A collection of Articles from the www.fortgatoffshore.com blog.

The Duality of Trust Law in Saint Lucia- March 3rd, 2014.

Saint Lucia throughout its history has ruled by the French, The British and The Spanish, who all often fought each other for control over the islands resources and strategic location. The legacy of this conflict has left the jurisdiction with two concurrent legal systems. One is Saint Lucia’s Civil Law which comes from Saint Lucia’s civil code, and was adopted by the French. The other is Saint Lucia’s common law system which was adopted by the British. The Civil Code is the embodiment of French codified law, containing provisions that arrange the obligations inherent on all civil commitments entered into by Saint Lucia’s citizens. The code deals with claims, trusts, Property, Wills and Estates, just to name a few. Saint Lucia’s common law is made up of domestic legislation and case law primarily emanating from Saint Lucia and the regional Caribbean, as well as some use of UK case Law and other common law jurisdictions. Both of these systems exist in tandem and in some respects, the Civil Code overrides any existing common law precedent and indeed any existing Saint Lucia legislation, unless that legislation makes it clear that the Code in any specific case is to be overridden. This means the Code is “gospel” except in the rare cases where a new law comes along and says otherwise. As a result of this duality there are two separate types of Trusts that can be established in Saint Lucia. The First is a domestic Saint Lucia Trust. This trust is governed by the provisions of the Saint Lucia Civil Code which in turn states that all Saint Lucia Trusts are to be governed by the law of trusts in force, from time to time of England and Wales. In other words, a Saint Lucia Trust is for all intents and purposes a UK trust. The Second type of Trust is an International Trust. This type of Trust is governed by the International Trustees Act and is regulated by this Act. Both types of trusts, Saint Lucia Trusts and International Trust, are tax exempt with regards the income generated by the trust, so long this income is generated outside Saint Lucia. The Saint Lucia Civil Code however, provides for the appointment of a body corporate as a trustee of a Saint Lucia trust. The international Trustees Act allows for the appointment of a Saint Lucia tax exempt company or International Business Company as trustees of a Saint Lucia Trust and an International Trust. Thus, a Saint Lucia trust can have as its appointed Trustee, a Saint Lucia International Business Company or IBC. The assets of a Saint Lucia trust can also be owned by an International Business Company or by any company or person for that matter, which is not unusual to offshore trust structures. An International Trust on the other hand must be registered with the Regulator and only a local trustee is able to perform this task. A Saint Lucia tax exempt company is also an eligible trustee for an International Trust, but to be treated as an International Trust it must be registered by a local trustee. A Saint Lucia Trust therefore need not have an appointed institutional trustee at its helm, but will still enjoy tax exempt status so long as the income generated is outside the jurisdiction. Both an international Trust and Saint Lucia Trust can be established as a unit trust for the purposes of establishing a fund. So what are the differences between a Saint Lucia Trust and an International Trust? Except for a few provisions relating to asset protection in relation to an International Trust, both types of trusts are identical. The asset protection clauses contained in the International Trustees Act, can easily be duplicated in terms of implementation, in a Saint Lucia Trust, by simply separating the Trustees from the ownership of the underlying assets of the trust. The advantage of Saint Lucia Trust, despite its tax exempt status, is that there is no need to appoint a locally licensed Trustee. The client is free to appoint any one as Trustee through the incorporation of a trust company or IBC , with directors chosen from any persons available to the client. This saves considerable running costs, as there are no fees chargeable by an institutional trustee.

It is unlikely this current state of the law will ever change, as it would mean denying Saint Lucian residents the benefit Saint Lucia’s Trust law in favor of the international trust law that has been enacted. Just as with many other provisions of Saint Lucia’s Civil Code, this duality in the law of trusts, between the Saint Lucia Civil Code and The International Trustees Act, will continue to coexist which is for the most past, consistent with Saint Lucia’s legal historical record, where these dualities have existed for over one hundred years. Author- Tonjaka Kho-Hinkson B.A (Ont) L.L.B (Lond.) BVC (Lond.)

Who are Saint Lucia Registered Agents and why are they so important? January 6th, 2014 Saint Lucia is an “offshore” jurisdiction in its purest form. When the industry was conceived by the enactment of the International Business Companies Act in January of 2000, the objective was to encourage foreign investment. To that end, companies established under the Act, are given an exemption from Capital gains taxes and financial reporting. Exemption on Capital gains tax and financial reporting, go hand in hand. If there are no Capital gains taxes to declare, then there is no need for any financial reporting to the tax agency. Some jurisdictions, however, do require some financial reporting and I view these as “quasi-offshore jurisdictions”. In Singapore for example, all foreign companies, including those that benefit from lower Capital gains tax payments, are required to make periodic financial reports available to Singapore’s tax authority. It should also be noted that Singapore does not offer a total exemption on Capital gains taxes for any of its foreign companies, which puts it squarely in the category of a “quasi- offshore jurisdiction”. Some jurisdictions require that you have a local director who is ordinarily resident in the country. So if you establish an offshore company in that country, you will be required to pay for a local director to be appointed to your company. This again ensures further measures are in place for financial reporting beyond the responsibilities imposed on the client. In Saint Lucia, there is no requirement for any of the directors of a Saint Lucia offshore company, to be ordinarily resident in Saint Lucia. In other jurisdictions, only Registered Agents can hold offshore accounts on behalf of companies. Therefore if you set up an offshore company in that country, your bank account is operated through your Registered Agent. The government policy here is clearly to ensure close monitoring of accounts by the Registered Agent, and allow for any unscrupulous activity to be reported to the regulators. In Saint Lucia all of the information acquired about the client initially, is used to determine eligibility for an offshore account, and once the account is opened, the client has full control over it. So the Registered Agent had better do his or her job right to start with, because once the account is opened, there is nothing more he or she can do, and the Registered Agent has no control or knowledge about the activities of the account once it is opened. All of this means that the role of a Registered Agent in Saint Lucia is extremely important and extremely onerous, with regards to maintaining the integrity of the system that we currently have in place. We are like the gatekeepers of the Kingdom and we must be vigilant in determining who we give the keys to! In most, if not all instances, the only interaction the client will have with any authority, is with the Registered Agent. As there is no financial reporting required, there is no interaction with the Regulator or Saint Lucia’s tax agency. Registered Agents in Saint Lucia are therefore an extension of the Financial Services Regulatory Authority, and we are tasked with conducting a thorough, systematic, due diligence check before taking on a client. Due Diligence is primarily the gathering of background information about a client to determine that clients eligibility to own an offshore company and an offshore account.

Eligibility is determined based on the Clients identity, Country of residence, source of funding and other factors which are meant to safeguard against money laundering and terrorism financing and other illegal activities. Registered Agents therefore have a massive responsibility, especially in Saint Lucia, to maintain the honesty and good will of the International Financial Services Industry in Saint Lucia. As a result, Registered Agents in Saint Lucia are carefully picked. There is a stringent application that must be made to the Regulator and only those with sufficient integrity and expertise in the field are chosen to be Registered Agents. It is also important that persons within the Industry in Saint Lucia can vouch for you as a suitable candidate. The system is deliberately set up this way to counterbalance the nature of the offshore industry in Saint Lucia. With no financial reporting, no local director required, and total exemption from taxes, the system in Saint Lucia is built in such a way that Registered Agents are trained in the knowledge required to ensure, that persons who wish to establish an offshore structure and open offshore accounts in Saint Lucia are vetted, and their business activities are known to, and understood by, the Registered Agent. Any illegal activity discovered by the Agent must be immediately reported to the Financial Services Regulatory Authority in Saint Lucia, who then act on the information. We are therefore like the wardens of the Industry, working to protect its integrity and keeping it at the highest standard possible. It is clear this system works. Saint Lucia has never been blacklisted by the Financial Action Task Force and maintains one of the most reputable Offshore industries in the Caribbean. Our Registered Agents recognize this and as we all have a stake in the industry, both financially and as citizens of our country, we are all committed to providing not only the highest calibre of service to our clients, but to protecting the goodwill and integrity of the industry as a whole. I for one am quite proud of what we have achieved in such a short space of time as a nation, and I am very excited to see what the future will bring. Author -Tonjaka E. Hinkson B.A. (Ont.) L.L.B. (Lond) BVC(Lond)

Why the world needs offshore financial services -November 21st, 2013 Before I became a lawyer I was an Economist. So I thought it would be only fitting that I put on my Economist cap, and have a closer look at the offshore financial services industry. In particular, I thought I would examine the idea that offshore financial centers form one of many integral components of the economies of not only the countries that offer offshore financial services incentives, but also the countries to which these services are meant for. It goes without saying that the most attractive feature of a jurisdiction that offers economic incentives to incorporate and trade via offshore corporate structures, is the tax exempt status of these companies. The net gains on capital accumulated by these companies are completely tax free. This is an obvious incentive to companies earning in the higher income brackets and also to individuals whose assets and income are at the higher end of the tax spectrum. These individuals are usually referred to as 'high net worth' individuals or sometimes 'ultra high net worth' individuals, depending on the value of their net assets. On a micro economic level, tax incentives affect an individual's disposable income. The more taxes you pay the less money you have to spend on goods and services all things being equal. For companies, the less taxes it pays the more money the company will have as profit. The question therefore is, if a company or an individual is paying less in taxes, what will that company or individual do with the extra profits or disposable income? From a purely economic stand point, if an individual's disposable income increases that person will spend more on goods and services, regardless of what his or her tax rate is. That person will invariably

be able to afford to purchase more goods and services in the market. In fact, your disposable income is a measure of your purchasing power, and therefore the likely maximum amount of goods and services you are able to purchase and the overall utility you will enjoy. Utility in economic terms is a measure of a person’s "well being", given the amount of goods and services that person can afford and has access to. Here's an example of utility at work. If two individuals can afford to buy healthy fruits as part of their diet, but only one of them uses their available disposable income to do so, whilst the other does not, the person who refrains from buying these goods, even if they can afford them, is not maximising his or her utility. Alternatively, if one of the individuals cannot afford to purchase healthy fruits but the other can, then the person who cannot afford these goods, may well have already maximised his or her utility, because that persons disposable income is just not enough to purchase healthy fruits. That person unfortunately, does not enjoy the standard of living the individual who can actually afford these healthy foods has. That means utility is subjective, and depends on the purchasing power of the individual and is directly affected or directly proportional to that persons level of disposable income. The more disposable income you have the higher your utility and so on. Now what does all this have to do with mitigating taxes through offshore jurisdictions? Well the answer is simple. If two individuals or two companies have the same net worth, but one of them has mitigated their tax liability through an offshore structure, the company mitigating, has gained a comparative advantage in the market they are operating in, and the individual mitigating has increased his or her utility in the same market. The individual has increased his or her disposable income, and the company has increased its profit or capital gains margin. On a macro economic level, we have seen this type of advantage creating extraordinary successes in small businesses that have grown exponentially, and have garnered significant market shares within the economies of onshore jurisdictions. These companies have achieved this in a relatively short space of time. With reduced overheads and a simple business model, companies like Apple and more recently Google and Facebook, have been able to focus their profits on research and developing new products, beyond that which they first began producing. Google for example started off as a search engine, and now makes laptops. Through their aggressive tax structuring, these companies have been able to refocus their revenue and take risks they otherwise would not have taken. These added capital gains reduce the opportunity for loss, when new decisions are taken to venture outside the usual line of products and services these companies began offering. This allows them to significantly increase their market shares. Risk is reduced and the freedom to innovate and take chances with new technologies and investment strategies is greater. So what does this mean for the future of offshore jurisdictions? Tax mitigation through offshore structures will become more integral in the investment strategies of businesses that have increased their market shares as a result of huge gains in profit margins. These companies have a significant stake in the economic "branding" of the countries they operate in, and serve as a vessel for economic growth and technological advancement. These companies also allow countries to compete more effectively on a global scale and encourage investor confidence in that country’s ability to provide, an ultra successful model for the provision of products and services. Tax mitigation, although not feasible as an onshore policy objective, because of the overreaching political ramifications, will continue to be a necessitated component of these countries economic growth, through the use of offshore jurisdictions. I say necessitated, because although the success of companies like Google has not been the result of offshore tax structuring, its ability to expand and venture into new areas of production and achieve massive gains in overall market share, to a large extent, has been. Author- Tonjaka Kho-Hinkson B.A. (Ont.) L.L.B (Lond.) BVC

FortGate Offshore Investment and Legal Services LTD 9 Red Tape Lane The Morne Castries Saint Lucia Wes tIndies P.O. Box 838

Telephone (London): +44 07527089165

Telephone (St.Lucia): +1 758 285 7447

Fax: +1 758 452 2493

Email: tonjaka.hinkson@fortgateoffshore.com

theresa.hinkson@fortgateoffshore.com

…………………………………….......... TONJAKA HINKSON-DIRECTOR

Prepared on behalf of Fortgate Offshore Investment and Legal Services LTD

Author- Tonjaka Hinkson- Attorney and Director of Compliance and Fiduciary Services.