News in Brief

Offshore company information Cyprus

Licensing of Trust and Company Service Providers

In line with other major offshore financial centres Cyprus is to regulate the activities of businesses providing company and trust formation and management services. A draft bill, the Regulation of, Fiduciaries, Administration Businesses and Company Directors, etc (Cyprus) Law 2006 has been published and the intention is that it shall become law before the end of the year.

The Regulator will be the Central Bank of Cyprus and the draft law provides that the Regulator may exchange information with other regulatory authorities and shall cooperate and/or exchange information with regulatory bodies of any European Union of EEA member State in order to assist the latter in the exercise of their functions and responsibilities.

Offshore company information Liechtenstein

Bank secrecy

In a recent interview, the Ruler, Prince Alois, is reported to have said that the Principality is unlikely to repeal its banking secrecy laws because the measure would not be approved in the referendum required under the Constitution.

Financial services constitute about 30% of Liechtenstein’s gross domestic product, attracted by relatively low taxation, liberal incorporation and corporate governance rules and bank secrecy. There is also an impression however that, historically, banking secrecy has made the country attractive to money launderers.

Capital Gains Tax France

Capital gains tax exemption

France has introduced a one off capital gains tax exemption for French and other EU nationals (and for residents of states with which France has a non discrimination agreement) when they sell their French residence. The seller must have been resident in France for at least two years prior to the sale.

Offshore Trusts South Africa

Trust residence

We have been sent numerous circulars from financial service providers in South Africa suggesting that, post amnesty, settlors of offshore trusts should appoint South African resident trustees and return the administration to South Africa. The principal reasons are given as the convenience of being able to deal with a local trust company and a promised cost saving.

Whilst such a course of action may be superficially attractive we would encourage settlors to think carefully before being seduced by offers of this nature. A government has far more control over the trustees of a trust when they are in the jurisdiction and is able to more easily levy additional taxes or impose exchange restrictions. It may be instructive to look at what has happened in the United Kingdom where tax can bite harder on resident trusts and where there may be tax penalties for exporting a trust even when it would make sense to do so, e.g. the beneficiaries become non – residents. The South African exchequer may be overflowing with cash at present, but what may happen when this is no longer so?

United Kingdom

Trust residence

The government is intending to simplify the income tax and capital gains tax treatment of trusts and harmonise the definitions and to amend the rules for determining where trustees are resident for tax purposes.

Under the new rules, even having one trustee resident in the U.K. and a majority abroad, will make the trust resident for tax purposes unless the settlor was resident, ordinarily resident and domiciled outside the U.K. when he made the trust.

Investigation of offshore banking accounts (continued)

It will be recalled that the Tax Authorities successfully applied for authority to access offshore banking account details of customers of credit card companies. The nature of the information sought has now been revealed to be as follows,

• The names, addresses and dates of birth of customers, having a U.K. address with a credit card, who, on the application form, or subsequently, gave details of a non-U.K. banking account with which the account was associated
• The bank and branch code and the number of the account
• Interest earned on the account
• Transactions on thee credit card for six months

Special teams are being set up to analyse the information obtained and compare it with tax returns filed.

In a separate but related development the Inland Revenue has won a legal battle with Barclays Bank forcing the bank to supply details of U.K. resident customers who keep offshore accounts. The Revenue is now expected to turn its attention to other banks.

Dubai

Seven new Islands

Following on from the success of the Palm Island projects, Dubai is to build an additional seven islands. They will offer 100% freehold ownership to all nationalities. Half of the project will be sold to third party investors as land plots for development and the remainder will be developed and sold.

Seychelles

The Governor of the Central Bank stated in a recent press interview that he expects most of the remaining exchange controls to be removed before the end of 2006.

European Savings Tax Directive

It has been reported in the Swiss media that wealthy investors are finding it easy to circumvent the directive, which requires either the reporting of savings interest to the authorities in the account holder’s home country or the withholding of tax from savings interest. Funds have been transferred from European banking centres to territories not covered by the directive, for example Hong Kong and Singapore or have been placed within trusts and offshore companies, to which it does not apply.

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