 GFCI: 31 Areas of expertise: Banking, asset management, hedge funds, private equity, e-gaming Key global markets: Far East, India, Russia, Latin America Notes of interest: There are £90bn of deposits held in Guernsey

Offshore centre: 8 GFCI: 60 Areas of expertise: Banks, trusts, private client Key global markets: Europe. Asia, Latin America, Middle East Notes of interest: In 2009, Monaco was removed from the OECD’s ‘black list’ of uncooperative finance centres after it signed 24 tax agreements

Offshore centre: 9 GFCI: 68 Areas of expertise: Banking, funds, insurance, pensions, e-gaming Key global markets: Europe, China Notes of interest: Malta’s financial services industry is rapidly growing since joining the EU

cayman islands

mauritius

panama

Offshore centre: 4 GFCI: 41 Areas of expertise: Captive insurance, hedge funds, company registrations, shipping, aircraft registration Key global markets: US, Asia, South America Notes of interest: Cayman’s funds industry represents over US$1 trillion in net assets

Offshore centre: 10 GFCI: 70 Areas of expertise: Banking, insurance, capital markets, fund administration and management Key global markets: India, Africa, China Notes of interest: Mauritian structures are responsible for 42% of foreign direct investment into India

Offshore centre: N/A GFCI: 67 Areas of expertise: Banking, trusts, insurance, re-insurance Key global markets: US, Central America, Latin America Notes of interest: Panama was removed from the OECD’s ‘grey list’ in 2011 after signing its 12th tax information exchange agreement in two years

isle of man

gibraltar

geneva

Offshore centre: 5 GFCI: 43 Areas of expertise: Banking, captive insurance, fiduciaries, fund management, e-gaming, precision engineering Key global markets: UK, Europe. China, Asia Notes of interest: Isle of Man has a AAA credit rating from Moody’s and AA+ from Standard and Poor’s

Offshore centre: 3 GFCI: 35 Areas of expertise: Private banking, fund management, private equity, corporate investment Key global markets: Europe, South America, Africa Notes of interest: e-gaming industry centre of excellence

Offshore centre: N/A GFCI: 7 Areas of expertise: Banking, private wealth, fund management Key global markets: US, Europe, Asia Notes of interest: Geneva is the world’s largest centre for managing institutional fortunes

dublin

cyprus

zurich

Offshore centre: N/A GFCI: 56 Areas of expertise: Banking, hedge funds, asset financing, fund management, corporate treasury management, specialised insurance Key global markets: Europe, US Notes of interest: Dublin is the world’s number one centre for hedge fund management, handling 40% of the global alternative fund market

Offshore centre: 12 GFCI: 75 Areas of expertise: Private banking, corporate structuring Key global markets: Russia, Eastern Europe Notes of interest: There are serious questions surrounding Cyprus’ future as an IFC, as a result of financial turmoil in the region

Offshore centre: N/A GFCI: 5 Areas of expertise: Banking, asset management, fund provision, alternative investments Key global markets: US, Europe, Asia Notes of interest: Swiss banking is expected to suffer heavily from the US Governments clamp down on secrecy

british virgin islands (BVI)

hong kong

Offshore centre: 6 GFCI: 47 Areas of expertise: Corporate structuring, captive insurance, funds Key global markets: Hong Kong, Singapore, China, Eastern Europe, Russia Notes of interest: Around 50% of the government’s revenue comes direct from licence fees for offshore companies

Offshore centre: N/A GFCI: 3 Areas of expertise: Equity funding, private banking, fund management, technology Key global markets: China, US, Asia Notes of interest: Hong Kong was named the world’s top financial centre for the past two years by the World Economic Forum, thanks to the strength of its business environment, infrastructure and favourable tax regime

bahamas

singapore

Offshore centre: 11 GFCI: 73 Areas of expertise: Banking, trusts, fund administration, capital markets, e-commerce, insurance, and corporate and shipping registries Key global markets: US, South/Central America Notes of interest: The Bahamas has been providing banking & trust services to the international financial community since the 1930s

Offshore centre: N/A GFCI: 4 Areas of expertise: wealth management, private banking, hedge funds Key global markets: China, South Asia, India Notes of interest: PwC predicts Singapore will overtake Switzerland as the world’s top hub for managing international funds (by AUM) by 2015

new zealand (wellington)

Offshore centre: N/A GFCI: 42 Areas of expertise: Banking, asset protection, trusts Key global markets: Asia-Pacific, Cook Islands, South America Notes of interest: New Zealand is known by many as the ‘Switzerland of the South Pacific’ for its favourable asset protection climate

Source: Offshore centre ranking and GFCI ranking are taken from the Global Financial Centres Index 13 (published in March 2013)

international BUSINESS review global analysis, local perspective

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10 international business review september 2013

FOCUS

jersey: P

roperty experts may extol the virtues of ‘location, location, location’ when it comes to the value of houses, but it seems the same rule applies to islands too. Jersey sits 85 miles south of mainland Britain and 14 miles from the coast of France, a position that’s bestowed a great deal of significance on the island over the centuries – from a failed French invasion of 1790 to the 1940 Nazi occupation. But while the nature of its strategic appeal may have changed, the jurisdiction remains a gateway for European ambitions of a different kind. For many companies around the world, Jersey has become an important financial route to the London and European markets.

How important? Well, Jersey accounts for the greatest number of FTSE 100 companies registered outside of the UK, with 37 companies listed on the UK main market (LSE) as of March 2013. These companies have a market cap in excess of £103bn. Jersey is also a popular route to the Alternative Investment Market (AIM), the UK’s fast growth market – listing 34 companies, with a total market cap of more than £1.7bn.

international business review september 2013 11

“Through Jersey you can go straight in and float at no extra cost, with no extra due diligence needed,” explains Geoff Cook, CEO of Jersey Finance. The fact that Jersey boasts an unusual level of access is indicative of the amount of faith that the London Stock Exchange places in the island, which, it recognises, is operating to the same governance standards. This has been helped by recent changes to the UK’s Takeover Code, which now covers international companies listing on AIM but incorporated in Jersey, and improves the process of takeovers for those companies managed and controlled elsewhere.

Greater flexibility While Jersey may be attractive in terms of its similarity to the UK, it also boasts several key differences that really help it stand out. Jersey offers a tax-neutral environment, with no capital transfer tax, capital gains tax, value added tax, withholding taxes, wealth taxes or corporation tax. This provides tax certainty and allows for fiscally efficient investment across borders. Hence a Jersey Public Holding Company may be comparable to a UK PLC, but without many of the restrictions to which a company would be exposed if setting up in the City itself.

When flights to London take only 30 minutes, and the island boasts more than 40 years’ experience of working closely “For an international business, using a with the City, this all makes perfect sense. vehicle like a Jersey company gives you But there are other factors at play. While flexibility along with all the advantages relations are close, and Jersey has an that a UK company would give you,” says allegiance to the British Crown, it crucially Raulin Amy, Head of the Corporate and retains its independence and is not a part Commercial team at law firm Ogier. “You’re of the United Kingdom. It has its own able to do certain things under the Jersey Parliament and its own judicial system. Companies Law that you can’t under the This creates an unusual environment UK Companies Act. The latter is more where the laws governing business are prescriptive in terms of what you can and complimentary to, yet also significantly can’t do, and how you have to do it.” distinct from, those in the UK. And it’s this that enables the island to deliver the This is a sentiment that is echoed by ideal business conditions for international James Mews, Director of Finance Industry finance. Development at the States of Jersey. “There’s no shortage of good blue-chip One key advantage that Jersey has over examples that have used Jersey,” he says. other international finance centres (IFCs) “The main reason is our state-of-the-art as regards UK listings is that shares of company law, probably the leader in Jersey companies can be traded directly its field. It’s robust and familiar to UK through CREST, the UK’s paperless trading lawyers because it’s broadly similar to UK system. If you’re going to trade shares from legislation, but it’s also very flexible. As other jurisdictions, like the British Virgin we’re not constrained by the EU company Islands or the Cayman Islands, you have law directives, we’ve developed our law to issue and trade depository receipts – ahead of the UK’s, and that’s something we an extra step that costs time and money. pride ourselves on.” Meanwhile Jersey has three CRESTenabled registrars on the island.

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gateway to europe For companies around the world looking to list on London and Europe’s stock markets, Jersey can provide the perfect opportunity – and is developing a strong reputation in the process The question for an international business looking at London is, therefore, less why should they go via Jersey, but why they shouldn’t. “A Chinese mining company that has no physical presence in the UK anyway won’t want or need to subject itself to UK tax laws,” says Mike Jeffrey, a Partner at law firm Carey Olsen. “They would if they went to the UK direct, but they don’t have to if they go via Jersey.”

Added value It should come as no surprise then that plenty of businesses have planted their flag in Jersey already. Take Swiss commodities giant Glencore, which at $10bn was the largest ever capital raising by an international company in London when it floated on the LSE with a Jersey parent company in 2011. Polymetal International plc, a Russian company which is incorporated in Jersey, is part of the FTSE 100. Meanwhile AIM listings have proven popular with Chinese companies, such as clothing manufacturer Camkids, looking to tap into that market.

Jersey is a route to London that’s built on stability, reputation, flexibility and experience. “We have a long track record, from working with FTSE-100 companies down to junior AIM-listed companies,” says Raulin Amy. “We’re not reinventing the wheel – it’s just a quality product. Plus all the softer factors, all the expertise and advisors to properly help with listings – other jurisdictions simply don’t have that.”

JT LAB: Leading the way

The Israeli-based tech company Starcom floated in February on AIM, the LSE’s market for growth businesses, through a Jersey incorporated holding company. It raised £14.5 million, a respectable sum for an AIM float.

For innovative companies around the globe, Jersey not only offers the ability to list on London and European markets – through the island’s Tier 1 telecoms carrier, JT Group, it also acts as a ‘test bed’ for innovative companies looking to research, develop and launch their own products.

Appleby acted as Jersey counsel for the Starcom listing – and as James Gaudin, a Partner in the law firm’s Corporate and Commercial department explains: “There are strong links between Jersey and Israel that have developed over the years. If a company is looking to list anywhere, especially a smaller company, then AIM is one of the more robust exchanges. Investors are comfortable to go with a UK-registered market like AIM, and Jersey is a well-trodden path in terms of international companies listing that way.”

Yet these companies aren’t attracted simply by how Jersey compares to the UK, but what it offers as a jurisdiction in its own right. Jersey is politically stable, well-regulated and has a proven track record. It also has a vast range of personnel and expertise: of its population (currently around 99,000), there are 12,470 professionally trained staff working within finance and support industries, in companies with a global presence and an understanding of the needs of companies wanting to expand. Investors know that they’re dealing with a reputable jurisdiction that is on the OECD ‘white list’ and has already achieved a level of transparency that’s still being sought by the UK and US. That’s a crucial factor in what is a changing global business environment.

starcom & jersey

Gaudin adds that there are several Israeli companies on his books that may consider an AIM listing in the fashion of Starcom, which makes sense given Israel’s strength in small, intellectually rich tech companies. It will simply depend on appetite and the state of the markets, locally and globally. “They will wait for the right time, but it’s likely that more will float,” he says.

Companies

Jersey accounts for the greatest number of FTSE 100 companies registered outside of the UK, with 37 companies listed on the UK main market (LSE), as of March 2013.

£103bn

Jersey registered companies on Capitalisation LSE

An independent report produced and published by AcreWhite distributed by the Jerusalem Post. AcreWhite takes sole responsibility for all contents.

JT Lab provides tech growth companies around the world with a unique opportunity to carry out R&D on a real carrier’s infrastructure, in real time, with real customers. It provides a contained, safe test environment where key learnings can be captured on a small scale prior to larger scale rollout. JT is the only Tier 1 carrier in the world that offers its network and customer base to companies to trial their technology, products and services before launching worldwide, making it the perfect launch pad into the UK and European markets.

international business review september 2013 13

It’s about loving what we do, creating strong client relationships and applying some drive. Fairway is a regulated, independent, owner managed boutique group of companies dealing with private client business, fund services and pension trustee services.

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a rewarding partner for business For companies around the world looking to list on London and Europe’s stock markets, Jersey can provide the perfect opportunity – and is developing a strong reputation in the process

n o i s pen

FOCUS

ste u r t

IBR: In what other areas is Jersey seeing growth as far as its relationship with Israel is concerned? AM: Technology and IT is an area of particular interest. Jersey is a thriving hub of e-commerce activity offering one of the most advanced, tech savvy environments in Europe. As well as having a stable and safe telecoms infrastructure in place and a commitment to world-class IP protection, Jersey is also leading the world with the pan-island deployment of fibre broadband. This initiative is transforming the Island, offering companies an ideal environment for innovative high-bandwidth, globallyfocused services.

Senator alan Maclean, minister for economic development, states of jersey

International Business Review (IBR): Jersey has been visiting Israel for some time now. How is that relationship progressing? Senator Alan Maclean (AM): As a result of numerous visits by Jersey’s government, its regulator, financial services firms and representatives from the wider business community, Jersey has a history of working with Israel that stretches back a number of years now. This commitment has really helped Jersey raise its profile within Israel’s business community.

Group

fairway_FP_ad-intl_business_review-DRIVE.indd 1

8th Floor, Union House, Union Street, St Helier, Jersey, JE2 3RF tel: +44 (1534) 511700 reception@fairwayjersey.com Regulated by the Jersey Financial Services Commission

11/09/2013 14:30

Israel clearly shares with Jersey the desire for success in high quality, cutting edge business. Based on a closely aligned vision, I am delighted that Jersey intends to strengthen its relationship with Israel further this year. Following my own visit earlier this year, a delegation from Jersey that includes representatives of Jersey’s government and business community will be visiting again in October, and in December Jersey will also be represented at Innovate Israel.

IBR: Jersey is perhaps predominantly known as an International Finance Centre. What sort of financial services developments are you seeing between Jersey and Israel? AM: There’s no doubt that financial services is the engine of Jersey’s economy and that Jersey is recognised globally as a leading, well regulated International Finance Centre. Having 13,000 highly skilled workers across Jersey’s banking, funds and wealth management sectors gives us a solid platform to explore new aspects of our financial services offering. In particular, Jersey has highly attractive company legislation and the right expertise to support Israeli businesses seeking to access capital markets, through listing on exchanges in key markets such as London. In addition, we are seeing real opportunities for Israeli funds to be domiciled and managed through Jersey, thanks to Jersey’s flexible funds regime and highly experienced funds workforce.

businesses to prosper. An incredibly accessible place, it benefits from fast and frequent access to London, as well as 30 European hubs like Geneva, Paris and Dublin, offering connectivity without compromise. We frequently hear that Jersey’s unparalleled quality of life, and its safe, stress-free environment for living and working are key reasons behind business location decisions. There is also government-level commitment to major investment in Jersey’s infrastructure. Major developments include 600,000 square foot of prime office space in St Helier, creating Europe’s newest business quarter.

With this infrastructure in place, and a shared commitment to a digital economy, there are real benefits to be gained from a strong collaboration between Jersey and Israel. Indeed, we are already seeing interest from Israeli tech companies considering establishing a presence in Jersey to help support their expansion, and we are delighted to be part of their success.

Over the past four years, we have seen year-on year increases in enquiries from businesses wishing to establish a presence in Jersey, evidence that we are sending out the right message to the international business community.

IBR: What attracts international businesses to Jersey? AM: The focus for Jersey is very much on creating the right environment for innovative businesses to flourish. As well as offering some of the lowest direct tax rates in Europe, businesses are attracted to Jersey by the approach of its businessfocussed, independent government and its highly experienced network of professional services firms and globallyrenowned experts.

AM: The overwhelming message from Jersey is that it is very much open for business, and the feeling I get from recent visits is that Israel shares a very similar outwardly-looking vision. I remain convinced that there are real opportunities for Israel and Jersey to work together, particularly within the financial services and technology sectors.

Overall, Jersey is focused on being a place that rewards enterprise, not punishes it. Businesses find that an attractive proposition.

Locate Jersey is the department within Jersey’s government responsible for promoting Jersey as a leading business centre overseas, targeting inward investment, handling enquiries from businesses and individuals considering establishing a presence in or moving to Jersey, and supporting the diversification of Jersey’s economy.

IBR: What differentiates Jersey as a jurisdiction specialising in innovative global business? AM: Everything is geared up in Jersey to enabling internationally-focused

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IBR: How do you see the relationship with Israel evolving in the coming years?

about locate jersey

14 international business review september 2013

international business review september 2013 15

Business 20:20

digital jersey

island innovators

Digital Jersey is attending DLD in Tel Aviv, along with some technologists and creatives from Jersey, all of whom are looking to inspire and be inspired by the Israeli tech community. What is ‘Digital Jersey?’ Digital Jersey is the independent organisation responsible for promoting Jersey as a leading centre for digital excellence. Working alongside government and industry, Digital Jersey coordinates activities to improve the environment for digital business in Jersey; these activities include skills development, technical innovation, research and marketing. Digital Jersey was established in early 2013 with the objective to accelerate development in the Island’s digital sector, with three key aims, namely: 1. To increase economic returns to the Island through international partnerships and business, 3. Reap social benefits from being a connected population, 3. Develop the reputational advancement of Jersey as a digital Island.

Q&A

Why was Digital Jersey set up? Digital Jersey was established following Jersey’s recent emergence from the global financial crisis. As a result of this challenging period, security policies have left the once strong position of offshore financial centres under threat, and Jersey joins a list of jurisdictions each looking to grow their digital economies. The digital sector is unique in that it offers the potential for high growth from a modest capital investment, making it a prime target sector for regions possessing ambition to diversify. Digital Jersey is working to position the Island as the jurisdiction of choice for companies looking to develop in areas of e-commerce, intellectual property, and digital industry in a general sense. Digital Jersey is seeking to leverage Jersey’s existing advantages including; its competitive tax base, excellent legal system, good infrastructure, strong public finances, high quality workforce and world-class finance sector to advantage.

mark stutchfield, head of innovation and strategy, jt lab

How can international partners get involved with Digital Jersey?

will enable investment in digital companies.

At Digital Jersey we are working closely with Jersey companies who are looking to develop overseas partnerships to establish technologybased development projects.

This means that for any company providing technology-based products and/or services considering Jersey as a location to develop their business, Digital Jersey will have the necessary resource to help them assess the benefits of this decision and utilise our on-Island connections to make this process easier.

In addition, we are developing a unique proposition for the development of innovative services, which can be trialled across an entire population. This has already attracted the attention of companies involved in cybersecurity and, especially e-Health, which is set to become a focus for Jersey. The emergence of big data as an invaluable tool for assessing macro trends and personal opportunities is also an area where Jersey’s robust legislative environment has started to attract companies wishing to exploit a first-mover advantage across a number of applications. We have made significant progress in this area recently and will officially be partnering with the finance industry to set up a Tech Growth Fund that

It’s the fact that you wouldn’t expect all of those things from a company like JT that make them possible, because the truth is that there aren’t many Tier 1 telcos like JT at all. Being small makes us quicker to adapt, more agile and therefore able to innovate – all key factors in the modern telecommunications industry, especially when you have the vision to see the opportunities all around you. JT’s size is one asset; its location is another. Based in the Channel Island of Jersey,

with TED RIDGWAY WATT, CHIEF EXECUTIVE OFFICER, DIGITAL JERSEY

Ted comes to the helm of Digital Jersey Ltd with 20 years experience in connecting international business to the UK science base and proven success with a range of multinationals, new technology companies, academia and government.

You wouldn’t necessarily expect a telecommunications company from an island measuring just nine-miles-by-five to be installing an award-winning fibre-optic network that will connect 45,000 premises by 2016, to become the fastest ubiquitous fibre network in the western world. You probably wouldn’t expect it to be hosting world leading technology companies from around the world at its revolutionary ‘JT Lab’ test bed facility either, or at the forefront in the Machine-to-Machine market and you may not even expect the CEO of a publiclyowned organisation from an island of fewer than 100,000 people to be speaking at prestigious Silicon Valley conferences.

What are your long-term aims? We are confident that by 2016 Jersey will be a world leader in terms of its connectivity. It is intended that by 2016 we will have fully functioning, 100% penetration gigabit fibre in place, Island-wide. The Gigabit Jersey project will enable vast amounts of data to be generated and used in Jersey. The States of Jersey can exploit this by creating an intelligent infrastructure for Jersey (e.g. traffic systems, ID systems, energy usage, analysis of police communications, community health,

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etc.) and in so doing so, trigger a range of Jersey-based businesses and opportunities that will secure Jersey’s place on the digital map as it were. Sustained success in digital jurisdictions globally is correlated to early and strong support for e-Government platforms delivered on the basis of intention to drive growth in the private sector and will ultimately provide societal benefits through the total availability of innovative services. It is to this end that the States of Jersey is embarking on a number of transformative projects in Jersey to encourage and support the development of new businesses. An example of this would be the move towards community healthcare, this requires increased use of telecare and telehealth. Essentially, the long-term aim of Digital Jersey is to act as an accelerator for the digital economy and the development of a digital connected society.

off the south coast of England, we are 20 milliseconds away from the UK and mainland Europe – but we’re not bound by UK or EU legislation. The Island is English-speaking and is best-known for its world-leading international offshore finance industry, which has spawned a strong professional services sector – there’s also a new government agency, Digital Jersey, backing tech innovation and seeking to develop this growing new strand to Jersey’s economy. However, it’s the fibre-to-the-home network that makes JT and JT Lab stand out. JT Lab provides companies with the opportunity to test, research, develop and launch products on a real network, on real customers and in real time. We’ve been in talks with some of the leading software and hardware firms in the world about trying out their new products and services in our unique testing facility, which is currently already being used by a world-leading hardware company and a top Israeli internet-security firm. This is all down to our agility – for some major global players, arranging and carrying out testing can take months or years, our size means that we can make that happen in a

timescale that better fits the fast-moving modern telecommunications sector. Whatever the future trends and new product/sector innovations may be, for all areas of telecommunications whether it be fibre, mobile and the Machine-toMachine markets, JT is perfectly placed for them. Our vision is to become the partner of choice for global telecommunications innovation which we will deliver through unique propositions such as JT Lab. Importantly, we’re experienced at engaging with organisations at the cutting edge of this dynamic and rapidly-changing industry.

contact jt To find out how we can help your organisation visit www.jt-lab.com or www.jtglobal.com

trust turmoil With much fanfare and following hype and expectation the Taxation of Trust Law was enacted in 2006, as part of a package of tax reforms designed to increase the flow of foreign capital into Israel and help establish Israel as an international financial center. In the years following the introduction of the Taxation of Trust Law it is estimated that approximately $3 billion per year entered the Israeli economy from family members abroad. A major vehicle responsible for foreign income flowing into Israel is the Foreign Settlor Trust (FST), a trust which exempts Israeli and other beneficiaries named in the trust deed from paying Israeli tax. This exemption caused the FST to become a “star performer” enticing foreign settlors to establish such structures and thereby enabling them to channel trust assets to their beneficiaries who lived in Israel. In late 2012 early 2013 the FST came under tremendous scrutiny by the tax authorities primarily as a result of several publicized cases involving the abuse of

the FST. Several high profile personalities were accused of using the FST as a means of not paying tax, resulting in the tax authorities being unable to collect billions of Shekels in tax. These abuses resulted in a reactionary response by the authorities who were so outraged by this situation that they were driven to introduce sweeping reforms concerning the taxation of trusts. These reforms were included in the Budget Law which came into effect on the 1st August 2013. From the 1st January 2014 a FST which has one direct or indirect Israeli resident beneficiary will be considered an Israeli Resident Beneficiary Trust. An Israeli Resident Beneficiary Trust is obliged to pay tax on its worldwide income in Israel. However, there is no indication as to how the authorities intend to determine whether in fact there is an Israeli resident beneficiary named in a FST, which is crucial to the implementation of the new law. The difficulty facing the tax authorities

here is that discretionary irrevocable trusts often used for long term estate planning allow for beneficiaries to be substituted, excluded and included at the discretion of the trustees at any time. The beneficiaries of such a trust are not fixed and such a trust may be around for generations.

The Taxation of Trust Law introduced in 2006 has made a 180 degree turn in only 7 years.

There are many other technical issues which have to be dealt with for example the capital gains made on trust assets. The present situation is that any capital gains made by the sale of a trust asset before 2014 will not be subject to tax however the sale of such an asset after 1 January 2014 will render the entire gain subject to Israeli tax. The tax consequences made on a significant gain would be considerable if the trust asset is sold at the incorrect time.

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The Taxation of Trust Law introduced in 2006 has made a 180 degree turn in only 7 years. The adoption of the new laws has effectively disabled the original purpose of the FST, by turning off the tap which allowed billions of Dollars to flow into the economy from family members abroad. The saving grace is that there is a window of three months before the new law concerning the FST kicks in. The window should be utilized by all those involved with Foreign Settlor Trusts to plan and restructure their affairs, and solutions are available to ensure that they are not the ones paying for the abuses of others.

contact linde krost For more information contact Alan Krost on: enquiry@lindekrost.com or visit www.lindekrost.com