nevis - the standard · governed by the nevis offshore banking ordinance 1996. disclosure in...

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Population: 11,400Currency: Eastern Caribbean dollar; EC$2.70 = US$1 (mid-2005, fixed rate)Language: EnglishTime zone: GMT minus 4Centre’s expertise: Ambitious with IBC legislation based on Delaware;

broad-based products and secrecy guarantees

General requirementsNevis Limited Liability Company (LLC), IBC, plus offshore banks,exempt trusts, mutual funds, insurance, Nevis FoundationEnglish Common LawIBCs only24 hoursUS$220 plus registered agent fee (which may add US$1,000+)US$220 plus registered agent fee (which may add US$750)NilUK onlyNoneEnglish characters only

Share capitalPermitted currencies US dollarsMinimum paid up None (IBC’s only)Usual authorised capital n.a. (IBC’s only)

Directors and personnelMinimum number 3Local required NoCompany secretary & qualifications Yes, none specified

Shareholders and AGMMinimum number 1Disclosure requirements NonePublicly accessible records Only articles of incorporation, name of registered agentObligations for annual meetings YesLocation of AGM Anywhere

AccountsRequirement to prepare NoneAudit requirements None except annual audits for insurance companies & mutual fundsAccount filing obligations NonePublicly accessible accounts None

OtherRequirements to file annual return NoChange in domicile permitted YesNeed for registered office YesNumber of companies set up in last year 2,800Total number of companies on register 16,000

Data supplied by Guardian Trust Company Limited

Type of entity

Type of lawShelf company availableTime to establish a new companyMinimum costAnnual feesTaxationDouble taxation agreementsForex restrictionsLanguage & name restrictions on companies

NEVIS

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NEVISGary A. Ferraro, President and CEO

Guardian Trust Company Limited

NEVIS is an island of 36 square miles (93 square kilometers) in the Caribbean Sea, 200 miles southeast ofPuerto Rico and 1,000 miles south of Miami. It is an independent parliamentary democracy based onBritish Common Law and the British parliamentary system with an elected local assembly. It is a part ofthe Federation of St. Kitts and Nevis. The federation also has its own representation at the United Nations.

Nevis is politically stable and the federation has had a history of political stability. It has won highmarks for freedom from Freedom House of the US.

US dollar is second currencyThe official currency is the Eastern Caribbean dollar, pegged to the United States dollar at EC$2.70 to

US$1. The US dollar is generally considered to be a second currency and is freely accepted and inter-changeable throughout the island. The exchange rate versus other currencies fluctuates according to worldmoney markets.

Business ordinance modelled on DelawareThe start of the ambitions of Nevis to be active in the offshore financial business go back to the Nevis

Business Corporation Ordinance of 1984 based on US corporate law in the state of Delaware. This wasfollowed by other laws creating trusts in 1994 and limited liability companies – which have proved themost attractive of the financial products – the following year. Offshore banking was added in 1996. In thelast two years state of the art laws have been adopted to attract insurance companies and mutual funds.

The last few years have also seen enactment of legislation against money laundering, in keeping withpromises to the Organisation for Economic Cooperation and Development to see that the strict confiden-tiality that Nevis promises to its offshore clients is not abused by money launderers and other criminalelements.

Taxation treatiesThe Federation of St Kitts and Nevis has a tax treaty with the United Kingdom. There is also a Mutual

legal assistance treaty with the United States of America.

No income taxThere is no income tax, capital gains tax or withholding tax in Nevis. Income earned outside Nevis is

not taxed in Nevis. Companies incorporated under the Nevis Business Corporation Ordinance 1984 andthe Nevis Limited Liability Company Ordinance 1995 are fully exempt from corporate tax, income tax,withholding tax, stamp duty, capital gains tax, asset tax, or other taxes on income originating outsideNevis. Local companies incorporated under the Companies Ordinance 1999 are subject to a corporate taxon profits. Certain local companies may qualify for tax holidays of up to 15 years for an approved projectas well as for exemptions on customs duty on imported goods. Nevis nationals pay a social services levyof 3 percent and a social security tax of 5 percent. There are import duties on certain goods, and there isa land tax that is based on the rental value of buildings and land.

Secrecy of informationSecrecy of information is governed by the Confidential Relationship Act 1985. This act prohibits the

disclosure of any information obtained in the course of business, and applies to banks, and professionalsas well as Government officials. The act provides prison sentences for violations. Banking secrecy isgoverned by the Nevis Offshore Banking Ordinance 1996.

Disclosure in company formation and trust settlementDisclosure of beneficial ownership is not required on incorporation of a company. Confidentiality is

governed by the Confidential Relationship Act 1985. Companies are not required to be audited, but theymust have a local registered office. A trustee is not required to register the beneficiaries of a trust.

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Powerful impenetrable protection vehicles for assetsThe two laws, the ordinance of 1994 and its amendment of the year 2000, that govern the formation,

establishment and operation of international trusts offer an amalgamation of the progressive interna-tional trust legislation of various jurisdictions combined with innovative provisions to form a totallyunique product. When properly structured alone or when used in conjunction with the provision of theNevis Limited Liability Company and/or Nevis International Business Corporation ordinances, userscan create powerful virtually impenetrable protection vehicles for their assets.

Outstanding features of the trust are that the trust assets and income deriving from the corpus of aninternational trust are exempt from all exchange controls and estate, corporate, gift, income, inheritance,withholding, succession and stamp taxes in Nevis. Under the Nevis International Exempt Trust Ordinance,the international trust can be created with only one trustee and the settlor or trustee of the trust may alsobe named as a beneficiary. The rule against perpetuities does not apply.

An important feature is preventing fraudulent dispositions. A creditor seeking to set aside a transferto an international trust is required to establish beyond reasonable doubt that the transfer constituted afraudulent disposition. Every creditor has to pay a bond with the court as a security deposit before bring-ing any action. The ordinance also provides for the appointment of a protector to monitor the major actsof the trustee as an added protection feature.

The assets and earnings of a Nevis international exempt trust are exempt from all exchange controlsand all forms of taxation and stamp duty in Nevis.

State-of-the-art LLC legislationNevis law recognizes the following types of companies: 1. Local companies incorporated under the Companies Ordinance 1999; 2. Companies incorporated under the Nevis Business Corporation Ordinance 1984; and 3. Companies formed under the Nevis Limited Liability Company Ordinance 1995.

The Nevis Business Corporation Ordinance 1984 governs the establishment of non-resident domesticcompanies. The Ordinance is based upon American, Delaware and New York laws. However, the ordi-nance also contains many features of British company law which provides for its utilization by practitio-ners familiar with either or both types of company statutes. A Nevis corporation can be incorporatedusing any name except words such as bank and insurance, loans, finance and other related words. Thename of the corporation must be suffixed with either corporation, incorporated, company, limited, orS.A., or their abbreviations to indicate that it is a corporation with limited liability.

A company may be incorporated to conduct any lawful business and there is no need to enumeratethe particular objectives for which the company is incorporated. The registration process is simple andcan be done in 24 hours once it is in compliance. A person interested in registering an offshore companyin Nevis need only provide the name of the company and ensure that the company complies with theprovision of the ordinance. An offshore company registered in Nevis is required to maintain a registeredagent at all times and a registered office in Nevis.

With the enactment of the Nevis Limited Liability Company Ordinance (LLC), the island of Nevisboasts of some of the most state-of-the-art LLC legislation in the world. The Nevis LLC is a businessentity that provides an alternative to those who might consider using corporations or partnerships.

The Nevis LLC Ordinance protects the company’s assets from the creditors of its members throughthe limitation of creditors to a charging order and further specifies that this is the exclusive and onlyremedy available to the creditor and gives the company the power to redeem the interest of creditors.

Gary A. Ferraro is the President and CEO of Guardian Trust Company Limited.Contacts: tel + 869 469 5295, fax + 869 469 5268; email [email protected] www.guardiantrustcompany.com; Address 1 Springates South, Government Road, Charlestown, Nevis, West Indies.

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aPopulation: 2.8 million (2000)Currency: Balboa, par with US$Language: Spanish, but English widely spokenTime zone: GMT minus 5Centre’s expertise: Key location between North and South America with growing political

stability

Data supplied by Icaza, González-Ruiz & Alemán

CorporationsLaw 32 of 26 Feb. 1927 complemented by Decree Law No 5 of 2 July1997Yes2 to 5 working days300 Balboa annual franchise tax; US$600 would cover tax plusresident agent’s chargesApprox. US$450-$500, including agent’s chargesNo tax on transactions or business outside Panama; no tax onforeign source incomeNoneNoneSpanish is language of documents; names may not be similar toexisting names

Any but US$ is usualNoneUS$10,000

Three minimum, either individual or corporateNoneRequired but no nationality requirements

1, but no nationality requirement, except for corporations doingretail business in PanamaPublic registration of directors and officers, but not ofshareholdersNo requirement to disclose beneficial ownersAs provided in company charterMeetings may be held outside Panama, as per company charter

Not for offshore companies; only if the company operates insidePanamanian territoryYesRegistered office is not compulsory, but registered agent is25,200 companies set up in 2004n.a.

Not for companies that do not do business in PanamaNot for companies that do not do business in PanamaNot for companies that do not do business in PanamaNot for companies that do not do business in Panama

Type of entityType of law

Shelf company availableTime to establish a new companyMinimum cost

Annual feesTaxation

Double taxation agreementsForex restrictionsLanguage & name restrictions on companies

Permitted currenciesMinimum paid upUsual authorised capital

Minimum numberLocal requiredCompany secretary & qualifications

Minimum number

Disclosure requirements

Publicly accessible recordsObligations for annual meetingsLocation of AGM

Requirements to file annual return

Change in domicile permittedNeed for registered officeNumber of companies set up in last yearTotal number of companies on register

Requirement to prepareAudit requirementsAccount filing obligationsPublicly accessible accounts

General requirements

Share capital

Directors and personnel

Shareholders and AGM

Other

Accounts

PANAMA

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PANAMARoberto R. Aleman H., Partner

Icaza, González-Ruiz & Alemán

THE REPUBLIC OF PANAMA is located on the central American isthmus and unites North and SouthAmerica. It covers 75,517 square kilometers, and is subdivided politically into nine provinces plus aspecial administrative region of San Blas. The Panama Canal crosses the republic from north to south, atthe Isthmus' narrowest point and plays an important role in the world commerce as the primary shippinglink between the Atlantic and the Pacific oceans.

The population of slightly more than three million, according to 2004 estimates, comes from a varietyof racial groups: mestizos are 70 percent; whites,10 percent; mulattos are 12 percent; and the remaining 8percent are natives. The official language is Spanish, but English is widely spoken especially in the ser-vices sector of the economy. For centuries, even before the construction of the Panama Canal, the country’sgeographic position allowed it to play an important role in global commerce. Today, the country’s welltrained bilingual workforce, the US dollar as its currency, the excellent communications andtelecommunications, and its political stability all play an important role in the development of Panama asa global corporate and financial centre.

Separate but harmonious branches of governmentThe constitution of the Republic of Panama establishes the country with a unitary, representative,

democratic, and republican government. The legislative, executive and judicial branches of governmentact separately but in harmonious cooperation.

The legislature consists of a unicameral legislative assembly, currently of 78 deputies, elected to fiveyear terms by direct, universal, and popular suffrage. Members may stand for reelection.

The president and the cabinet constitute the executive branch. The president is elected for five yearsby direct popular suffrage. Two vice presidents are elected concurrently for the same period.

The judiciary consists of a supreme court, superior courts, and such tribunals as established by law.The nine magistrates who make up the supreme court are nominated for 10 years by the president andcabinet and have to be ratified by the legislative assembly. The Public Prosecutor's Office is headed by anattorney general and a solicitor general nominated by the executive branch with the advice and consentof the legislative assembly.

An appointed governor heads each province and is assisted by a provincial council of boroughrepresentatives. Each municipality has a mayor and council.

Well-rooted system of legalityThe constitution itself is the primary document for the Panamanian legal system since it constitutes

the principal doctrine that organizes the overall structure of the State. Subordinately, in a lower levelfollow the republic's laws that may be organic or regular, followed by decree-laws and cabinet decrees.Thereafter rank all executive decrees, regulations, ordinances and resolutions (administrative or judicial).Treaties or international agreements rank alongside the law.

The Panamanian system is rooted in a notion of legality, which suggests that all acts exercising theauthority of the State should be grounded in previously enacted legal norms. This means that publicofficials cannot execute acts that are not expressly authorized in the law. In contrast, private parties havecontractual freedom to do what the law does not prohibit.

US dollar is the effective paper currencyThe official monetary unit is the Balboa at par with the freely circulating United States dollar. The

constitutionally mandated absence of officially issued paper currency allows the US dollar the role ofeffective currency in Panama.

Private sector is the main economic playerThe private sector is the main economic player in Panama. The most rapidly developing sector of the

economy is services, with special emphasis on local and international commerce carried out within and

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afrom Panama. Outstanding in importance are the Panama Canal and its ports, the International BankingCenter, the Colon Free Zone, export processing zones, ship registration (Panama’s is the largest shipregistry in the world), and the well-established international corporate financial centre, as well as tourism.Services indeed account for about 80 percent of the economy. The fact that the government cannot printmoney also helps financial discipline and keeps inflation low.

Advantages of Panama as a financial centreLaw No. 32 of l927 covering the organization and operation of Panamanian corporations, has helped

make Panama one of the most important corporate centres in the world and has made Panamanian cor-porations accepted by bankers, investors and governments. The potential of the financial centre has beenrecently extended by laws establishing the Panama Trust and private interest foundations.

There are clear tax advantages for companies registered in Panama but operating worldwide becausePanama has territorial taxation, and thus only locally-sourced income is taxed.

The tax advantages that Panama offers may substantially benefit persons and companies wishing touse Panama-based corporations for holding purposes or for directing business activities in different partsof the world. Among the many advantages of Panama are the following: • The country is virtually located at the crossroads of the world, with the best air and ocean transportation,

both for passengers and freight, as well as excellent telephone, fax and email communications withthe rest of the world.

• There is an excellent banking system, which includes 100 banks with offices in Panama, among themsome of the largest and best known banks operating internationally, supported by strong banksecrecy laws.

• There are absolutely no exchange controls and there is complete freedom to transfer funds. No regist-ration with the authorities nor any permits are required for any transaction involving the receipt ortransfer of funds.

• The monetary system of the country uses the US dollar as its medium of exchange. • There are no taxes on capital (stocks, bonds and other investments) held by Panama corporations. • There are no tax treaties with any other country. • The Colon Free Zone offers unique opportunities for the duty free storage, repackaging and reship-

ment of goods of all sorts. • The recently established agency for the Panama Pacific Special Economic Area, provides incentives

for attracting and promoting foreign investments. • The income tax law of Panama specifically exempts from its provisions the following:

A. Directing from an office established in Panama, operations which are completed, consummated ortake effect abroad;

B. Invoicing, from an office established in Panama, the sale of merchandise or products for a sumhigher than that at which said products or merchandise had been invoiced to the office establishedin Panama, provided that said merchandise or products are handled exclusively abroad;

C. Income from international maritime commerce of vessels registered under the Panama flag.D. Corporate dividends or participations when said dividends or participations are derived from in-

come not produced within the territory of the Republic of Panama, including the income derivedfrom the activities mentioned in points a and b above.

E. The interest earned for funds kept in time deposits or savings accounts.

Panama was originally placed on the Financial Action Task Force black list in the year 2000, but wasquickly removed the following year for its substantial efforts to conform to 40 recommendations set outby FATF in its code of good practice to combat money laundering and financing of terrorism. The effortsof Panama coincided with a general improvement in the economy after trimming of state expendidtureand a programme of liberalization and privatization that emphasized a commitment to business-friendlypolicies. The IMF reported in 2004 that Panama had taken steps to comply with the Basel Core Principlesand that the banking system was sound. The country has also benefited from recognition of Panama’sgrowing political stability.

Roberto R. Aleman H. is a Partner of Icaza, González-Ruiz & Alemán.Contacts: tel + 507 205 6000, fax + 507 269 4891; email [email protected]; website www.icazalaw.comAddress Aquilino de la Guardia Street, IGRA Bldg. No 8, P.O. Box 87-1371 Panama 7, Republic of Panama.

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ittsPopulation: 35,000Currency: Eastern Caribbean (EC) dollar; US$1=EC$2.70 (mid-2005, fixed rate)Language: EnglishTime zone: GMT minus 4 hoursCentre’s expertise: Recent entrant into offshore finance but with wide range of services

Data supplied by Marketing and Development Department, Ministry of Finance, St Kitts

Ordinary and exempt companies limited by shares, guarantee, or by bothCompanies Act, 1996 (No. 22 of 1996)No24 hours once all of the documents filed are in orderUS$200 government filing feeAnnual renewal fees are US$200 for exempt companiesNo corporate tax payable by exempt companiesCaribbean Community double taxation agreementNoneCertain restricted words in the Companies Business Names Order

US dollars, pounds sterling, Canadian dollars, euros, EastCaribbean dollarsNo minimum specifiiedUS$10,000

1NoLocal company secretary who is also an authorized person required

None specifiedShareholders and beneficial owners must be known by thecompany secretaryFormation documents for company are filed at the Registrar's officeYes, however this may be dispensed with as long as all membersagree in writingNo specific location mandated by law

All companies are required to file an annual returnYesRegistered office required in St Kitts.n. a.n. a.

YesNot for exempt private companiesNo requirement to file accounts with the Registrar of CompaniesNot accessible for exempt companies

Type of entityType of lawShelf company availableTime to establish a new companyMinimum costAnnual feesTaxationDouble taxation agreementsForex restrictionsLanguage & name restrictions on companies

Permitted currencies

Minimum paid upUsual authorised capital


Minimum numberDisclosure requirements

Publicly accessible recordsObligations for annual meetings

Location of AGM

Requirements to file annual returnChange in domicile permittedNeed for registered officeNumber of companies set up in last yearTotal number of companies on register



Share capital



Other

Accounts

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ST KITTSShawna Lake, Director

Marketing and Development Department, Ministry of Finance, St Kitts

ST KITTS is a 68 square mile island in the Caribbean Sea, centrally located between North and SouthAmerica. The island is part of the twin island Federation of St Kitts and Nevis and was formally a colonyof the United Kingdom. The country gained its independence from the UK on September 19th 1983 and isan independent sovereign nation. English is the official language spoken by the 35,000 inhabitants of theisland.

The Government in St Kitts is a parliamentary democracy and a member of the Commonwealth ofNations. Queen Elizabeth II is head of state of the Federation and is represented on St Kitts by a governorgeneral. Basseterre is the capital of St Kitts and it is the administrative capital of the Federation.

The currency used in St Kitts is the Eastern Caribbean Dollar, which has been fixed at EC$2.70 to US$1since July 1976. There are four domestic banks operating in St Kitts, namely First Caribbean InternationalBank, Bank of Nova Scotia, St Kitts-Nevis-Anguilla National Bank and Royal Bank of Canada. Thesebanks conduct international banking transactions on behalf of their local and overseas customers andprovide foreign exchange accounts in US dollars, pounds sterling, Canadian dollars and euros to theircustomers.

The legal system is based on the English Common Law and the island is part of the multi-state EasternCaribbean Supreme Court comprising a high court of justice, and a court of appeal. The judicial commit-tee of the Privy Council in London serves as the final appellate court.

Financial servicesIn 1996 St Kitts officially launched itself into the financial services arena with the passing of four laws:• The Companies Act, No. 22 of 1996• The Trusts Act, No. 23 of 1996• The Limited Partnerships Act, 1996• The Financial Services (Regulations Order) SR&O 25 of 1997The Companies Act provides for the formation of ordinary and exempt companies. Ordinary compa-

nies are those that carry on business with residents of the Federation of St Kitts and Nevis and are subjectto corporate tax at the rate of 35 percent per annum. Exempt companies are those that do not conductbusiness with residents of the federation and are therefore exempted from all income, withholding orcapital gains taxes. Companies formed under the Companies Act may be limited by shares or guaranteeor by both shares and guarantee (hybrid companies).

The Companies Act also makes provision for the formation of segregated portfolio companies. Thistype of company is single legal entity that can allocate its assets and liabilities between different portfo-lios within the company. When sub-divided the assets and liabilities of each segregated portfolio aredeemed to be entirely separate from each other and the creditors of a segregated portfolio only haverecourse against the assets of that particular segregated portfolio. Segregated portfolio companies areused for captive insurance for companies whose insurance risks are not sufficiently large to justify theformation of their own captive. They are also useful for investment funds either to hold portfolios withseparate asset managers or to enable investors to invest in a common pool of investments.

St Kitts foundationsSt Kitts later introduced the Foundations Act, No. 8 of 2003, which provides for the formation of St

Kitts foundations. The foundation is a creature of civil law and is used for very similar purposes to theCommon Law trust. The concept of a foundation consists of the endowment of a specific amount ofassets for a specific purpose or object determined in the articles of the foundation. An appointed bodyknown as the board of councillors is entrusted to carry on the business and affairs of a foundation and topursue its objects. The person(s) who creates the endowment is known as the founder and the personswho benefit from the endowment are known as beneficiaries. Unlike the traditional corporation, thefoundation does not have a share capital, it does not recognize shareholders and the founder does notretain or acquire any such ownership rights in relation to the foundation’s property. The law doesrecognize, however, the beneficiaries or the persons in whose benefit the foundation is created, which

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ittscan include the founder. The foundation provides a fiduciary structure for the orderly transfer anddisposition of the assets to the beneficiaries upon the death of the founder, keeping control of assetsduring lifetime.

All entities available in St Kitts may be formed within 24 hours of filing of the relevant documentationwith the Registrar of Companies, Trusts, Limited Partnerships and Foundations. The registration systemis very efficient and the authorized providers operating in St Kitts provide very sophisticated services totheir international clientele.

Regulatory frameworkSt Kitts has an extremely comprehensive body of laws and regulations governing anti-money laun-

dering and to prevent financing of terrorism. Among the major measures are:• The Proceeds of Crime Act, No. 16 of 2000• The Financial Intelligence Unit Act, No. 15 of 2000• The Financial Services Commission Act, No. 17 of 2000• The Anti-Money Laundering Regulations, SR&O 15 of 2001• The Anti-Terrorism Act, No. 21 of 2002• The Organized Crime (Prevention and Control) Act, No. 22 of 2002The Financial Services Commission (established by the Financial Services Commission Act) coordi-

nates all activities of the regulators for the island. The regulators are responsible for conducting inspec-tions of financial institutions and issuing guidance to these institutions on anti-money laundering andcounter financing of terrorism measures. The Financial Intelligence Unit (FIU) conducts analysis andinvestigations of suspicious transactions and activities and also assists with requests for internationalcooperation from other countries. St Kitts cooperates and participates in the activities of the FinancialAction Task Force (FATF) and of its Caribbean branch and is not on any FATF blacklists. St Kitts is also amember of the OECD sub-group seeking to establish a so-called level playing field and has worked con-sistently with this group since its formation at the Ottawa Global Forum.

Recent and proposed developmentsThe St Kitts and Nevis International Ship Registry was established in 2003 and the registry began its

work in January 2005 after the appropriate governing regulations had been implemented and put intoeffect. The registry now has more than 100 vessels registered. The registry is operated out London in theUK and is being managed by maritime experts with many years of experience in registration services,marine engineering and ship surveying.

The island also operates a citizenship by investment programme that is a very well controlled andregulated system whereby persons wishing to obtain a second passport may make an investment into anapproved development project in St Kitts of at least US$250,000 and they would qualify to apply for StKitts and Nevis citizenship. Background checks are done on all applicants to ensure that they have nocriminal records or are not being investigated or pursued for any sort of criminal activity. The programmeis well recognized and is viewed as one of the better economic citizenship programmes being operated inthis region.

The island is focusing on the further development of its tourism products such as hotels, entertain-ment facilities and services. There are two areas that are currently being developed into five star tourismdestinations. These are the south east peninsula to the south of the island and the White Gate area to thenorth. St. Kitts has gained the attention of many persons all around the world and is now being seriouslylooked at as the “Next Destination of Choice” for fulfilling all financial services and investment needs.

Shawna Lake is the Director of Marketing and Development Department, Ministry of Finance, St Kitts.Contacts: tel + 1 869 465 1153, fax + 1 869 465 1154; email [email protected] www.skbfinancialservices.com; Address Marketing & Development Department, Ministry of Finance,Govt of St Kitts, Rams Building, Liverpool Row, Basseterre, St Kitts, WI.

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renadines

Population: 117,000Currency: Eastern Caribbean dollar, EC$2.70 = US$1 (mid-2005, fixed rate)Language: EnglishTime zone: GMT minus 4Centre’s expertise: Flexible IBC and trust acts, interesting mutual fund legislation and

competitive pricing

Data supplied by St Vincent Trust Service Ltd (of Jeeves Group)

IBC/LDCCommon Law plus local statutes on banking and financeYesSame day; can also be done onlineRegistration is US$125 for IBC, higher for trusts and banks; agentsoffer packages for US$800+ without directorsUS$100 for IBCs, higher for other financialsNo taxes for 20-year periodNoneNoneNone apart from usual to obviate confusion; Royal etc. not allowed

Any, but US$ is standardNoUS$100 for IBCs, higher for other financials

1NoNo

1NoNoYesAnywhere

NoYesYes1,026 (in 2004)6,280

YesNoNoNo

Type of entityType of lawShelf company availableTime to establish a new companyMinimum cost

Annual feesTaxationDouble taxation agreementsForex restrictionsLanguage & name restrictions on companies



Minimum numberDisclosure requirementsPublicly accessible recordsObligations for annual meetingsLocation of AGM




Share capital



Other

Accounts

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ST VINCENT AND THE GRENADINESAlex Jeeves, Managing Director

St Vincent Trust Service Ltd (of Jeeves Group)

ST VINCENT AND THE GRENADINES is a group of 18 small islands with 120,000 people that formpart of the Windward Islands, 1,600 miles east of Miami. The islands include renowned holiday islandsof Mustique and Bequia in the Grenadines, set in some of the world’s best waters for sailing. The countrygained independence from the UK in 1979, but the British sovereign remains head of state. St Vincentand the Grenadines has a parliamentary democratic system of government with a house of assemblyconsisting of 15 elected representatives and six senators appointed by the governor general on the adviceof the prime minister. The parliamentary term is five years, but the prime minister may call elections atany time. The official language is English. The legal system is the Common Law supplemented bystatutes. The court system starts at the level of magistrates’ courts, and there is a high court and court ofappeals. The judicial committee of the Privy Council in London is the court of final appeal.

The last few years have seen important changes in the economic structure. Previously, St Vincent andthe Grenadines was dependent largely on agriculture, especially on bananas, which had taken over as themain crop from sugar. The government has encouraged diversification, through increasing the produc-tivity of the banana crop, promoting other crops and supporting the growth of the services sector, nota-bly development of tourism and of financial services, with some success. In 2003, the revenue from themaking of the Disney film Pirates of the Caribbean, starring Johnny Depp, surpassed that of agriculture.

The islands are vulnerable to external shocks, both natural, from weather changes like droughts orhurricanes, and economic, from recession in the major tourism markets of the US and UK. In the 1990s,this was seen in the big variations in the annual economic growth rates, from a high of 8.3 percent to a lowof minus 2.9 percent. Unemployment is a problem, with rates of about 20 percent.

International financial centreThe country has a long tradition of international banking and finance. Its first bank was set up in 1837

by Barclays, and the first indigenous bank opened its doors in 1909. The concept of an internationalservices sector was first introduced by Swiss lawyers three years before independence. In 1996 a majoroverhaul was conducted of financial regulations in order to make financial services a focal point of theeconomy. An Offshore Finance Authority was set up to manage, direct, control and supervise the off-shore financial industry, and this body was renamed the International Financial Services Authority (IFSA)in November 2003. The laws governing the financial centre were amended and strengthened in 2001 and2002 to ensure that the regulatory regime is strong. The twin pillars of St Vincent legislation are the rightto privacy and to maximum asset protection. The government reiterated that it would not help othergovernments to collect their taxes under the guise of investigations or prosecuting offences. At the sametime, and the recent compliance legislation has stressed this, the St Vincent will only authorise financialinstitutions that are carefully vetted and regulated. In revoking the licences of three banks in 2005, IFSAdeclared: “the Authority continues to show a low tolerance towards financial institutions that are not incompliance with laws and regulations. As regulators, we expect that the institutions conducting busi-ness in this jurisdiction have a strong physical presence, to be compliant with the laws and regulations ofthe jurisdiction and abide by prudential banking practices.” The legislation of 2001 and 2002 set up botha Financial Intelligence Unit and a National Anti-Money Laundering Committee to discourage criminaland terrorist activity.

Offshore operationsOffshore entities may take the following forms:

• International banks• International business companies• Limited duration companies• International trusts• Mutual funds• International insurance companiesExempted companies and exempted limited partnerships receive a statutory guarantee when they are

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renadinesformed against imposition of any taxes for a 20-year period (even though such companies do not face anysuch taxes under the present system).

Banks can hold a Class I or a Class II offshore banking licence. All applicants must complete a “fit andproper” questionnaire. All banks that are licensed must have a physical presence in St Vincent, must havelocal employees and at least one director approved by IFSA. Class I bank applicants must pay a non-refundable application fee of US$1,000, establish and maintain a capital fund with fully paid-up capitalof not less than US$1 million or its equivalent, and hold a deposit or invest the sum of US$500,000 or itsequivalent in another currency in such manner as the IFSA may prescribe. For Class II banks, the non-refundable application fee is US$750, the capital fund must be US$500,000 or equivalent and US$50,000or equivalent must be held or invested as IFSA prescribes. In addition, a Class II bank must designate andname a registered agent, who is not an official of the bank, to act as its registered agent.

International trustsThe International Business Companies Act No.18 of 1996 and regulations SRO No. 33 of 1996 and

their amendments are the basis for corporate incorporation. Sensitive words such as “bank”, “banking”,“fund” or “insurance” will not be allowed without the relevant licence. Company names must include anabbreviation that signifies limited liability. Incorporation through documents in a foreign language isallowed, provided that a translation is attached. There are no requirements for a local director or anydomicile requirements.

Filed articles of incorporation in St Vincent are flexible and designed to contain a minimum of infor-mation that includes the name of the company, the registered agent, the currency of the capital andauthorised capital, type of shares and other provisions that the company requires. The registered agent,who is required as the only person who may submit applications for formations, or a solicitor mustsubmit a certificate of compliance that the requirements of the act have been met. This is the only infor-mation or the public record. Matters such as the operational aspects and rights of shareholders, directorsand meetings are reserved for the by-laws, which are a company internal document not open to thepublic.

There are two types of incorporation certificates available, either with or without the director’s namedisplayed. The IBC act allows a wide range of shares, including registered or bearer shares, voting ornon-voting, shares that may have less than one vote each, shares that entitle participation only in certainassets.

Trust deeds are registered in a confidential government Trust Registry and an official certificate ofregistration is issued to the settlor/grantor. A duly registered trust will not be rendered unenforceablebecause it was invalid under the laws of the settlor/grantor’s domicile or residence. Thus, forced heir-ship law and community property regimes can be avoided. Purpose trusts without named beneficiariesare allowed and statutorily prescribed. A foreign judgment against a registered trust or settlor or benefi-ciaries is not enforceable in St Vincent if the judgment was based on law inconsistent with the Interna-tional Trust Act 1996. The bankruptcy or insolvency of the settlor/grantor under the laws of his residenceor domicile will not affect a registered international trust. Registered trustees fall within the definition of“financial institutions” and are thereby subject to the anti-money laundering sections of the 2001 actagainst money laundering.

New mutual funds legislation imminentSt Vincent and the Grenadines has a steadily growing mutual funds sector. The government will

introduce new legislation in order to benefit from the fast growing sector for professional and institu-tional clients and will soon offer to them a very efficient application turn-around time. As a jurisdictionnot affected by the European Savings Directive it hopes to be able to attract mutual funds that may betempted away from the Cayman Islands and the BVI because of EU regulations.

International insurance has been identified as an excellent growth area, with insurers offered flexibil-ity to accommodate insurers from the largest international companies to small niche players within aregulatory framework and administration that has been developed to ensure market participation, trans-parency and confidence.Alex Jeeves is the Managing Director of St Vincent Trust Service Limited (of Jeeves Group)Contacts: tel + 1 784 423 236 1460, fax + 1 784 423 236 1461; email [email protected] www.jeeves-group.com; Address Bahnhofstrasse 7, FL 9494 Schaan, Liechtenstein.

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oaPopulation: 180,000Currency: Samoan Tala (SAT) is measured against a basket of several major curencies;

US$1 = SAT 2.70 (mid-2005)Language: Vernacular tongue is the Samoan language which is similar to other

Polynesian languages.Time zone: GMT minus 11Centre’s expertise: Because of the dateline, Samoa can register a Hong Kong or China

company yesterday

Data supplied by Samoa International Finance Authority

International companyThe International Companies Act 1987YesWithin 24 hoursGovernment does not regulate trustee companies charges; so theyvary according to service providers*Government annual US$300; but offers US$1,000 for 5 years,US$1,500 for 10 years and US$2,000 for 20 yearsExempt from taxationNoneExempt from currency and exchange controlsAny language provided certified translation in English

All major currencies except local talaNo prescribed minimumn. a.

1NoYes

1NoneNoNot if all members agree in writing not to do soCan be held anywhere, by radio, telephone, closed circuit TV orother electronic means of audio or visual communication

No, unless licensed as an international bank or insurerYesYes3,900About 16,000

Yes, must keep such accounts and records as directors deemnecessary or desirable to reflect financial positionNo, unless licensed as an international bank or insurerNo, unless licensed as an international bank or insurerNo

* Internet sites of service providers suggest incorporation may cost US$1,000.


Annual fees

TaxationDouble taxation agreementsForex restrictionsLanguage & name restrictions on companies





Requirement to prepare

Audit requirementsAccount filing obligationsPublicly accessible accounts


Share capital



Other

Accounts

SAMOA

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SAMOAErna Vaai, Chief Executive Officer

Samoa International Finance Authority

SAMOA became one of the first countries in the South Pacific to recognise the People’s Republic of Chinain 1975, and that move is one of the factors leading to the country seeking an Asian niche market for itsOffshore Finance Centre. Other important factors in the decision to target business in the Far East include:the strategic location of Samoa just east of the International Date Line in the heart of the South Pacific,thus allowing an Asian investor to register a company yesterday; the popularity of the Manu SamoaSevens Rugby Team and its winning of the much coveted Hong Kong Sevens Cup in 1993; and the conve-nience provided by the embassy of the People’s Republic of China when legalising corporate documents.There are five enabling pillars of Samoa’s International Finance Centre.

The International Companies Act 1987 is the equivalent of the international business corporationlegislation in the Caribbean.

The Offshore Banking Act 1987 later replaced by the International Banking Act 2005. The act allowsthree types of bank licences, A, B(1) or B (2), all issuances subject to international standards of best prac-tice in banking. All holders of international banking licences must establish an office in Samoa, have atleast two directors who must be individuals and employ at least one person.

The International Trusts Act 1987 governs the registration of international trusts.The Trustee Companies Act 1987 is the licensing regime for trustee companies.Trustee companies,

which include corporate service providers, play a crucial frontline role as they deal directly with theclients. Government policy on the licensing of trustee companies ensures that only established profes-sionals with international connections that are of “fit and proper” standing are accepted. A trustee com-pany must be incorporated first as a domestic entity before seeking a license.

The International Insurance Act 1988 is the licensing regime for four categories of insurance licenses,namely general, long term, reinsurance and captive. The act reflects international standards on insur-ance supervision as advocated by the International Association of Insurance Supervisors (IAIS).

All entities (except for licensed trustee companies) established under the offshore legislation are ex-empt from all local taxation, currency and exchange controls and stamp duties.

To administer the offshore regime, the Samoa International Finance Authority Act 2005 replaced theprevious Office of the Registrar, a unit of the Central Bank, with a one-stop regulatory shop called theSamoa International Finance Authority (SIFA), which has assumed the responsibilities for administeringand regulating the offshore sector. The authority is an independent statutory corporation headed by achief executive officer assisted by two assistant managers (accounts and legal) and support staff. Theauthority is overseen by a board chaired by the governor of the Central Bank and including the attorneygeneral, chief executives of the ministry of finance and SIFA, plus three private sector representatives.

To maintain Samoa’s competitive edge, laws have been continually reviewed in the light of modernuser trends.

The International Companies Act 1987The International Companies Act 1987 remains the most successful product of the Samoa jurisdiction.

It has been reviewed several times with tailor-made refinements especially for the Asian investor. The actis easy to understand and follow. Government administrative requirements are kept to a minimum withno mandatory filing of annual returns or accounts.

One feature allows an international company to register its name and memorandum and articles ofassociation in Chinese provided there is a certified translation in English. Other positive attributes of aSamoan international company include the following:

• A company can be easily set up within hours on receipt of the memorandum and articles of association,notice of registered office and payment of the prescribed fee.

• A fixed Government annual fee of US$300 regardless of share capital and discount fees for long termregistration for 5,10 or 20 years of US$1000, US$1500 and US$2000 respectively.

• Only one subscriber is required for the memorandum and articles of association.• Only one director, who may be corporate, needs to be appointed and there is no requirement for a

resident director.• Responsibilities and liabilities of directors and other officers are clearly detailed with the circum-

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oastances under which actions can be taken against them, particularly when acting as nominees forothers who may have acted fraudulently.

• There is flexibility as to the terms upon which shares may be issued (either for par or no par value,at a discount or premium, by way of gift or fractions).

• A government fee of US$100 is charged for an international company wishing to redomicile intoSamoa.

• The act permits companies limited by shares, by guarantee, or limited by both guarantee and shares(hybrid) as well as United States styled limited life companies.

• A company or interested person can register a charge with the Registry and failure to register acharge will make it void as against the official liquidator.

• The act has asset protection provisions allowing the automatic transfer of a company’s shares uponthe occurrence of specified events, for example, attempted expropriation or nationalisation of for-eign assets.

The Segregated Fund International Companies Act 2000The Samoan segregated fund international company 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. Theassets and liabilities of a segregated fund are ring-fenced from other segregated funds. Creditors of aspecific segregated fund may only have recourse to that segregated fund, the assets of other segregatedfunds being protected from such creditors. A segregated fund international company can be limited byshares, by guarantee or a hybrid (limited by both shares and guarantee).

Developments in Samoa since 2000Apart from the hype about Y2K compliance, the year 2000 proved to be a turning point for all interna-

tional finance centres. Samoa like others had to face major challenges with the issuance by supranationalorganisations of three blacklists.

These blacklists stemmed from concerns of bodies like the Financial Action Task Force on Anti-MoneyLaundering and the Financial Stability Forum, about gaps in the global system in relation to moneylaundering and financial supervision. Fortunately for Samoa, out of self-interest for the long-term viabil-ity of its finance centre, it enacted the Money Laundering Prevention Act, and thus never appeared ontheir lists. The list issued by the Organisation of Economic Cooperation and Development (OECD) fea-tured Samoa amongst many jurisdictions as a putative tax haven. Samoa was delisted following its com-mitment to the OECDs principles of transparency and effective exchange of information to establish alevel playing field. Samoa is a member of regulatory groups encouraging adherence to internationalstandards of best practice like the Offshore Group of Insurance Supervisors, the International Associa-tion of Insurance Supervisors, the International Trade and Investment Organisation, the InternationalConference of Banking Supervisors and the Asia Pacific Group on Money Laundering. It has observerstatus in the Offshore Group of Banking Supervisors (OGBS).

Samoa’s commitment to its offshore finance centre has meant the government has participated vigi-lantly in global forums which have implications for the operations of its offshore sector. Such vigilancehas seen Samoa progress from the OECD blacklist to becoming the co-chair of both the OECD GlobalForum on Taxation and the sub-group on the level playing field. Samoa has also undergone assessmentsby the International Monetary Fund, the Asia Pacific Group on Money Laundering and the OffshoreGroup of Banking Supervisors all with the aim of ensuring a robust financial system. Such evaluationsare valuable in obtaining an independent assessment of the performance of financial regulators and dis-covering areas needing improvement.

The main recent objectives have been to ensure the financial centre’s compliance with the newly emerg-ing global consensus against money laundering and combating the financing of terrorism and on OECDtax issues. At the same time, Samoa has used its best endeavours to assert its sovereign right to deter-mine its own path towards economic development and sustainability.

Erna Vaai is the Chief Executive Officer of Samoa International Finance Authority.Contacts: tel + 685 24071, fax + 685 20880; email [email protected]; website www.samoaofc.wsAddress P.O.Box 3265 Apia, Samoa.

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NoYesYes4,23622,500

NoNoNoNo

1No (only to agent)NoNot mandatoryAnywhere

1No

Optional

Any hard currency (US$ usual)US$1

US$100,000 in 100,000 sharesof US$1

Data supplied by Acceptor Professional Directors HK Limited

Population: 82,000 (July 2005 estimate)Currency: Seychelles rupee; US$1 = 5.5 Seychelles rupees (mid-2005)Language: English or FrenchTime zone: GMT plus 4Centre’s expertise: Independent country in timezone between Asia and Europe

IBCCommon LawYes3-4 hoursUS$100US$100NilNoneNone

CSLCommon LawNo3-4 weeksUS$1,400US$1,200YesYes*None

Any hard currency (US$ usual)At least 10% authorised capital mustbe issued and paid upUS$100 comprising 100 shares ofUS$1

2No (but necessary for DTA reliancecases)Yes, local

2YesNoYesAnywhere

YesYesYesNo

YesYesYesn. a.n. a.

*Including China, Thailand, Malaysia, South Africa, Botswana, Mauritius and Oman

English or French or others with translationinto English or French



Permitted currenciesMinimum paid up

Usual authorised capital

Minimum numberLocal required

Company secretary & qualifications




Share capital



Other

Accounts

SEYCHELLES

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SEYCHELLES Suzanne Callister, Senior Vice President (Sales & Marketing)

Acceptor Professional Directors HK Limited

SEYCHELLES is a jurisdiction that is committed to providing an environment that strikes an effectivebalance between a sound regulatory environment and the provision of offshore products with attractivefeatures and benefits. It takes great pride in the speed and efficiency with which incorporation of acompany can be accomplished and in the modern infrastructure and technology that supports its day-to-day business life. Linked by sound telecommunications systems, the country has a pool of dedicatedprofessionals who understand the demands of international corporate life. Companies can be incorpo-rated under the popular International Business Companies Act of 1994 or under the domestic CompaniesAct. Both acts have special advantages to the end-user which we will now explore.

Seychelles IBCsSeychelles IBCs are incorporated under the International Business Companies Act of 1994 and are

most commonly used as:• asset and investment holding companies• international trading companies• consultancy and personal service companiesSeychelles IBCs are for use outside of Seychelles and may not carry on business in Seychelles (subject

to a number of statutory exceptions, such as opening a bank account, holding meetings and keepingrecords). The Seychelles IBC is a tax exempt entity which is non-resident for Seychelles tax purposes.

The use of Seychelles IBCs has increased dramatically in popularity over the last five years with sub-stantially increased company registrations. Since the enactment of the IBC Act in December 1994, almost22,000 IBCs have been registered in Seychelles. The growth rate of new registrations was 40 percent in2004 and an even more rapid growth is predicted for 2005. The main attractions which have led to suchincreased demand include:

• Competitive pricing• Fast and efficient processing and turnaround for incorporation• Acceptability to international banks• Foreign income attracts no taxation in the Seychelles• High degree of privacy and asset protection• Ease of administration

Summary of key corporate features of Seychelles IBCsSeychelles IBCs facilitate reduced administration logistics and costs. Under the act a Seychelles IBC

needs only to appoint a minimum of one director. There is no residency requirement, so a foreign directoris permissible and corporate directors may be used if so desired. Given that there is no requirement to filethe details of a director of a Seychelles IBC with the Government Registry, there are no public records ondirectors. Likewise, there is no public filing of, and therefore no public records of, shareholders or benefi-cial owners of an IBC. Foreign shareholders are permissible and a corporate shareholder may be used.Conveniently, the minimum number of shareholders is one. The issuance of either registered shares to anamed person (including shares held by a nominee) or bearer shares are permissible. The appointment ofa company secretary for an IBC is optional. Additionally, there is no requirement to file with the govern-ment either annual accounts or any company return.

IBC licence fees are fixed for life. Confidentiality is guaranteed by law and all civil proceedings inrespect of IBCs may be held by a judge in chambers rather than in public. The registrar maintains onlycopies of the memorandum and articles of association plus certificates of incorporation and change ofname and other such documents. An IBC may hold shares, debt obligations or other securities in adomestic company in the Seychelles. It may also own or manage an aircraft registered in the Seychelles.Ship and aircraft registration is an area that the centre is seeking to encourage as part of the move toextend the range of service offered, so that it is a fully fledged centre that is attractive internationally.

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CSLsIncorporated under the Companies Act 1972, the Company Special Licence (CSL) is a Seychelles do-

mestic company, which is granted a special licence under the Companies (Special Licence) Act 2003. TheCSL is a tax resident company and may carry on permitted business inside as well as outside of Seychelles.Being a Seychelles’ tax resident, a CSL may access Seychelles many double taxation avoidance agree-ments (DTAs). The two most favourable to date are with Indonesia and China although many moreinteresting agreements are in prospect. The CSL is liable to Seychelles business tax at the rate of 1.5percent on its world-wide taxable income. As an exception to the Seychelles territorial tax system, anyforeign income derived by a CSL will be deemed to be Seychelles-sourced income. Taxable income meansassessable (gross) income less allowable deductions. The CSL has substantial appeal, particularly tointernational groups and multinational corporations, as a vehicle for permitted uses including, for example,an international holding company, an asset or investment holding company, a company holding intellec-tual property, or other such uses.

About SeychellesThe Seychelles, an archipelago of 115 islands in the Indian Ocean about 2,000 kilometres off the east

African coast and between four and five degrees south of the equator, gained independence from the UKin 1976. The population of Seychelles is approximately 82,000. The local population is drawn from a well-fused mixture of African, European, Chinese and Indian roots. The official languages are English, Creoleand French. English is the predominant language in which business is conducted.

GovernmentSeychelles has comprehensive and modern international financial services laws. The Seychelles legal

system is based on English Common Law and French Civil Law. The company, banking, trust and otherfinancial services legislation is heavily based on English law and on offshore laws in the successful Car-ibbean offshore jurisdictions.

Seychelles International Business AuthorityIn 1994 the government passed a series of laws to launch the offshore financial centre. The Seychelles

International Business Authority (SIBA) was set up as the regulator of the offshore industry and handlesthe registration of offshore companies. SIBA also supervises the Seychelles International Trade Zone (SITZ),a parallel development to encourage inward foreign investment.

ConclusionSeychelles, as an offshore financial centre, has seen growth in its business volumes and international

profile in the last three years. To provide a solid foundation for further expansion, it has sought to con-solidate and strengthen its offshore product and services range as well as the regulatory framework.Additionally, the number of offshore service providers in the Seychelles is growing, thereby enhancingknow-how and adding to the range and depth of services. The jurisdiction aims for a progressive ap-proach that strikes a powerful balance between a highly-attractive offshore jurisdiction and a soundregulatory environment in accord with international standards. These strategies, coupled with strongand increasing market interest and demand, ensure that Seychelles is well placed to further expand andmake a substantial impact as an offshore financial centre.

The author wishes to thank Simon Mitchell, Attorney-at-Law, Seychelles

Suzanne Callister is the Senior Vice President, Sales & Marketing of Acceptor Professional Directors HK Limited.Contacts: Hong Kong Office tel + 852 2521 3661, fax + 852 2845 9198; email [email protected];

Address 12/F., Ruttonjee House, 11 Duddell Street, Hong Kong. Singapore Office tel + 65 6438 1330, fax + 65 6438 1332; email [email protected];

Address 80 Raffles Place, #16-20 UOB Plaza 2, Singapore 048624. Website www.acceptor.com

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General requirementsPrivate limited companyCommon LawYesUp to 4 days, but a private limited liability company name can beapproved in 2 hours and incorporation in 1 dayUp to S$1,500 for setting up, including government fees andprofessional chargesMaybe S$2,000 a year depending on whether registered office andcompany secretary feesEffective corporate tax rate of 20%, but international profits earnedoutside Singapore not taxed; personal tax 2 to 22%Yes, double taxation agreements with more than 50 countriesNoneRegistrar approves name

Share capitalPermitted currencies AnyMinimum paid up S$1Usual authorised capital S$100,000

Directors and personnelMinimum number 1, who must be Singaporean resident individualLocal required YesCompany secretary & qualifications Required and must be local and qualified

Shareholders and AGMMinimum number 1, who must be Singaporean resident individualDisclosure requirements YesPublicly accessible records YesObligations for annual meetings YesLocation of AGM Anywhere

AccountsRequirement to prepare YesAudit requirements Yes, but exempt private companies with fewer than 20

shareholders and turnover of less than S$5 m. are exemptAccount filing obligations YesPublicly accessible accounts Yes, with exceptions

OtherRequirements to file annual return YesChange in domicile permitted NoNeed for registered office YesNumber of companies set up in last year 17,153 of which 16,899 local private companies, 109 local public

companies, 143 foreignTotal number of companies on register 141,870

Population: 4.4 million (July 2005 estimate)Currency: Singapore dollar; US$1 was worth S$1.65 (mid-2005)Language: English is widely used. Mandarin, Malay and Tamil are official languagesTime zone: GMT plus 8Centre’s expertise: A major international financial centre, not an offshore tax haven

SINGAPORE

Data supplied by Amicorp Singapore Pte Ltd

Type of entityType of lawShelf company availableTime to establish a new company

Minimum cost

Annual fees

Taxation


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SINGAPOREJoe Teng, Managing Director

Amicorp Singapore Pte Limited

THE REPUBLIC OF SINGAPORE was founded in 1963 when Singapore separated from Malaysia.Singapore is a parliamentary democracy, whose head of state is the president. The government is run bythe prime minister and his cabinet, who are accountable to the parliament which is chosen by universalsuffrage with a five year term. The Singapore legal system is based on English Common Law. Many ofSingapore's laws are modelled on English acts and English Common Law rules apply in many areas. TheConstitution guarantees Singaporean citizens freedom and liberty and contains safeguards ensuring theindependence of judges. Court procedures are also similar to those in England and foreign judgmentsfrom certain Commonwealth jurisdictions are indirectly enforceable under the Reciprocal Enforcementof Commonwealth Judgments Act. Arbitration is available in Singapore. Arbitration awards from othercountries that are part of the New York Convention on Recognition and Enforcement of Foreign ArbitralAwards can be enforced in Singapore. Singapore is an active member of the United Nations, theCommonwealth, the Non-Aligned Movement and the Association of South East Asian Nations.

CurrencyThe official currency is the Singapore Dollar (S$). There are no currency controls. The Singapore dollar’s

exchange rate is managed by the Monetary Authority of Singapore or MAS. The exchange rate follows abasket of currencies of Singapore’s most important trading partners within an undisclosed trading band.

Economy boosted by clean and efficient bureaucracySingapore is renowned for its political stability, excellent physical infrastructure, transparent govern-

ment and clean and efficient bureaucracy. The country is the leading financial centre in South East Asiaand has one of the busiest ports in the world.

Traditionally, manufacturing in Singapore has been dominated by the electronics industry, which,along with commerce and a highly developed service industry and tourism, has been the backbone ofSingapore’s rise to one of the leading newly industrializing economies (NIEs) in the world. Since 1996, inanticipation of the emergence of other NIEs, Singapore has been in the process of reshaping its economicstructure. In order to reduce its dependence on the electronics industry, the country is actively promotingpioneer industries and services that will keep the island at the cutting edge of modern economicdevelopment. Specific companies and industries that operate as pioneers in their field are provided grantsand tax incentives to move to Singapore. Key industries in the modern 21st century Singapore includelife sciences, education, healthcare and high technology, as well as a modern and efficient internationalfinancial sector.

Setting up a company is quick and easyEstablishment of a private limited liability company is quick and easy. In most cases, name approval

can be obtained in two hours, while incorporation takes one day and the certificate of incorporation willusually be issued within four working days. Every company must have the words "private limited" or"limited" at the end of its name. A Pte Ltd company must have at least one shareholder. There are norestrictions on foreign ownership. A Pte Ltd company must also have at least one director who is a resi-dent in Singapore, one resident corporate secretary who must be a natural person and a registered ad-dress in Singapore. Corporate directors are not allowed The register of members, directors, managers,secretaries, directors' interests in the company and the minutes of board meetings must all be maintainedat the registered address of the company. Dormant companies or companies with less than S$5 million inturnover, no corporate shareholders and fewer than 20 members may elect not to have their accountsaudited. However, companies electing not to be audited must ensure that they keep proper financialaccounts so that they can be audited at any time. Companies’ other duties include holding annual gen-eral meetings and making tax and other filings and reporting to the Accounting and Corporate Regula-tory Authority (ACRA) annually.

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Foreign companies doing business in SingaporeSingapore does not allow companies to change their domicile; foreign companies wishing to do busi-

ness in Singapore as an extension of their existing business can register their presence as a branch, afterobtaining approval of the requested business name.

Important financial sector, but NOT an offshore tax havenThe financial sector continues to be one of the key industries for Singapore’s economy and it enjoys

the active encouragement of the government. Safety and stability are two watchwords. Banking secrecylaws are strictly enforced. The government maintains its very favourable business regime, with efforts togradually reduce corporate and personal incomes taxes. For all this, Singapore is clear that it does notwant to be classified as either a tax haven or offshore jurisdiction. This is not just a question of strictlyenforcing anti-money laundering regulations, which is a firm tenet of government policy.

Tax highlightsThe following are the major points of Singapore’s tax regime:

• Corporate tax is charged at 20 percent on income generated in or remitted into Singapore.• Foreign shareholders of a Singaporean company are usually not subject to taxation in Singapore

on dividend income.• There is no withholding taxation on dividends paid from Singapore.• There is no capital gains taxation.• Non-Singaporean domiciled individuals may avoid Singaporean estate taxation.• Foreign branch income remitted to the Singapore head office may be exempted from taxation.• There is a S$100,000 tax exemption for new resident companies on chargeable income.

Corporate income tax and capital gainsAll income derived from sources in Singapore and income derived from sources outside but remitted

into Singapore (e.g., into a Singapore bank account) is subject to income tax. However, if the managementand control of the business is exercised outside Singapore, the company is considered to be a non-resi-dent company. The actual jurisdiction of incorporation is not relevant. A non-resident Singapore com-pany not operating in or from Singapore is not generally taxed on foreign source income received inSingapore.

Foreign income in the form of dividends, branch profits and service fees/commissions are exemptfrom corporate income tax in Singapore provided the income is remitted from jurisdictions with a "head-line" tax of at least 15 percent and the income has been subjected to tax, (i.e., some tax must have beenpaid). Singapore does not tax capital gains. However in certain circumstances the Inland Revenue Au-thority of Singapore (IRAS) may consider frequent acquisitions and disposals of securities or propertiesthe operation of "trade" and accordingly deem capital income from such activities to be taxable.

Trading losses may be offset against other taxable income of the same year and unused losses may becarried forward for an unlimited period of time. Interest paid to non-residents is subject to a 15 percentwithholding tax. Interest paid by approved banks in Singapore on deposits held by non-residents is ex-empted from withholding tax if the non-resident doesn’t have a permanent establishment in Singaporeand doesn’t carry on any business in Singapore.

Interest paid on certain qualifying debt securities issued before the end of 2008 to non-residents whodo not have a permanent establishment in Singapore is also exempted from withholding tax. If a non-resident has a permanent establishment in Singapore but the purchase of the debt securities is not fi-nanced with funds from the permanent establishment, (i.e., the purchase has been paid with foreignsourced income) a withholding tax exemption applies as well.

Tax exemptions and reductionsA wide range of tax exemptions and reductions are available in Singapore, aimed at attracting busi-

nesses that support Singapore’s long term economic strategy. Notable instances of such exemptions arethe income tax exemption ranging from five to fifteen years for companies with a pioneer status or pio-neer service status, international or regional headquarters programme and a withholding tax exemptionfor approved royalties, technical assistance fees and research and development contributions.

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Other businesses that conduct qualifying activities for tax exemptions and reductions are companiesthat operate finance and treasury centres in Singapore, or those that qualify under plans to attract compa-nies specialising in financial business, shipping, international freight and logistics, global trading, cyber-trade, venture capital, and arts and antiques.

Tax administrationThe tax year or year of assessment normally runs from January to December. The period for which

profits are identified for tax assessment is called the basis year. For example, income derived in the basisyear 2004 will be assessed for tax in the year of assessment 2005. If a company does not follow the calen-dar year, assessable income is income earned in the 12 months period prior the year of assessment.

Companies are required to file an income tax return by July 31 of the year of assessment. Also, theestimated taxable income of the company must be filed within three months from the end of its account-ing year. Penalties of up to S$1,000 are imposed for late filings of tax returns.

Income tax is due within one month from the date of the notice of assessment, but usually companiesare allowed to pay their income tax in monthly instalments up to a maximum of 10 months. There is aninitial penalty of 5 percent on taxes not paid by the due date, with an additional penalty of 1 percent permonth if taxes have not been paid within 60 days after imposition of the first 5 percent penalty, up to amaximum penalty of 12 percent.

Unilateral tax creditsUnilateral tax credit is provided to Singapore residents (e.g., corporations) for specified types of for-

eign taxes paid in certain countries with which Singapore has no current treaty relationship. A unilateraltax credit is granted to Singapore residents for foreign tax paid on the following: income from prescribedprofessional, consultancy and other services from all non-treaty countries, which include the US; dividends,employment income and branch profits derived from non-treaty countries; and profits, out of which aforeign dividend is paid, provided the Singapore resident owns at least 25 percent of the shares in thedividend-paying company. The minimum shareholding requirement may be waived upon applicationand approval.

Tax treaties and foreign tax reliefSingapore has entered into full double taxation treaties with more than 50 countries and has limited

treaties with another seven countries. There is no tax treaty between Singapore and the United States.

Trading structures in SingaporeTrading structures can be organised to earn profits free of Singapore income tax. To achieve this result,

a Singapore company would establish a branch operation in a low or zero tax jurisdiction and open anon-Singapore bank account. All trading activities would occur through the branch operation.

The way it work is this: A Singapore company sells and purchases goods in its own name but allactivities are managed in the country of the branch. The profits will be taxed according to the rates of thatother (low or zero tax) jurisdiction and not subject to Singapore taxation, provided they are not remittedinto Singapore. The Singapore company’s offshore branch may not have its central management andcontrol located in Singapore, and the Singapore company may not carry on trade within Singapore or thecountry where the branch is located (e.g., British Virgin Islands or Labuan).

If it can be shown that the foreign branch is an operational branch, the profits of the branch may avoidSingapore corporate income tax provided that the invoices are issued by the branch outside of Singaporeand the branch’s profits are not received in Singapore.

To summarise, a branch operation is considered to be outside Singapore if it does not: carry on busi-ness operations in Singapore; make contracts in Singapore; employ capital in Singapore; perform servicesin Singapore.

Recent tax concessions for financial businessIn the last few budgets the government has tried to underline the point that although it is not an

offshore financial centre in the classic sense, it does want to attract high-value export oriented serviceindustries. This is in keeping with the facts of life of the small island – that it is a densely populated

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Joe Teng is the Managing Director of Amicorp Singapore Pte Limited.Contacts: tel + 65 6532 2902, fax + 65 6534 1244; email [email protected]; website www.amicorp.comAddress 20 Cecil Street, #22-04 Equity Plaza, Singapore 049705.

country with a shortage of land, high costs and a highly trained people who have to be encouraged to gocontinuously up-market to keep Singapore ahead of its competitors.

International fund managers have been one target of recent budgets. As a result of changes in 2004,international fund managers are no longer required to maintain a physical presence in Singapore and canmake their funds available through private banks. Singapore is developing into a leader in real estateinvestment trusts reits and in securitized real estate, with more than US$1 billion raised in capital in twoyears to 2004. Singapore’s highly educated workforce, the country’s triple A sovereign ratings and theclear legal system are factors attractive to leading international financial players. Hedge funds in Singaporehave grown from just eight in 2001 to more than 50 by 2004.

Even so, international players would like more incentives, such as cutting the restriction that at least80 percent of investment in foreign hedge funds has to come from overseas to qualify for tax exemption,and a reduction of the 10 percent tax on fund management fees. If the latter tax were reduced to 5 percent,so markets specialists claim, Singapore could be attractive for Indian, Japanese and Korean hedge funds,as well as for specialist Islamic funds.

In the 2005 budget finance minister Lee Hsien Loong, who is also prime minister, gave another en-couragement to the Reit market by announcing a planned halving of withholding tax on Reit distribu-tions to 10 percent for five years and a waiving of stamp duty on instruments of transfer of Singaporeproperties into Reits for stock market listing in Singapore.

Bond market specialists, foreign securities companies, offshore insurers, approved trustee and custo-dian companies and financial services processing companies were also among those encouraged by taxconcessions such as those outlined above in 2004. The aim is to broaden and deepen the financial marketin Singapore. As one small example of the efforts of Singapore, the government will allow companies thatare developing new and innovative financial products to make double tax deductions for expenses suchas in the costs of research and development personnel, legal expenses, training costs and consultancyfees. Measures like this show the depth and detail of the government’s own commitment to making surethat Singapore continues to be an increasingly important player in global financial markets.

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SWITZERLANDThe Editors

Offshore Financial Services Guide

SWITZERLAND is a small, landlocked country in the middle of Europe with a long, distinguished andsometimes controversial history as a financial centre. At various times the words “Switzerland” or “Swiss”have been regarded as synonymous with high finance, and not always in a flattering sense. The Swissfranc has long been probably the world’s safest haven currency against the storms of currency fluctuations.A private Swiss bank account, the famous or infamous numbered account, was in fiction and in film, thesafest place in the world to store treasure or stash away loot. Harold Wilson, then in opposition and laterthe British prime minister, in 1956 blamed “the gnomes of Zurich” for triggering speculation againststerling, a generation before George Soros drove the pound out of the European exchange rate mechanism.Today Switzerland is still one of the most powerful, and controversial, financial centres in the world,important for investment funds, private banking and insurance and estimated to hold a third of theworld’s private wealth.

Wilhelm, Guillaume, Guglielmo and Gugliem Tell to the rescueThe country has a long history. The Celtic tribe of Helveticans left southern Germany for the central

plateau of Switzerland in the first century BC, but their movement west was resisted by Caesar’s army in58BC. The Romans built roads, some traces of which still remain. The present quadrolingualism of mod-ern Switzerland began as far back as 400 AD when Rome evacuated its Alpine territories and Burgundianspressed from the west, Lombardian tribes came from the south, the Alemannians fought in from theRhine, while the Rhaetian Romans resisted in the high Grisons valleys. In the Middle Ages, Swiss terri-tory was in the Holy Roman Empire. But then the house of Hapsburg set up a system of officials whotried to optimise the revenues of their estates without regard to local susceptibilities. In 1291 a mutualassistance pact was signed by the forest communities of Schwyz, Uri and Unterwalden “to last, if Godwill, forever”. It was the beginning of the struggle for an independent Swiss confederation that wasembellished and given heroic stature by the exploits of Wilhelm or Guillaume or Guglielmo or Gugliem(or William) Tell, though Tell did not get his fine literary clothes until Friedrich Schiller in 1804.

Confederation became a reality in the latter part of the 14th century. After brilliant victories overCharles the Bold, the confederation was cemented on the battlefield at Dornach in 1499 when the Swisswon their independence from the Holy Roman Empire. The Reformation exposed a split in the fledglingstate when Huldrych Zwingli’s advocacy of religious, political and economic reforms was adopted inZurich and Jean Calvin took up residence in Geneva. Calvin helped to launch the Swiss watchmakingindustry when he banned jewellery and the jewellers turned to watches to display their craft. The guilds,which dominated the urban areas, were the driving force behind the new Protestantism, and helped tokeep Switzerland out of the Thirty Years’ War and the wars of absolutist monarchies. But Napoleonsmashed the original confederation and took it into his empire. It was 50 years before the new federalstate of Switzerland was born in 1848 with the strong autonomy of the cantons that today number 26.

Quintessentially European but aloofSometimes Switzerland is also regarded as being quintessentially European. Partly this is because of

its location in the centre of the continent. Partly it is that the Swiss population reflects the divisions andthe unity of Europe: 42 percent of its 7.5 million people are Roman Catholics and 35 percent are Protestants;in terms of ethnic groups, about 65 percent of the Swiss are of German origin, 19 percent French; 10percent are Italian and Romansch are only 1 percent. Partly it may be that Switzerland has a blend of thebest of European civilization, with a strong industry, prosperous economy and an admired and enviedfinancial system. It has done this while managing to preserve a lot of the chocolate-box image of oldEurope including picturesque scenery of Alpine resorts and valleys where the rich and famous gather forskiing and apres-ski.

But at the same time Switzerland has maintained an independence that is envied and criticised. Itstayed neutral through two world wars, though the government later expressed regrets for Switzerland’sbehaviour during the Second World War for closing its borders to Jewish refugees and assisting the Nazis.Switzerland became the headquarters of international bodies like the Red Cross, the World Trade

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itzerlandPopulation:Currency:Language:Time zone:Centre’s expertise:

Data supplied by Credit Suisse

Stock company (equivalent to US corporation or UK plc.)Civil LawNot recommended2 weeks up to 1 month3,000 Swiss francs (depending on which canton)Around 5,000 Swiss francs (depending on activity)Standard: 14 - 30 % (substantially reduced rates for special tax status)Yes, manyNoneYes

Swiss francs50,000 Swiss francs respectively 20% of statutory share capital100,000 Swiss francs

1 (board of directors)Yes (exceptions for holding companies)No

3 (at the time of formation), 1 (after formation permitted)No (save for companies listed on a Swiss stock exchange)Basically noYesAt the registered office of the company (in general)

YesYesYesn.a.n.a.

YesYesYesNo (except for shareholders)

7.5 millionSwiss Franc; US$1 = 1.24 Swiss francs (mid-2005)German, French, ItalianGMT plus 1 hourInternational financial centre; world leader for wealth management

Note: The details refer only to the stock corporation according to Art. 620 ff. Swiss Code of Obligations.








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Organization, as well as the European headquarters of the United Nations, but it resisted joining theUnited Nations until September 2002. It is surrounded by members of the European Union, but has re-fused to join.

One reason is a unique feature of Swiss democracy – that policy decisions often rest on the results ofa national referendum, which can be initiated by any citizen able to gather 100,000 voters’ signatures. A2001 referendum voted against starting talks for Switzerland to join the EU. In consequence, relationswith the EU are based on a range of bilateral agreements. In 2005, a referendum supported Swiss mem-bership of the EU Schengen and Dublin agreements to bring Switzerland into Europe’s passport-freezone and to cooperate on issues of crime and asylum. Even independent and outside the EU, Switzerlandhas made compromises on the EU Savings Directive.

Relations with the rest of Europe are a difficult balancing act. In the October 2003 general elections,the right-wing Swiss People’s Party standing on an anti-foreigner and anti-EU platform won 28 percentof the vote and became the largest party in parliament. On the strength of this, the party argued for andwon a second seat in the seven-member Federal Council, which is the unique four-party power-sharinggovernment designed under a 1959 “magic formula” that applies regardless of how the parties fare in theelection.

An economy as smooth as a Swiss watchThe Swiss economy today is developed and modern, with one of the highest per capita incomes in the

world, US$33,800 by purchasing power parity estimates for 2004. Though the country lacks raw materials,it has traditionally compensated by high quality labour and technological skills, particularly in the pro-duction of chemicals, machinery and precision instruments, pharmaceuticals and watches. Indeed, theSwiss watch is synonymous with expressions that indicate precision and keeping to exact time, as regularas clockwork. Even though the mass production of watches has moved to Asia, Switzerland retains theleading position for high-value precision timepieces, and indeed Swiss watch exports at 11 billion Swissfrancs in 2004 are the highest in the world by value, even though the country makes only 25 millionwatches a year against a billion pieces in China and 700,000 in Hong Kong. The legendary strength of theSwiss franc, which has gone from 4.3 against the US dollar in 1971 to 1.68 in 2000 and to 1.24 in mid-2005,has also helped to accelerate industrial restructuring. However, in the last few years Switzerland’s eco-nomic growth has been slower, in large part because the country’s agriculture, although it only contrib-utes 2 percent to gross domestic product, is politically important and highly protected. The constructionindustry, which contributes 10 percent to GDP is cartelised and has held the country back.

Financial services are one of the buttresses of the economy, contributing about 6 percent in terms ofemployment. Of Switzerland’s 3.2 million workers in 2004, according to government figures, about190,000 were employed in direct financial jobs, a fall on the 220,000 employed at the turn of the century.More than half of these – 112,000 – are in banking and another 51,000 are in insurance, with 20,500 beingemployed in accounting and auditing.

But in terms of its contribution to the economy, financial services punch much harder. Official esti-mates for 2002 put the financial sector’s share of gross domestic product at almost 60 billion Swiss francsout of total GDP of 431 billion Swiss francs or about 13.8 percent. In terms of taxes, the contribution of thefinancial sector to income and wealth taxes at combined federal, cantonal and communal levels wasabout 10 percent. Perhaps the most commanding figure of all is that in February 2005, according to theSwiss National Bank, securities holdings in banks in Switzerland totalled 3.46 trillion Swiss francs orabout seven times the country’s GDP. Of this sum, almost 2 trillion was held by foreign custody accountholders and only 1.5 trillion Swiss francs by Swiss custody account holders.

The financial sector contributes 15 billion Swiss francs a year to the country’s current account surplus.Capital investment of about a trillion Swiss francs held by the country’s insurance companies and pen-sion funds represent more than double Switzerland’s GDP, and the 140 billion Swiss francs worth ofinvestments abroad held by banks and insurance companies is a third of total Swiss foreign investment.

World’s largest private banking centreSwitzerland takes great pride in being the biggest centre in the world for fund management. It is art of

the brand name of being Swiss. This role has lasted for centuries, helped by the political neutrality thathas kept Switzerland clear of other people’s fights and by the ultra-conservative financial policies whichhave seen the Swiss franc remain strong under a low interest-rate regime.

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itzerlandSwitzerland’s banking sector shows marked differences from those of other big banking centres. Un-

like New York or Tokyo, to give the other extremes, where for decades the Glass-Steagall Act and itsJapanese equivalent enforced a strict distinction between banks and securities companies, Swiss bankshave long offered universal banking services. This means that they are free to offer the whole range offinancial services from commercial banking, such as opening accounts and taking deposits from custom-ers to lending money to clients, to securities business, such as stock market transactions and underwriting,which was traditionally the preserve of investment banks with their very different culture in the US orJapan. The Chinese walls have now come down elsewhere, but it has sometimes proved difficult to changethe cultures between the safety-first attitude of commercial bankers anxious to protect the value of theirdeposits and investment bankers with a more risk-taking attitude.

Recent consolidation has led to the emergence of two big Swiss banks, UBS and Credit Suisse Group,which together account for more than half of the balance sheet total of all banks in Switzerland. UBS isthe world’s leader in wealth management and Switzerland’s leading bank for individual and corporateclients. It is important globally in investment banking and in the securities business. Credit Suisse has aglobal presence as a provider of financial services, both directly and through its investment bank. Inaddition, through the Winterthur insurance company it has insurance and pension outreach. Togetherthe big banks accounted for about 65 percent of the total assets and liabilities of all 338 Swiss banks at theend of 2004 (1.64 trillion Swiss francs of the 2.5 trillion Swiss francs).

Besides the big two banks, Switzerland has 24 cantonal banks, semi-government organisations thatenjoy a state guarantee. Liberalisation is underway regarding the state guarantees, but the banks anywayare expected to behave in a prudent commercial way while promoting the canton’s economy. Their mainactivity is commercial banking, with an emphasis on deposits and loans. Switzerland also has a numberof regional and savings banks, which are smaller universal banks that voluntarily limit their operationsto one region. Their supporters say that the banks have the twin virtues of understanding local needsand the vicissitudes of the business cycle as they live in the local area. There are also 53 stock exchangebanks, which confine themselves to brokerage and portfolio management issues.

On top of these, there is also the Raiffeisen Group of affiliated independent banks with strong localroots and which are organised along cooperative lines. They have a history of more than a century andthe highest number of branches, about 450 in 2005, in the country and are affiliated to the Union ofRaiffeisen banks. The union is responsible for strategy and for risk management. It coordinates the groupand provides the infrastructure such as IT as well as advice, so that the individual banks can concentrateon dealing with clients.

Foreign banks also have a considerable presence in Switzerland, and there were 123 such banks at theend of 2004, with combined assets of 181 billion Swiss francs, though their influence is much bigger thantheir balance sheet size.

Private banks have 300 year-old-historyThe group of banks that gives Switzerland its special banking flavour is probably the private banks.

Strictly speaking a private bank, according to Swiss law, is one organised as an unlimited partnership.Just 14 still remain according to this definition, though there are a larger number of former private banksthat have incorporated. “Private banking” in the sense of providing banking, portfolio and wealth man-agement is probably what Switzerland is most famous for – and also infamous given the number ofscandals involving Nazi loot and the ill-gotten gains of dictators from Papa Doc Duvalier through theMarcoses to Sani Abacha, who have plundered their country’s treasuries for their personal use.

Private banks in the original sense of an unlimited partnership go back to the revocation of the Edictof Nantes in 1685 (in which the “Sun King” Louis XIV of France withdrew the civic rights of Protestantsand caused Huguenots to flee). Those banks that still survive have a rich history. The Bank Wegelin & Coin St Gall was created more than 260 years ago. Several banks existed in Geneva even before the cantonjoined the Swiss Confederation. The five banks in the Geneva Groupement des Banquiers Prives Genevoishave an average age of more than 190 years. Even today, the remaining banks that are still private accord-ing to Swiss law provide almost 4,000 jobs and manage about 300 billion Swiss francs in funds. Butfurther consolidation of the banking industry leaves big question marks over their future.

As one small example of the trend towards bigger institutions able to take a global view, in September2005 Julius Baer agreed to buy three banks and a hedge fund company from UBS for 5.6 billion Swissfrancs to create a “third force” in Switzerland after UBS and Credit Suisse. UBS managed almost US$1.3trillion in assets at the end of 2004, according to the consultancy Scorpio Partnership. The deal would

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give Baer alone assets under management of 270 billion Swiss francs, which would place it in 17th posi-tion worldwide, according to Scorpio, still below Swiss-based Pictet in 15th place.

Swiss traditions under attackAlmost any article, brochure, annual report or book produced by bankers from Switzerland begins

now with a robust defence of the country’s laws and regulations to prevent money laundering and crimi-nal activity. According to the Swiss banks, they have probably the world’s most comprehensive andeffective mechanisms for dealing with money from criminal sources. The Swiss Money Laundering Act,which has been in force since 1998, obliges all financial intermediaries to identify all clients and to estab-lish the beneficial owners of the assets – the famous “know your customer” (KYC) rule. The act is alsobacked by rules against money laundering in the Swiss Criminal Code and by Federal Banking Commis-sion guidelines of March 1998. In addition, all financial companies must report to the authorities anysuspicions they have that money laundering is going on and must freeze the suspicious assets. For morethan 20 years the Swiss banks have observed a “Due Diligence Agreement”, which contains the KYCdirective. The big Swiss banks have committed to global due diligence within the Wolfsberg anti-moneylaundering principles.

How then to account for the predilection of dictators to hide their money in Switzerland, as Swissinvestigations discovered in the case of the Nigerian Abacha? The Swiss protest that they don’t wantsuch dirty money. One problem is that as the global leader in cross-border asset management, the chancesof a dictator or despot trying to bring money into Switzerland are statistically high. Since the scandals,Switzerland has drawn up detailed rules covering the treatment of assets of what are called “politicallyexposed individuals”. The US has called these regulations “exemplary”.

Nevetherless, bankers are beginning to protest that these rules may be on the point of being pushedtoo far. In mid-2005, the Swiss Bankers Association, the umbrella organisation representing the country’sbanks, rejected proposals in a circular by the Federal Banking Commission for new regulations. The mostcontroversial of these was introduction of a system whereby a bank’s employees could go directly to theboard of directors with details of irregularities rather than approach their immediate superiors. The bankssaid that such a “whistle-blowing” clause would affect the workplace, and change the culture.

Previously, the emphasis of the Swiss financial system was that secrecy and confidentiality was as-sured and people could feel safe in leaving their money in Swiss banks. Banking secrecy was formallymade the law under the 1934 Banking Act. In addition, the protection of individual privacy is guaranteedby the general provisions of the Swiss Civil Code. Bankers and the regulatory authority insist that noth-ing has changed: very few people have access to bank details, confidentiality is the law unless there areoverriding suspicions of criminal activity.

No distinctions between Swiss and non-Swiss in setting up companiesSwitzerland is a country that follows the Civil Code rather than the Common Law of Anglo-Saxon

countries. This means, according to critics, that the formation and administration of companies tends tobe slow and bureaucratic. In Switzerland the Civil Code is at the federal level but businesses are domi-ciled in a particular canton. The canton keeps the commercial register of companies and their directors,shareholders and capital structure in a public document. Company formation is subject to strict rules.

The attraction of Switzerland as a corporate jurisdiction is not that it is “offshore”, an expression thatSwiss officials hate to see applied to their country as much as Hong Kong does, but that it offers a low taxregime in a polity that proved itself to be stable politically, conservatively run, financially sound andaccomplished in its financial operations, not just for years or decades but for centuries. Indeed, there is nodistinction between foreign and domestic, Swiss and non-Swiss, offshore or onshore, when it comes tosetting up a company. The rules are the same for all. The profits tax rate for a company based in Zurich in2003 was 24.1 percent.

There are several varieties of corporate vehicle, but the one most used by foreign investors is the stockcorporation (either societe anonyme or aktiengesellschaft). A holding company is a stock corporationwith special tax status that benefits from reductions in income and capital gains taxes at federal andcantonal level and from a reduction in net worth tax at cantonal level. At cantonal level, an entity is aholding company for tax purposes if it gets 51 to 66 percent of its income from dividends remitted by asubsidiary or holds 51 to 66 percent of the subsidiary’s shares. For federal tax, it is a holding company ifit holds either a minimum 20 percent of the share capital of another corporate entity or its shareholding

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itzerlandhas a market value of at least 2 million Swiss francs. The OECD targetted the Swiss holding company inits “unfair tax competition” initiative. Eventually a deal was struck that Switzerland would share infor-mation about a holding company where there was prima facie evidence of fraud.

One of the world’s biggest insurersSwitzerland’s first private insurance companies were founded in the 19th century. Many of these

pioneering companies are still around today, such as Swiss Mobiliar (founded in 1826), Swiss Life (1857),Helvetia (1861), Baloise (1863), Swiss Re (1863), Zurich Insurance (1872) and Winterthur (1875). The in-surance industry has seen enormous growth over the last 150 years, much of it since the Second WorldWar. Switzerland’s transformation from an agrarian state via industrialisation to a modern informationsociety, coupled in particular with a strong rise in life expectancy, the increased capital intensity of pro-duction and an improvement in prosperity, also means that insurance needs have been constantly changing.Many new and specialised forms of insurance have developed, such as accident insurance, marineinsurance, motor liability, life, financial loss, IT insurance. Today, the Swiss population ranks as one ofthe best insured in the world – with an average of 7,000 Swiss francs spent per person per year on privateinsurance premiums. The average Swiss family spends about 20 percent of the household budget oninsurance.

Many Swiss insurance companies have a pronounced international focus. Almost 60 percent ofSwitzerland’s overall premium volume is generated outside of Switzerland, with 40 percent coming fromEurope and 20 percent from other countries, particularly in North America. In 2003 Swiss insurancecompanies enjoyed a surplus of 4.6 billion francs from their overseas operations, mainly in re-insurance.

In 2004 a new Insurance Supervisory Act was passed and is expected to come into force in 2006. Itgives new powers to the supervisers, strengthens the solvency requirements and improves consumerprotection.

EU puts on the pressureSwitzerland’s position, surrounded by EU countries and enjoying a special relationship while not

being a member, posed problems for Brussels when it wanted to pass its directive on savings. Luxem-bourg in particular protested that it would not agree unless Switzerland were brought in. In the end,compromises were reached all round, with Switzerland agreeing under the terms of the Schengen agree-ment to provide assistance in cases of indirect taxation, such as customs, VAT, alcohol and tobacco duties,but holding out against supplying information in the case of direct taxation. Swiss officials point out thatthe country imposes a 35 percent withholding tax on payments of interest and dividends of Swiss liableparties, without distinction between residents and non-residents, as a major deterrent against tax evasion.

Some Swiss bankers are raising questions as to whether the country is doing enough to meet the risingcompetition to its role as a financial centre. Procedures are slowly going ahead for new legislation onfinancial supervision. The Federal Council favours the creation of an integrated system of financial mar-ket supervision. Hitherto, banks, investment funds, stock markets and securities trading have been po-liced by the Swiss Federal Banking Commission, with partial self-regulation of the stock market by theSwiss Exchange SWX. Payments transactions are the responsibility of the Swiss National Bank, whileinsurance is looked after by the Federal Office of Private Insurance, and financial conglomerates by which-ever is the lead regulator for their principal business. Other activities are looked after by the FederalSocial Insurance Office and cantonal authorities, the Money Laundering Control Authority, the Compe-tition Commission and the Swiss Federal Gaming Board. A draft Federal Act on Financial Market super-vision is due to be drawn up by the end of 2005.

Meanwhile, the bankers complain, the slow legislative process means that Switzerland is being leftbehind by nimbler competitors. They have an envious eye on Luxembourg, especially in the area ofinvestment funds where the grand duchy has devised successful Sicavs (societes d’investissement a capi-tal variable). Switzerland has been pondering the problem of the need to renew the Investment FundsAct since before 2002, but it will be 2006 at the earliest before there is a new law and that date might be setback if a referendum is called. The Swiss Private Bankers Association was so exercised about the issuethat it declared in frustration: “Will the fabled tortoise ever catch up with the hare?”

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Numbered bank accounts a myth that lives onOf all the burning issues of Swiss finance, numbered bank accounts are the one that still raise themost heat. You can feel the legendary cool Swiss in their mountain fastnesses getting cholerically hotunder their collars at the accusations that dictators and criminals have been able to shield their ill-gotten gains and stash them away in a numbered bank account to which no one has a clue, let alonea combination or a key. Helpfully, the Swiss Bankers’ Association has prepared answers to somefrequently answered questions.

With remorseless logic they approach the question of numbered accounts via the question, “Canaccounts be opened anonymously in Switzerland?” Their answer is a flat: “No, that is not possible.Banks follow so-called ‘Know-your-customer’ rules which require staff to identify the person open-ing an account and, where necessary, to establish the identity of the beneficial owner…”

This leads logically to their next question to themselves, “But numbered accounts are anonymous,aren’t they?” – which gives rise to the equally adamant answer: “No. Contrary to what one mightgather from thrillers and the media, there is no such thing as an anonymous account. The name of theholder of a numbered account is known, though only to a small group of people inside the bank. Asfar as bank customer confidentiality is concerned, there is no difference between numbered accountsand any other sort of account.”

For all this, the myth persists and a Google search revealed 190,000 items for Swiss numberedaccounts (in 0.35 seconds). Many of them were offering invitations to subscribe, the first being boldenough to say, “Open a numbered account in Switzerland, the mythical Swiss numbered account,the ultimate symbol of wealth…Use a number instead of your name or choose a pseudonym such as‘violin’ or ‘Octopussy’… ” This could be a real bargain at 1,299 Swiss francs (US$1,100), especiallywith the prospect of being able to read the account statements and follow your investments onlinefrom anywhere in English, French, German or Italian. The deal, which does not apply to citizens ofAlbania, Colombia or Nigeria, also promises a gift any budding James Bond or Jason Bourne wouldlove to have, “a pocket encryption device the size of a keyring that generates a new number every 30seconds.”

The only downside is that you are expected to achieve a minimum balance of 100,000 Swiss francswithin a few months, but if you go to 500,000 Swiss francs or above you will have to go to the bank inperson to testify to your bona fides. There is no mention of the Matterhorn of paperwork that has tobe filled in or the fact that another site is offering an unnumbered unmythical Swiss bank accountfor just US$69.

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Caicos IslandsPopulation:Currency:Language:Time zone:Centre’s expertise:

Data supplied by TCInvest

25,000US dollarEnglishGMT minus 5 hoursEstablished low cost centre with new products

Exempt company (IBC)Common Law plus Companies Ordinance 1981 as amendedYesCan be done in 24 hoursGovernment fee of US$100 for authorised capital of US$5,000;service providers package including agent costs US$1,000-2,500US$300 for exempt companiesNil; in addition, a 20-year tax exemption certificate will beissued valid irrespective of any future tax changesNoneNoneNeeds to be pre-approved, and in Latin or Chinese alphabets; butno restrictions on the ending of a name

NoNoNoNo

Yes, to declare that the company is continuing to comply with theCompanies OrdinanceYesYes, local registered office required1,99117,076

1NoNoNoAnywhere

AnyOne share of par value or no par valueUS$5,000

1NoYes, but it may be the same natural person or corporate entity as thedirector and shareholder


Annual feesTaxation





Requirements to file annual return

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TURKS AND CAICOS ISLANDSJackie Mulligan, Consultant

TCINVEST

THE TURKS AND CAICOS ISLANDS (TCI), a British self-governing territory, is a chain of more than40 islands, only eight of which are inhabited. The inhabited islands of Providenciales, Grand Turk, NorthCaicos, Middle Caicos, South Caicos, Parrot Cay and Pine Cay have long attracted beach a ficionados andshrewd investors looking for escape from stress or a new start for their investments overseas. The coralislands cover an area of 193 square miles and boast 230 miles of white sand beaches and an idyllic loca-tion on the third largest coral reef system in the world. The country has rich potential, blending the bestof the past, including cultural habits of friendliness and community spirit plus historic colonial architecture,with the prospects of a wonderful present and future. TCI has splendid economic prospects based oncareful environmentally friendly upscale tourist development of the awe-inspiring beaches and a blos-soming offshore financial centre.

Proximity to the US a natural plusThe islands’ geographical proximity to the United States is a natural advantage. Thanks to strong

economic growth and growing tourism and business demand, airlines expanded their non-stop flightsby 25 percent in 2005. Now the islands enjoy non-stop air services from Miami, New York, Boston, Charlotte,Atlanta, Philadelphia, Toronto and London.

Financial services promote new skillsRapid growth over the last three decades both in tourism and in the financial services industry has led

to a great increase in skills as well as a more diversified population. About half of the 25,000 people areTurks and Caicos islanders, but the rest include people attracted from many places both near and far,including Haiti, Jamaica, the Dominican Republic, the US and Canada and Europe. About 18,000 peoplelive on Providenciales, locally nicknamed Provo, which is the tourist hub. Significant developments,such as a Carnival Cruise ship dock, a Ritz-Carlton resort, an Aman resort and numerous larger condo-minium developments are now underway across the islands.

200 years of political stabilityThe islands have enjoyed political stability for more than 200 years, and today are a British self-gov-

erning territory, with a governor appointed by the British Crown, an executive council and a legislativecouncil. The governor is responsible for external affairs, defence, internal security, as well as for offshorefinance and other matters. The legislative council passes laws, monitors government policies and bringsthe executive council to account on behalf of the electorate. The executive council is presided over by thegovernor and includes the elected ministers of government along with the attorney general and chiefsecretary. Elections are held once every four years. In 2003, the Progressive National Party (PNP) led byMichael E Misick was elected to government, winning a majority against the People’s Democratic Move-ment (PDM).

Growing potential for financial servicesThe offshore financial services sector contributes 7 percent of gross domestic product and ranks be-

hind tourism as the main source of income. About 66 percent of the people are employed in tourism. Buta progressive scholarship programme is helping to ensure local people achieve qualifications in law,accountancy and business management to enable all to participate in growing and potential markets.

A major objective of the government is to attract quality investments that create a sustainable economyfor the Turks and Caicos islands. The offshore financial centre is an important part of that. In recognitionof the fact that the attractiveness of the islands as an offshore financial opportunity may have been missedbecause of their small size, the government in 2005 decided that it was an opportune time to launch apublicity drive. TCInvest was given the mandate to promote offshore opportunities and financial ser-vices on an unprecedented scale. This government commitment is a sign that financial services will cometo play an increasing role in the economic future of the islands.

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sThe Turks and Caicos is a zero tax jurisdiction. Government revenues come from various user fees,

levies and duties on imported goods and services. Investors in approved projects get duty concessions,which are more generous in the lesser developed islands. The US dollar is the local currency. The Turksand Caicos has no central bank or monetary authority, and there are no restrictions on the movement offunds in or out of the territory.

Almost a 25-year history of offshore financeThe TCI Companies Ordinance 1981, which was a highly innovative piece of legislation, provides for

the formation of exempted companies (internationally known as IBCs), as well as of ordinary companies,foreign companies, non-profit organisations and limited life companies. The TCI company is an extremelyflexible vehicle and incorporators are unrestricted in defining capital structure and the rights and liabili-ties of members. Such companies have been mainly used for establishing reinsurance companies and forreal estate transactions. The Turks and Caicos Government is about to introduce legislation to allowprotected cell companies. There are six licensed entities that carry out banking business, five licensed tocarry out domestic and international services from within the islands. Since there is no direct taxationwithin the Turks and Caicos Islands the banks are not required to pay corporation or income tax. Thisgives them a distinct advantage in being able to place funds at competitive rates with lower margins.Bank deposits total about US$700m.

There are 20 active trust companies managed by licensed professional trustees in the islands. TCI'slaw contains specific provisions facilitating the establishment of trusts designed to protect assets fromexpropriation and claims by persons whom the settlor wishes to exclude from his or her estate whilstrecognizing the rights of bona fide creditors. The validity of a TCI trust, the interpretation of its terms andthe administration of the trust property are each regarded as severable aspects. In addition the trustexcludes the applicability of foreign law to the creation of a TCI Trust and to dispositions made under it.

The insurance market is an important sector and a growth area, with more than 3,000 licensed insur-ance companies. The TCI has developed a niche market for captive insurance companies known as creditlife or producer owned reinsurance companies or PORCS. These companies, typically owned by USretailers, provide reinsurance for credit life and product warranty insurance. The insurance is underwrit-ten by a US direct writer, who in turn reinsures all or most of the risk with the TCI reinsurance companyowned by the producer of the business. The direct writers of course are regulated by the US authorities.

Legislation has been introduced to regulate mutual funds. It will also provide for mutual funds con-stituted under the laws of a foreign country to be licensed in the islands as recognised mutual funds.

Financial Services Commission set up as statutory bodyThe Turks and Caicos Islands offers the international business community a well defined regulatory

framework within which to operate a comprehensive range of financial activities including banking,insurance, trusts, mutual funds, investment dealing, companies and partnerships. TCI's modern legisla-tion is complemented by an experienced professional infrastructure in the public and private sectors.

The Financial Services Commission (FSC) embodies in a single agency all regulatory aspects of thefinancial services industry. The FSC is responsible for licensing and supervising all finance-related oper-ating entities to internationally accepted standards. The FSC also provides a centralised and cost-effec-tive service for registering companies, partnerships, trademarks and patents in TCI. Prior to 2002, theFSC was a department of government within the ministry of finance, but in that year it was given its ownidentity as a statutory body. This was in line with recommendations made by the KPMG report of 2000 tothe UK government after its review of financial regulation in the Caribbean overseas territories andBermuda. The International Monetary Fund in its review of the islands in 2004 urged that the FSC begiven more resources, stronger supervisory powers and greater operational independence, and this isunder active discussion.

TCInvest (Turks and Caicos Islands Investment Agency) is an independent statutory agency to attractinvestment, encourage entrepreneurship and provide financing.Contacts: Clayton E. Been, Investment Manager, tel + 1 649 941 8465, fax + 1 649 941 8467;email [email protected]; website www.tcinvest.tcAddress TCInvest Office, Town Centre Mall, P.O. Box 835, Providenciales, Turks and Caicos Islands.

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