Friday, June 19, 2009






Friday, July 18, 2008
Tax Haven Banks

Below is the Senate Report on Tax Haven Banks. This is a heads up to all return preparers that all of the offshore transactions should be expected to be audited. That should be a heads up for your clients that those transactions will be disclosed to the IRS. However, the risk to the return preparer is that you will run the risk that not only will the transaction not meet the reasonable basis standard but it could subject you to the greater section 6694(b) penalties. Of all of the red flag audit issues, all offshore transactions are the largest set of red flags.The IRS is very aggressive in these transactions. It is as if they assume there is a fraudulent motive for the transaction unless you prove it is not a fraudulent transaction.

Senate Permanent Subcommittee on Investigations Release: Permanent Subcommittee on Investigation Issues Report on Tax Haven Banks Hiding Billions from the IRS
July 18, 2008 110th Congress July 17, 2008


WASHINGTON --At a Thursday hearing entitled, Tax Haven Banks and U.S. Tax Compliance, the latest in a series of hearings with insider information about the workings of the offshore industry, the Senate Permanent Subcommittee on Investigations will examine how tax haven banks facilitate tax evasion by U.S. clients, hide client and bank misconduct behind the cloak of bank secrecy laws, and add to the offshore abuses that cost U.S. taxpayers an estimated $100 billion dollars each year. A six month-long bipartisan Subcommittee investigation examined LGT Bank in Liechtenstein and UBS in Switzerland to expose how tax haven banks are assisting U.S. taxpayers to evade taxes, in particular by urging U.S. clients to open accounts in their offshore jurisdictions, assisting them in structuring those accounts to avoid disclosure to U.S. authorities, and providing financial services in ways that do not alert U.S. authorities to the existence of the foreign accounts. Subcommittee Chairman Sen. Carl Levin (D-Mich.) and Ranking Minority Member Norm Coleman (R-Minn.) will release a 115-page joint staff report detailing the findings of the investigation in conjunction with the hearing. Tax havens are engaged in economic warfare against the United States, and the honest, hardworking American taxpayer is losing, said Levin.The iron ring of secrecy around tax haven banks and their deceptive banking practices enable and encourage tax cheats to hide assets from the United States. Congress needs to enact strong penalties on tax haven banks that help U.S. taxpayers avoid paying taxes to Uncle Sam.Senator Coleman said,It is simply unacceptable that some individuals are using offshore tax havens and secrecy jurisdictions to shelter trillions of dollars from taxation, forcing working families to shoulder the tax burden. By exploiting gaping loopholes, these foreign banks are enabling felony tax evasion. Simply put, foreign banks should not be Al Capone safe-houses for evading taxes. Closing these loopholes means we must strengthen reporting requirements, broaden the scope of the audit program, and extend the amount of time the IRS has to investigate cases involving an offshore tax haven.Exposing a trove of internal bank documents and interviews with bank insiders, the Subcommittee report shines a spotlight into the murky operations of two high-profile tax haven banks. Eight case studies expose bank practices that could facilitate, and have resulted in, tax evasion by U.S. clients:

1. Marsh. The Marshes of Ft. Lauderdale, Florida, hid $49 million in four Liechtenstein foundations over 20 years.
2. Wu. LGT helped William Wu hide ownership of assets, including his house in Forest Hills, New York, using an elaborate offshore structure.
3. Lowy. LGT used transfer companies and a foundation with a Delaware corporation to help the Lowys hide their beneficial interest in a foundation with $68 million in assets.
4. Greenfield. LGT private bankers, including Prince Philipp of Liechtenstein, met with Mr. Greenfield and his father to pitch the transfer of $30 million from Bank of Bermuda to LGT.
5. Gonzalez. LGT helped a Gonzalez car dealership inflate invoices, move funds offshore and, after getting sued for their pricing practices, hide assets in case of a court judgment.
6. Chong. LGT helped Richard Chong use hidden accounts to move millions of dollars related to his business ventures, routing them through an offshore corporation to avoid scrutiny.
7. Miskin. LGT helped Michael Miskin hide assets from courts, tax authorities, and his wife.
8. Olenicoff. Bradley Birkenfeld, a private banker employed by UBS AG, pleaded guilty last month to conspiring with a U.S. citizen, Igor Olenicoff, to defraud the IRS of $7.2 million in taxes owed on $200 million of assets hidden in Switzerland and Liechtenstein.

In reviewing these case histories, the investigation found: (1) bank secrecy laws and practices are serving as a cloak, not only for client misconduct, but also for misconduct by banks colluding with clients to evade taxes, dodge creditors, and defy court orders; (2) from at least 2000 to 2007, LGT and UBS employed banking practices that could facilitate, and have resulted in, tax evasion by their U.S. clients, including assisting clients to open accounts in the names of offshore entities; advising clients on complex offshore structures to hide ownership of assets; using client code names; and disguising asset transfers into and from accounts; (3) since 2001, LGT and UBS have collectively maintained thousands of U.S. client accounts with billions of dollars in assets that have not been disclosed to the IRS; UBS alone has an estimated 19,000 accounts in Switzerland for U.S. clients with assets valued at $18 billion, and the IRS has identified at least 100 U.S. taxpayers with accounts at LGT; and (4) LGT and UBS have assisted their U.S. clients in structuring their foreign accounts to avoid QI reporting to the IRS, including by allowing U.S. clients who sold their U.S. securities to continue to hold undisclosed accounts, and by opening accounts in the name of non-U.S. entities beneficially owned by U.S. clients; while these banking practices did not technically violate the banks' Qualified Intermediaryagreements with the IRS, the result is that the banks helped keep accounts secret from the IRS and thereby facilitated tax evasion by their U.S. clients.

Reforms recommended by the Levin-Coleman report to reign in tax haven abuses include the following:

1. Strengthen QI Reporting of Foreign Accounts Held by U.S. Persons. In addition to prosecuting misconduct under existing law, the Administration should strengthen the Qualified Intermediary Agreements by requiring QI participants to file 1099 forms for: (1) all U.S. persons who are clients (whether or not the client has U.S. securities or receives U.S. source income); and (2) accounts beneficially owned by U.S. persons, even if the accounts are held in the name of a foreign corporation, trust, foundation, or other entity. The IRS should also close the QI-KYC Gap by expressly requiring QI participants to apply to their QI reporting obligations all information obtained through their Know-Your-Customer procedures to identify the beneficial owners of accounts.

2. Strengthen 1099 Reporting. Congress should strengthen the statutory 1099 reporting requirements by requiring any domestic or foreign financial institution that obtains information that the beneficial owner of a foreign-owned financial account is a U.S. taxpayer to file a 1099 form reporting that account to the IRS.

3. Strengthen QI Audits. The IRS should broaden QI audits to require bank auditors to report evidence of fraudulent or illegal activity.

4. Penalize Tax Haven Banks that Impede U.S. Tax Enforcement. Treasury should penalize tax haven banks that impede U.S. tax enforcement or fail to disclose accounts held directly or indirectly by U.S. clients by terminating their QI status, and Congress should amend Section 311 of the Patriot Act to allow Treasury to bar such banks from doing business with U.S. financial institutions.

This hearing and report follow other investigations into offshore abuses by the Subcommittee. Hearings held by the Subcommittee in 2001 examined the historic and ongoing lack of cooperation by some offshore tax havens with international tax enforcement efforts and their resistance to divulging information needed to detect, stop and prosecute U.S. tax evasion. A hearing held in December 2002 and report issued in January 2003 provided an in-depth examination of an abusive tax shelter used by Enron. Two days of hearings in November 2003, and a bipartisan report issued in 2005, provided an inside look at how some respected accounting firms, banks, investment advisors, and lawyers had become engines pushing the design, sale, and implementation of abusive tax shelters to corporations and individuals across the country. In August 2006, a hearing and report examined six case studies illustrating the operation of the offshore tax industry, its service providers and clients, and how tax haven abuses are undermining, circumventing, or violating U.S. tax, securities, and anti-money laundering laws.

July 17, 2008

Each year, the United States loses an estimated $100 billion in tax revenues due to offshore tax abuses.1 Offshore tax havens today hold trillions of dollars in assets provided by citizens of other countries, including the United States.2 The extent to which those assets represent funds hidden from tax authorities by taxpayers from the United States and other countries outside of the tax havens is of critical importance.3 A related issue is the extent to which financial institutions in tax havens may be facilitating international tax evasion. In February 2008, a global tax scandal erupted after a former employee of a Liechtenstein trust company provided tax authorities around the world with data on about 1,400 persons with accounts at LGT Bank in Liechtenstein. On February 14, 2008, German tax authorities, having obtained the names of 600-700 German taxpayers with Liechtenstein accounts, executed multiple search warrants and arrested a prominent businessman for allegedly using Liechtenstein bank accounts to evade €1 million ($1.45 million) in tax.4 About a week later, the U.S. Internal Revenue Service (IRS) announced it had initiat[ed] enforcement action involving more than 100 U.S. taxpayers to ensure proper income reporting and tax payment in connection accounts in Liechtenstein.5 The United Kingdom, Italy, France, Spain, and Australia made similar announcements on the same day.6 Altogether since February, nearly a dozen countries have announced plans to investigate taxpayers with Liechtenstein accounts,7 demonstrating not only the worldwide scope of the tax scandal, but also a newfound international determination to contest tax evasion facilitated by a tax haven bank. In May 2008, a second international tax scandal broke when the United States arrested a private banker formerly employed by UBS AG, one of the largest banks in the world, on charges of having conspired with a U.S. citizen and a business associate to defraud the IRS of $7.2 million in taxes owed on $200 million of assets hidden in offshore accounts in Switzerland and Liechtenstein. The United States had earlier detained as a material witness in that prosecution a senior UBS private banking official from Switzerland traveling on business in Florida, allegedly seizing his computer and other evidence. In June 2008, the former UBS private banker, Bradley Birkenfeld, pleaded guilty to conspiracy to defraud the IRS.8 His alleged co-conspirator, Mario Staggl, part owner of a trust company, remains at large in Liechtenstein. The current UBS senior private banking official, Martin Liechti, remains under travel restrictions. This enforcement action appears to represent the first time that the United States has criminally prosecuted a Swiss banker for helping a U.S. taxpayer evade payment of U.S. taxes.9

On June 30, 2008, the United States took another step. It filed a petition in the U.S. District Court for the Southern District of Florida requesting leave to file an IRS administrative summons with UBS asking the bank to disclose the names of all of its U.S. clients who have opened accounts in Switzerland, but for which the bank has not filed forms with the IRS disclosing the Swiss accounts.10 The court approved service of the summons on UBS on July 1, 2008.11 The summons has apparently been served, but according to Swiss authorities the Swiss and American governments are negotiating over its execution.12 This John Doe summons represents the first time that the United States has attempted to pierce Swiss bank secrecy by compelling a Swiss bank to name its U.S. clients. The U.S. Senate Permanent Subcommittee on Investigations has long had an investigative interest in U.S. taxpayers who use offshore tax havens to hide assets and evade taxes.13 As part of this effort, the Subcommittee has undertaken an investigation into the extent to which tax haven banks may be assisting U.S. taxpayers to evade taxes, in particular by urging U.S. clients to open accounts abroad, assisting them in structuring those accounts to avoid disclosure to U.S. authorities, and providing financial services in ways that do not alert U.S. authorities to the existence of the foreign accounts. Of particular concern in this investigation has been the extent to which tax haven banks may be manipulating their reporting obligations under the Qualified Intermediary ("QI") Program, which was established by the U. S. government in 2001, to encourage foreign financial institutions to report and withhold tax on U.S. source income paid to foreign bank accounts. QI participant institutions sign an agreement to report and withhold U.S. taxes on an aggregate basis in return for being freed of the legal obligation to disclose the names of their non-U.S. clients. Evidence is emerging, however, that tax haven banks are taking manipulative and deceptive steps to avoid their QI obligation to disclose their U.S. clients. To illustrate the issues, this Report presents two case histories showing how banks in Liechtenstein and Switzerland have employed banking practices that can facilitate, and have resulted in, tax evasion by their U.S. clients.I. Executive Summary


Offshore Bank Accounts: What You Need To Know Jan 4th, 2009 | By Benjamin Mulletonin | Category: Wealth Building

Offshore accounts are typically located in a place, or a tax haven with a reduced tax burden on the offshore account depositor. Offshore accounts are administered via banks and give traditional banking services which make it more convenient to utilize the assets held in the bank accounts for everyday spending, receipt and distribution of assets. An offshore account can normally be established with not much effort. We continually suggest the offshore banking account be opened utilizing a corporate, foundation or trust structure. For a large number of clients it may be practical to open the offshore bank account in a jurisdiction situated closer to the tax haven of the actual industry of the corporation or to the actual location of its beneficial owners.Offshore banking accounts are usually opened under the name of offshore institutions or IBCs. Off shore banking accounts must be opened with an initial deposit to activate your bank account. Some offshore banks require large sums of funds as a deposit, and there can be large annual membership and maintenance fees if you don’t understand all the terms of the agreement. Typically offshore banking accounts can be opened with as little as $1000 for deposit. Offshore banks are the easiest proper way to make sure no one can ever seize your funds, while keeping your tax bills as low as legitimately possible. Large number of offshore banks have strict rules for disclosing personal details recognized as banking privacy. However, there is currently a trend where offshore banks are providing formal data to authorities when there is evidence of serious crimes or acts of terrorism. In spite of the fact that the level of safety and chances for higher returns will vary with each offshore bank, you can expect to find one that best suits your needs with a little basic research. To open a corporate bank account for an offshore corporation, all reputable banks will have to have detailed personal and business information from the owners and controllers of the offshore banking account. While the banks are required to know their customers in detail, banking secrecy remains a fundamental cornerstone in all offshore financial centres, and certainly in Panama (our recommended tax haven).

Release of banking information to any overseas party or government is not possible, unless ordered by a court in the country where your bank account resides. Opening an offshore bank account in a country with bullet proof banking secrecy laws is a good country to begin your asset security strategy implementation. In a huge number of cases, you neither have to visit the offshore place in which you desire to bank, nor do you have to travel to the country to keep your bank account in good standing or perform banking account maintenance.Banks found in much more developed countries onshore typically have stricter banking and reporting laws. Banks have to constantly reduce the amount of concern offered to customers in order to encounter the profit margins expected via their shareholders. Offshore banks tend to have a minimal overhead due to less government monitoring. This translates into them being able to offer high interest than home banks which tend to have larger operating charges. When searching for an offshore bank account supplier make sure they have on - line banking including the resources to send international wire transfers, check balances, history and alternate info and that they all have English speakers. The standard set of Company documentation (if properly certified by notary and legalised via Apostille) combined with private info for banking account signatories will usually satisfy the formal requirements of most banks obtain up with a corporate bank account. The banking account signatory will be protected via banking secrecy laws and any bank account activity namely wires will be performed in the name of the company shielding you personally.The tax-free status of the country being used is regularly a major consideration. But the point is, these jurisdictions have set themselves up only to supply sound financial services to those whom want to defend their assets. The problem is that tax collecting authorities have frequently attempted to characterize offshore banking accounts as being associated with tax escaping, money washing, criminal enterprises or terrorism. The US tax collection authorities, Internal Revenue Service (IRS), estimate that last year they missed $40B in tax receipts due to the existence of offshore bank accounts and offshore financial centers. The problem is, since Sep 11, 2001 a large number of tax authorities have used the opportunity created in the crisis to levy addition scrutiny on offshore accounts, offshore banks and offshore monetary centers. To be ranked a good tax haven there should be no taxation on offshore-derived earnings and the place must be free of tax treaties.The advancements of global commerce and the world wide web have allowed for greater advantages to offshore account holders. An offshore account has definite advantages over a domestic one, and is considerably easy obtain. Since the offshore account is a key component of any asset security structure you must be diligent to make sure your funds are secured in a strong bank in a stable country with strong banking secrecy laws. An offshore account combined with an offshore IBC is usually the starting point for individuals who are interested in protecting their funds from creditors.

Welcome to our Lovis Limited proffessional Company registration Service & Offshore Technology webpage !

The offshore industry was small and mysterious 20 years ago. The increasing demand for offshore facilities has resulted in the growth of shore services. Over 60% of the world's money flows through offshore today. Offshore facilities, due to advances in technology and telecommunications became an integral and important part of the world's financial system. They are used worldwide, twenty-four hours a day, 365 days a year, despite the malicious stereotype maintained by the high-tax nations that low-tax offshore jurisdictions attract a disproportionate share of the world's dirty money. The independent assessments of USA government agencies (the State Department, Internal Revenue Service, The Central Intelligence Agency) confirm that offshore tax havens do not attract a disproportionate share of the world's criminal loot. Indeed, the government agencies assessments indicate that dirty money is far more likely to be laundered in high-tax nations (for more details refer to website). It becomes obvious that the OECD and the EU's real agenda in their persecution of offshore tax havens are not the fight against money laundering but the fight against low taxes.As people gain wealth they naturally want to protect it from political instability; unnecessary taxation; extravagant heirs and any other unwanted creditors. An offshore IBC (International Business Company) is a route to achieve the level of protection which is required.An offshore IBC is a useful tool for medium and small businesses. Surely most of the readers know what offshore IBC's are. But let us recapture the main points of an offshore IBC.An offshore IBC is tax exempt on profits. An offshore IBC cannot conduct any local business in the jurisdiction of incorporation. An offshore IBC can make payments of government fees, registered agent services, legal or accountancy services (if any).Typical uses of an offshore company might be put into the following categories:For Investment purposes-Individuals make common use of offshore companies to hold their investments (shares, stocks, bonds, cash, etc). Personal holding companies provide a better return on your investment and give you more privacy. Besides, there is no income tax on interest earned or capital gains tax to pay on the disposal of an investment in the country of the offshore company.

For example, Dominica and Seychelles offshore IBC's are the perfect vehicles for a UK property acquisition by a UK non-resident. The main reasons are the attractive buoyant property market and stability of the British economy. Besides, UK offers a very favourable tax treatment in respect of non-residents and non-UK domiciles. The use of an offshore IBC as a purchasing entity (which name will be on the HM Land Registry) avoids imposition of inheritance tax if you do not domicile in the UK. Another important incentive for UK property investment is the exemption from UK capital gains tax (CGT), providing that the company is not trading or controlled in the UK. You have to bear in mind that, rental income will be subject to UK income tax. Another point to mention is UK stamp duty, which is always levied on the sale of land and building. Assuming that you are non-resident in the UK and the property is registered in an offshore IBC's name, the payment of stamp duty could be avoided. Under Dominica and Seychelles laws you can sell the entire issued share capital of the offshore IBC to the purchaser - no stamp duty or any other tax or levy will be payable on the above transfer. And what is most important -your confidentiality is preserved.The UK is just an example, offshore IBCs from Dominica and Seychelles can be used with the same advantages for European and Americans to invest in highly attractive Caribbean property.For assets protection.The advantage of buying and holding assets through an offshore IBC might safeguard against possible litigation, unwanted creditors, former spouses, etc.For e-commerce.By organizing your e-commerce business through an offshore company you will be more price competitive as you will not impose VAT or sales tax on your customers. And all your profits will be also tax free (no corporation/income taxes).For Inheritance Planning.Expatriates will find that the transfer of wealth to an offshore company will avoid undesirable consequences (e.g. time delays with probate, inheritance tax, and saves on legal fees) for their wealth when they die.For International Trading.For import/export operations it is possible to incorporate an offshore company which would deal with the suppliers/customers directly. The goods will be dispatched from the manufacturer or place of purchase. The profits arising on the difference between purchase and sales price will remain offshore and will be tax free.Factoring trading debts of a company in the high-tax jurisdiction through a company established in a low tax offshore jurisdiction may assist in transferring funds into the offshore jurisdiction.
For ownership of real property and land .The advantages of using an offshore holding company include avoidance of capital gains tax, inheritance tax, ease of the property transfer as well as the advantageous (reduced) property sale to the next owner.

Offshore IBC ownership of intellectual property (royalties, copyright, patents, franchise, etc)An offshore company can be assigned all the rights to intellectual property and then the offshore IBC can enter into a selling agreement for such rights worldwide. The income will be accumulated offshore. There are no withholding taxes on dividends.For Professional Services.Individuals who provide professional services could sign an agreement with an offshore company to receive their remuneration fees. The employment agency could reinvest, on the clients behalf, the profits in a tax efficient way. Payments to individuals can also be arranged to minimize their tax. ... And many more.The use of an offshore company is not limited to the examples above.

Offshore Mission
Offshore Mission - Our Mission

An offshore structure for your investment is no longer the preserve of the very rich.
We introduce offshore companies into your tax planning structure, offshore banking facilities, offshore e-commerce solutions through offshore international merchant accounts, which allows you to organize your personal financial affairs in a more profitable manner.We can provide your new or ongoing business or investment with invaluable offshore services.These steps lead to more efficient utilization of your hard earned money; safeguard your assets; increase the revenue from your investment. The same applies to companies. It is probably true to say that no company which trades internationally can expect to be competitive without taking advantage of the tax breaks available offshore.Introducing an offshore entity into your tax planning makes a difference between success and failure but is often ignored by those starting a new business or new investment. We aim to make offshore facilities available to a wider audience by providing offshore company formation, supplementary offshore services, offshore banking and offshore merchant account services. We believe that the right to own and control personal property offshore is a cornerstone of personal liberty and freedom.It is the sovereign right of an individual to engage in legal commerce with whom they wish, where they wish and structure their affairs so as to pay the least amount of taxes allowable by the law.It is our belief that it is in each individuals right to pursue aggressive and unrestrained enterprise. And that may be developed through a secure, reliable, confidential and tax friendly offshore jurisdiction.

We aim to assist you to achieve this objective in the most professional manner. We pride ourselves on providing a quality offshore service at reasonable cost with a high level of expertise. 100% confidentiality is guaranteed!!! Our clients are located in almost every country of the world and are of varied profiles. Our most typical client is the individual investor or businessman who requires a relatively simple and inexpensive offshore structure and who requires a comprehensive but reasonably priced ongoing offshore service.We understand the needs of our customers and approach them individually, whether they are individuals or companies.Contact: The Company Lovis Limited Suite 2 Glacis Road, Portland House,
United Kingdom Overseas Territory Gibraltar E.U. Reg. No.: 93240

Offshore Banking Has Been and Will Remain at the Cornerstone of the Offshore Finance Industry and in the Months Ahead Wednesday, 29 October 2008 16:11

Offshore Banking Has Been and Will Remain at the Cornerstone of the Offshore Finance Industry and in the Months Ahead By Geoff Cook, Chief Executive, Jersey Finance Limited

Offshore banking has been and will remain at the cornerstone of the offshore finance industry and in the months ahead, the stability provided by the leading jurisdictions in the offshore environment will be the most important feature. International investors share the same concerns as resident savers who have watched the dramatic events that have hit the global banking community unfold across the world. Investors generally have had their confidence deeply shaken by events in New York, London and other leading markets and going forward there will no doubt be a demand from investors for greater economic stability and security.An International Financial Centre such as Jersey provides a relative oasis of calm in these turbulent times. The Island has a huge pool of liquidity available from deposits placed locally. More than £200 billion sterling has been attracted to Jersey over the years, funds that do not lie idle in the bank vaults of Island offices, but are circulating amongst the onshore financial centres, particularly London.As stability becomes an essential commodity for international investors the Island’s long held reputation as a safe, secure location in which to shelter assets from global turmoil, is gaining special significance.Banks in Jersey are subsidiaries or branches of world-wide financial institutions, but tend to be far more capitalized in Jersey than the industry norm, because the Island is a centre for deposits, giving further comfort to investors.

Alongside the need to demonstrate stability, offshore jurisdictions are also competing more aggressively than ever for international investment business with many new opportunities arising from the emerging markets in the Far East, particularly in China and India.Jersey recently commissioned a long term study into the future of financial services which was undertaken for the Island by the London Business School. One of its main conclusions was that greater resources would need to be devoted to the markets in China, India and Eastern Europe which were identified as markets where, alongside London, most new business would be acquired in the future. The events of the last few months have not affected those trends. Jersey professionals have been encouraged by the increasing numbers of legal and finance professionals based in the emerging markets turning to Jersey in support of their investment planning and asset structuring. In China, for example, there are many instances where institutional investors have been able to tap into the investment opportunities available in the European markets through the formation of Jersey companies which are then listed on European exchanges. A delegation from Jersey Finance has already made two successful visits to China this year and further visits are planned.It is clear also from a recent visit to India by a delegation from Jersey that the Island is an attractive location for Indian holding companies looking to diversify business interests into the UK and Europe. Since Indian nationals are able now to invest up to $US 200,000 per annum outside of India, this has opened up the opportunity for a range of private wealth management work.

The privacy issue

Finance centres have also needed to embrace the requirements of international bodies such as the OECD which has been engaged in its harmful tax competition initiative, the objective of which is to achieve a global level playing field based on high standards of transparency and effective exchange of information in tax matters. In response to these international moves, Jersey has, for example, been committed to the principles of exchange of information on request and transparency since as far back as 2002.However, this international pressure on jurisdictions to provide greater information on their client’s financial affairs has led to widening concern amongst high net worth clients that the privacy of their affairs may no longer be guaranteed. This has, in turn, led to considerable debate amongst those who advise wealthy clients about the threats to confidentiality posed by the demands for greater transparency from tax authorities. The fact is that it is possible for jurisdictions to adhere to international standards and to co-operate with international moves to combat fiscal crime, whilst maintaining a client’s right to privacy and confidentiality.It is worth considering for a moment the differences in the rules that exist between jurisdictions. There are some financial centres that rely on banking secrecy laws to uphold the privacy of financial affairs. However, such centres are attracting an increasing level of negative publicity regarding assets linked to illegal activity which hide behind a cloak of secrecy. As a result, there is mounting pressure for them to abandon the secrecy barrier.There are other centres which do not rely on secrecy laws, including many jurisdictions which are familiar to British expatriates. In this respect, Jersey, for example, is not a secretive jurisdiction and it protects the rights to privacy and confidentiality of financial information relating to law abiding citizens without the need for banking secrecy laws.

Jersey embraces the concept of transparency in its regulatory practices and it is acknowledged for doing so by international bodies and law makers, but this does not mean that private and confidential data about clients held solely by institutions in Jersey is accessible and will be disclosed. On the contrary, Jersey has always upheld the principle of confidentiality of client affairs. Some may question whether the Island can continue to do this when the HMRC have been seen to increase its powers to obtain information about offshore bank accounts, most notably following the Court ruling won by HMRC in 2007. This case related to information held about clients in the UK with offshore bank accounts. The Industry believe that HMRC would not generally be able to compel information to be disclosed by Jersey subsidiaries and/or branches of UK institutions, provided always that the relevant information was not held in the UK. Although the position has not been tested in the Island, this is the view of Jersey legal experts familiar with an understanding of Irish and English civil case law.

Tax and transparency

In the fight against money laundering and fiscal crime and to meet OECD principles of transparency, a new model agreement has been created known as the Tax Information Exchange Agreement.Many financial jurisdictions are signing agreements with individual countries and Jersey is amongst them. To date, the Island authorities have negotiated agreements with the USA, Netherlands and Germany. It is important to recognise that tax authorities can only use TIEAs in specific cases where the requesting authority is able to demonstrate that there is a need to obtain information and that all other means to discover the information they require has been exhausted in their own territory.It is possible in Jersey’s view to support the concept of greater transparency in financial affairs whilst adhering to original and long held principles that the financial affairs of legitimate, law abiding clients, are sacrosanct.Alongside the need to demonstrate stability and the challenging issues of transparency and information exchange, financial centres will continue to compete on their ability to innovative and enhance their commercial environment so that they are more attractive for international investors. In Jersey already this year, the Island has introduced enhancements to its company laws, launched rules that enable promoters to set up unregulated funds which complement the hugely successful regulated funds regime and finalised new legislation which will enable Foundations to be formed in the Island for the first time. Foundations which will be available in Jersey alongside existing vehicles such as companies, trusts and limited partnerships, may be of particular interest to international investors and their advisers in respect of long term financial planning.Unlike a trust, a foundation is a distinct legal entity similar to a company, although it has no shareholders. The powers of the foundation will be exercised by a council, one of whose members must be registered under the Financial Services (Jersey) Law 1998 to conduct financial services business of this type. The foundation’s charter will need to be lodged with the Registrars department of the Jersey Financial Services Commission, setting out the name and broad objectives of the foundation.We anticipate that the foundation vehicle will appeal to clients based in civil law territories where they are less familiar with the trust concept and it will also be an effective financial planning vehicle for those clients who want to maintain more personal control of the assets. It has some of the attractions of a trust vehicle and some of the benefits of a company structure including separate legal status, which will enhance its appeal to private clients and their advisers who may not previously have considered Jersey as a location to shelter assets.Whilst the need for a stable and secure environment will be paramount, investors also need choice. The flexibility of regulation, the widening scope of legislation and the growing specialist skills prevalent in jurisdictions such as Jersey, help to provide the choice that investors seek. Diversity and specialization are also essential ingredients in successful international finance centres.


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