Legislative amendments to provide for the formation of Private Trust Companies have been introduced in the Bahamas. The government is currently consulting with relevant stakeholders.A private trust company is formed for the specific purpose of acting as trustee of a single trust, or a group of related trusts for the benefit of members of the same family. Generally it has no intrinsic value; its sole purpose is to act as trustee of the family trust and so its value is usually no more than the amount of its paid-up share capital.Current regulations in the Bahamas allow for the licensing of such family trust companies only with a restricted licence.?This is a progressive step in the continued growth and development of our financial services industry and of our economy,” said Parliamentary Secretary in the Ministry of Finance, Michael Halkitis.
27 June 2007, the European Commission approved under EC Treaty state aid rules a scheme providing tax reductions worth €300 million until 2020 to companies setting up in the free zone of Madeira (ZFM) between 2007 and 2013.The granting of the aid is subject to requirements to create jobs and safeguards as to the implementation of the aid. The Commission was satisfied that the aid was intended to promote regional development in Madeira by enabling companies established in this outermost region to overcome their structural handicaps.Competition Commissioner Neelie Kroes said ?The aid will contribute to attract investment and economic activity to Madeira, supporting cohesion in the EU and regional development in this outermost region.?The ZFM comprises an industrial free zone, an international services centre and an international shipping register. New companies licensed to carry on business there between 1 January 2007 and 31 December 2013 will benefit from a reduced tax rate of 3% in 2007-2009, 4% in 2010-2012 and 5% in 2013-2020.Admission to the ZFM is restricted to activities included in a list drawn up by the Portuguese authorities. As under the previous scheme, authorised by the Commission on 11 December 2002, financial and insurance intermediary activities, financial and insurance auxiliary activities and “intra-group services” (coordination, accounting and distribution centres) are explicitly excluded.
26 June 2007, Chief Minister Peter Caruana announced in the Budget that Gibraltar had decided against pursuing a ?zero-10? tax strategy, in favour of a flat low tax regime. Under the zero-10 system, first introduced by the Isle of Man on 1 July 2006, all companies qualify for a zero rate of tax except financial services companies, which pay a 10% flat tax. Of the other UK Crown Dependencies, Guernsey is due to introduce a zero-10 system on 1 January 2008, and Jersey one year later.Caruana said Gibraltar would instead introduce a flat corporate tax by mid-2010. ?We are moving away from zero tax to low tax. An internationally competitive tax rate is an important attraction for business. Our philosophy remains that a low tax rate encourages investment and delivers wealth,” he said.?This will most probably be set at 10%, but in any event not higher than 12%. This will be similar to arrangements that already exist in Ireland, Cyprus, Malta and other European Union countries.”In the meantime he announced that the corporate tax rate is to be reduced to from 35% to 33% for the 2007/2008-tax year, and to 30% for the following year. He further signalled the intention of a further reduction the year after that to 27% in anticipation of the flat low tax rate in 2010.The tax cuts are intended to lessen the effects of the phasing out of the existing tax-exempt company regime, which the European Commission challenged on grounds that it breached EU state aid rules. Gibraltar has agreed to end the regime by 2010. A ruling from the European Court on Gibraltar?s appeal against the Commission?s ruling on “regionality” in relation to Gibraltar?s broader tax proposals is imminent.
The Dutch Finance Ministry said it intends to sign a number of Tax Information Exchange Agreements with offshore financial centres. The Netherlands recently concluded treaties with the UK Crown Dependencies of the Isle of Man and Jersey, and negotiations are underway with Guernsey.”The main reason we’re doing this is to exchange information, so that the Tax & Customs Administration can see what’s going on in these territorial jurisdictions,” said Robert van der Have, head of the bilateral tax treaties department of the Dutch Finance Ministry. He said the next round of talks would be held with UK Overseas territories in the Caribbean, including Bermuda, the British Virgin Islands and the Cayman Islands.
1 May 2007, the Commonwealth Secretariat published a report that concluded many OECD member states have regulatory standards no better, and sometimes worse, than many offshore financial centres classified as tax havens.Their deficiencies included mechanisms for tax information exchange and for identifying beneficial owners of companies or trusts, said the report, commissioned on behalf of the International Trade & Investment Organisation (ITIO), a group of small countries with international finance centres. Offshore financial centres, it said, have improved their regulatory standards as a result of the OECD?s harmful tax competition initiative, launched in 1996. In 2000 it published a ?blacklist? of 35 tax haven countries, which obliged offshore centres to make commitments to remove harmful tax practices, improve transparency and exchange information.This process had led to ?considerable rapprochement? between OECD and non-OECD participants. Both sides had recognised the case for creating ?a level playing field?, although non-OECD countries still had concerns about distortions caused by the tax treaty network and the OECD?s ?organisational blindness? about the regimes of its own members.Many US states, including Delaware and Nevada, do not require companies to provide beneficial ownership information. Many industrialised countries, including the UK, permit the use of bearer shares, which reduce transparency. Switzerland limits exchange of tax information to cases of fraud, while Hong Kong and Singapore limit information exchange to cases where they have a domestic interest.Small countries should be involved in the creation of new international standards, rather than have these imposed on them by multilateral bodies controlled by large countries, such as the OECD, it said.The report also called on large countries to open up access to the international network of double taxation treaties to small countries. It criticised OECD members for offering small countries ?tax information exchange agreements? without mutual benefits. It said OECD members wanted to obtain information about taxpayers ?at as low a cost and with as little disruption to their competitive positions and existing international arrangements as possible?.Ransford Smith, deputy secretary-general of the Commonwealth Secretariat, said: ?To reduce global inequality, international standard setting exercises need to promote a level playing field and fair competition.?
2 April 2007, the tax treaty signed between Spain and the United Arab Emirates (UAE) in Abu Dhabi on 5 March 2006, was brought into force. Residence for the purposes of the treaty applies to individuals that have their domicile in the UAE and are nationals of the UAE, or companies that are incorporated in the UAE and have their place of effective management in the UAE. Subject to tax treaties, there are no withholding taxes in the UAE and there is no capital gains tax.Under the treaty, withholding tax on dividends is limited to 5%, although this increases to 15% if the receiver holds less than 10% of the capital of the company paying the dividends. Interest or royalties arising in a Contracting State and beneficially owned by a resident of the other Contracting State will be taxable only in the other Contracting State.For capital gains purposes, the alienation of shares is taxable only in the Contracting State in which the vendor is resident. The sole exception are capital gains arising from the transfer of companies in which more than 50% of their value directly or indirectly derives from immovable property: in this case, the capital gain will be taxed in the Source State. In Spain this would attract an 18% rate of tax.Article 25 of the treaty includes an exchange of information clause similar to those included in the treaty recently signed with Malta and the amended treaty with Switzerland. The UAE was included on Spain?s ?blacklist? of countries or territories regarded as tax havens for Spanish tax purposes. Spain will de-list a country when a tax treaty that includes an exchange of information clause enters into force.
24 May 2007, the UK Court of Appeal upheld a £48 million-divorce award to the former wife of insurance tycoon John Charman ? the largest contested settlement in English legal history.Charman had challenged the sum, which was originally awarded by a High Court judge, arguing that his ex-wife should receive only £20 million from the couple’s joint assets of £131 million. The court rejected Charman’s appeal. Lord Justice Potter said the result of recent emphasis by the courts on the principle of equality in settlements was “to raise the aspirations of the claimant hugely”. The first such settlement was White v White, in which the wife achieved parity with her former husband because she was deemed to have made an equal contribution to their farming business. Until then awards for wives had been limited to their “reasonable requirements”.The Court of Appeal accepted that a “special contribution” by one party to the marriage would justify departure from equality. Where one spouse had made a special financial contribution, the judges added, the other spouse should receive no less than one third of the assets.Mrs Charman had conceded that her husband’s “extraordinary” success in business meant she could claim not more than 45% of his assets. But she challenged his argument that she was entitled to little more than 15%.The court also rejected Charman’s claim that £68 million he had put in a family trust should be excluded from the assets available for distribution on divorce.”In the circumstances of the present case, it would have been a shameful emasculation of the court’s duty to be fair if the assets which the husband built up in Dragon (the trust) during the marriage had not been attributed to him,” the court said.Charman was refused leave to take the case to the House of Lords. In their ruling, the three senior judges suggested that pre-nuptial agreements should become legally enforceable so that couples could avoid bringing acrimonious legal claims to London – the “divorce capital of the world”. They also called for an inquiry by the Law Commission to consider whether divorce payments are out of step with those in other parts of Europe.Owen,
The UK government proposes to finalise new tax treaties with the Faroes, Macedonia, Moldova, Slovenia and Thailand over the coming year, and complete protocols with Australia, Mexico, New Zealand, South Africa and Switzerland.Setting out the UK’s ongoing treaty negotiating programme, Financial Secretary Jane Kennedy said the UK intends to progress negotiations with Bahrain, the Cayman Islands, China, Croatia, Germany, Hungary, Luxembourg, Libya, Netherlands, Peru and Saudi Arabia. The UK government also planned to complete work on new Tax Information Exchange Agreements with Jersey, Guernsey, the Isle of Man, Anguilla, Bermuda and the British Virgin Islands, and to commence TIEA negotiations with the Turks & Caicos Islands, the Netherlands Antilles, Aruba, the Bahamas and Panama.
In May, Senate Finance Committee leaders asked the Government Accountability Office (GAO) to investigate the five-storey Ugland House building in the Cayman Islands and to evaluate the associated US tax compliance implications.Ugland House is home to an international law firm and is listed as the registered office for a number ? 12,748 according to the Senate ? of Cayman entities. The Finance Committee said that it hoped to use the GAO?s findings to gain a greater perspective on the problem of offshore tax evasion as a whole.In a letter to the US Comptroller General, committee chairman Senator Max Baucus wrote: “In order to help this Committee understand the significance of the offshore corporations, we would like to learn more about what is happening in this particular location ? the Ugland House. Specifically, we request that GAO travel to the Cayman Islands and visit the Ugland House to determine what sorts of transactions are being conducted in that building.”The GAO has been authorised by the committee to have access to “the necessary taxpayer information” under the Internal Revenue Code, but conceded that the GAO “may be limited in its ability to obtain information in the Cayman Islands”.Cayman Islands Leader of Government Business Kurt Tibbetts said that the Cayman Islands has ?absolutely nothing to hide,? and accused the Senators leading the attack against the Cayman Islands as ?needing a platform to be seen and heard.”He said representatives of the US government were welcome in the Cayman Islands to discuss the issue, but insisted that his government would not be dictated to.?All they have to do is accept the invitation and come down here,? he stated. “But if they think they can just hop a flight and come down and do what they wish? it ain?t gonna happen. They have to go through the proper channels.?In its official response to the Senators’ announcement, the Cayman Portfolio of Finance & Economics said: “The Cayman Islands financial services industry operates on the principle that the presence ? not the absence ? of effective laws and regulations has contributed to our growth as an institutionally-focused, specialised financial services centre over the past 40 years. The law enforcement, regulatory and tax information exchange channels between the Cayman Islands and US ? some dating back more than 20 years ? offer no protection for Americans who are seeking to evade their tax obligations.”