The Quebec Civil Code was the model for on the trust-like Law in the Czech Republic. The trustee is not the owner of the trust assets, but merely the administrator. A notarised deed is required for the establishment of a trust. There is a Register of Trusts. A trust has no legal personality, unlike a Foundation or Foundation Fund. The legislation is quite recent, and there are, so far, only a few decided cases – notably decisions about how much control the settlor can retain and about the interaction with insolvency and forced heirship. The Czech Republic has not adopted the Hague Convention, but the domestic rules have some similar provisions, and foreign trusts are recognised for tax purposes if they are taxable in their home jurisdictions.
Taxation of profits from exporting goods and services can sometimes offer opportunities for tax planning. Note that a server can be a taxable permanent establishment and franchise payment can be partially a royalty. Tax treaties deal with various aspects of the taxability of a foreign branch or subsidiary. The sale of a foreign branch to a foreign subsidiary may incur capital gains tax in the home country or the foreign jurisdiction. Generally, losses of foreign subsidiaries are allowed against domestic profits, but there are exceptions.
The Cyprus trust law has its roots in English law. There are local trusts, International Trusts, and foreign trusts. The International Trust must comply with limitations on reservation of powers to the settlor; it can be of unlimited duration; it may be revocable; it imposes duties of confidentiality on trustees; creditors’ claims may be time-barred; the trustees can take advantage of Cyprus’s tax treaties; the law governing the trust can be changed; the trust deed may be amended.
The Trusts Law of 1966 has a number of attractive features. In the 1960’s, the economy of the Cayman Islands was largely based on remittance of seamen. The Act of 1967, drafted by Milton Grundy, provided for the registered trust and the exempted trust. Registration is evidence of the existence of the trust. The Cayman law was followed by the enactment in other jurisdictions of features intended to be appealing to the international client in – e.g. in Jersey and Guernsey. This was followed by provisions in the Cook Islands protecting the trust from claims by creditors. The BVI law provided for the settlor to reserve powers. In Cayman the STAR trust was introduced and in the BVI the VISTRA trust. Provisions for arbitration of trust disputes have been enacted in Malta and elsewhere. New provisions have been introduced in New Zealand and the Cook Islands making changes in the trust law.
ATAD 3 aims to prevent use of “shell companies” for tax avoidance. It is expected to come into force in January 2024. It applies to entities resident in the EU, which satisfy various criteria called Gateway One, Two and Three, subject to any of five carve-outs. A shell company cannot get a certificate of tax residence. Four examples illustrate the working of those rules. There are provisions for exchange of information and for penalties.
Citizenship and residence investment programmes began in St Kitts and Nevis in the 1980’s. Such programmes are now offered by a number of countries. Some residence programmes offer tax advantages, the criteria varying in different countries. The Maltese programme is the most popular in Europe; those in Montenegro, Portugal, Australia and Thailand are also popular. There was a lull in applications for citizenship or residence with the Covid pandemic, but now the flow of applicants has resumed.
Nevis is part of St Kitts and Nevis, but has its own Parliament and some laws of its own. It has no UB register or income tax. It offers LLCs and IBCs, trusts and foundations. An international trust offers asset protection advantages as does the foundation. The example of Mr Smith illustrates the options available for the use of a trust or foundation holding shares in the family business.
The ownership of a yacht should shield the owner from claims arising from the operation of the boat or the employment of the crew. Malta has the lowest VAT rate of European countries with access by sea: a boat held by a Malta company by be licensed to a Cayman (or other non-EU) company for journeys outside the EU.