1. Development and features of offshore centres Flashcards
What is an offshore centre?
Jurisdiction which provides much of its financial services business to non-resident individuals and seeks to create a competitive advantage through favourable laws, i.e. low taxation or bank secrecy
OECD
Organisation of Economic Co-operation and Development
What is an onshore offshore centre?
Major onshore centre that offers offshore features to non-residents. I.e. in the UK non-resident individuals are not subject to all direct taxes.
Provide 2 examples of an offshore centre and an offshore onshore centre?
Offshore - Jersey, Guernsey
Onshore offshore - UK, Canada, Netherlands
How does taxation differ in offshore centres?
In low tax jurisdictions, residents are taxed at lower rates and non-residents are generally exempt from direct taxes.
Why did offshore centres historically develop rapidly?
Due to their lack of regulation compared to onshore centres. Better regulation was therefore demanded in order to maintain the integrity of offshore jurisdictions.
What did increased regulation and legislation lead to?
- Better control and supervision
- Restored confidence and respect
- Growth of quality business
FATF
Financial Action Task Force
What is FATF’s stance on Offshore centres?
They recognised that not all ‘offshore centres’ are the same - some have much higher standards than others.
Their focus is now on whether a jurisdiction complies with international standards rather than whether it is offshore or onshore.
What is the relationship between offshore and onshore centres?
Onshore centres continue to make it more difficult for residents to benefit from lower taxes by moving their finance offshore.
Offshore centres have responded by seeking new opportunities to remain competitive, e.g. offering new vehicles such as foundations.
What are the used of offshore centres?
- Tax efficient international trade structures
- Wealth structuring
- Holding and investment companies
- Offshore investment funds
- Protection of personal wealth and estates
- Captive insurance companies
- Ship registration
- Pension funds
Who are the users of offshore centres?
- High net worth individuals (HNI)
- Entrepreneurs
- Small businesses
- Trading companies
- Multi-national corporations
What are the various offshore centres?
- The Crown dependencies (Jersey, Guernsey and the Isle of Man)
- British Overseas Territories (Anguilla, Bermuda, BVI, Cayman Islands, Gibraltar and some mainland countries such as Monaco and Panama)
- Others include Bahamas, Barbados, Belize, Cyprus, Malta and Mauritius
What are the features of offshore centres?
- Low tax regime (No or minimum income tax, capital gains tax, inheritance tax)
- Privacy and confidentiality (Reduced disclosure of beneficial parties)
- Lack of exchange controls (Free movement of money in and out of the country)
- Moderate or light regulations (Less onerous and bureaucratic)
- Areas of Expertise (Experts attracted to good working environment)
- Asset protection (Structures protect from lawsuits / divorce settlements)
What are the considerations when choosing an offshore centre?
- Reputation (Lack of incidents / good track record, i.e. not on black lists)
- Human infrastructure (expertise, language, local economy - stable and secure)
- Reporting (are the beneficial owners / beneficiary registers)
- Tax ( such as no CGT, IHT / low income tax and VAT or are there double tax treaties in place?)
- Geography (transport links, accommodation, climate, time zone, communications)
- Legal System (legal regulations, amount of interference, similar law system to own jurisdiction, good trust and company law)
- Political and social stability
- Exchange controls
- Links to niche markets i.e. captive insurance
