Intro To Taxation

Question 1

Define taxes

Answer 1

Charges levied by gov to raise revenue to pay for public services & meet needs of communities to ensure people are healthy & secure

Compulsory

Question 2

What are taxes

Answer 2

Tax rules & laws vary between jurisdiction

Natural persons, legal persons & arrangements are subject to tax

Basis of taxation varies depending on type of person (natural & legal) & jurisdiction deemed to be resident/ domiciled

Question 3

Outline types of taxes

Answer 3

Capital gains tax (CGT)

Income Tax

IHT

Stamp Duty

Value added tax (VAT)

Wealth Taxes

Question 4

Outline direct taxes

Answer 4

Taxes on Income

• CGT
• Corporation tax
• Income tax
• stamp duty land tax
• stamp duty reserve tax

Question 5

Outline Indirect Tax

Answer 5

Tax on expenditure

• customs duties
• excise duties
• insurance premium tax
• VAT

Question 6

Why do offshore clients need expert advice

Answer 6

Many complex rules surround taxation that vary depending on circumstances of individuals/ entity

i.e - lack of clarity for tax purposes regarding residency, ordinary residency & domicile

Offshore SP appreciate need for expert advice

Tax rules change yearly, SP provides should be conscious while structured remain appropriate at time of incorp it may not be tax efficient in future/ to act in best interests of BO tax consequences should be reviewed ongoing

Not the role of offshore T&C professionals to give clients tax advice & are entitled to trust clients are honest by declaring relevant income & gains to tax authority

However SP must bear in mind own obligation for suspect tax evasion under jurisdiction AML/ dealing with proceeds of tax evasion legislation

Question 7

Outline types of income tax systems

Answer 7

Progressive

• rate of tax increases as persons earnings increase
• usually level of income exempt from tax / followed by rates that increase when certain thresholds are met
• UK tax system

Proportional

• flex rate regime
• exemption for certain amount of earned income & then single rate of changed on remainder
• JSY tax system

Earned income - income earned from employment

Regressive
-rate of tax falls as the level of income subject to tax rises

Question 8

Outline tax offshore

Answer 8

Many taxes found onshore are not present offshore centres
-CGT
-IHT
-VAT
Although some offshore clients may be subject to them

Offshore administrators must be familiar with taxes & basic tax concepts onshore/ clients & entites under admin can be impacted by them

Where taxes exist offshore usually charged on residents of jurisdictions @ lower rates