Newsletters on International Tax

Newsletter 25 May 2009

Current Attacks on Traditional Non Tax Centers

Things are changing fast these days in the offshore world, especially in Europe. A new tax information exchange agreement (TIEA) between the United Kingdom and Jersey was signed in London on 10 March 2009. This will be the fifth comprehensive TIEA signed by the UK. The text broadly follows the OECD Model Agreement on Exchange of Information on Tax Matters. The UK already has a TIEA in place with Bermuda and signed TIEAs with the Isle of Man, the British Virgin Islands and Guernsey. To date, Jersey has signed TIEAs with the United States, the Netherlands, Germany, Denmark, Finland, Greenland, Iceland, Norway, Sweden. It has just signed a TIEA with France, and is negotiating with Ireland, Australia, New Zealand, Spain and Italy.

Multilateral TIEAs are the New Trend

In anticipation of a rush to sign a large number of Tax Information Exchange Agreements on the part of offshore centres wishing to see their names removed from the OECD 'grey' and 'black' lists, the OECD has set up a mechanism for concluding multi-lateral agreements. An increasing number of countries are finding this convenient and consider it the way forward.

Small offshore financial centres lack the resources to enter into negotiations with a large number of countries. The OECD’s 2002 Model Agreement on Exchange of Information on Tax Matters sets out an option for multilateral rather than bilateral TIEAs and the OECD has been working on the detail of this in recent months to develop the concept. The OECD is also examining how the Nordic experience of multilateral negotiations leading to simultaneous bilateral agreements could be adopted more widely. Just this month the British Virgin Islands signed up TIEAs with Finland, Norway, Sweden, Iceland, Greenland and the Faeroes in one signing ceremony at the Icelandic Embassy in Copenhagen.

The most common TIEA is currently a bilateral agreement, with two parties negotiating the terms of an agreement, but many offshore financial centres now consider multilateral agreements to be the way forward. Some countries have small administrations, often as few as two or three people, but even Switzerland, with an objective to sign 12 agreements by the end of the year, is finding the speedy conclusion of agreements very challenging.

Banking Secrecy being removed

International centres such as Switzerland, Luxembourg, Singapore, Jersey etc. are under severe attacks from USA, Germany and France. Ground breaking news in recent days, is that jurisdictions so recognised for their banking secrecy have just pledged to implement information exchange arrangements which follow the OECD standards. Switzerland, Austria, Liechtenstein, Luxembourg, Monaco, Belgium and Andorra very recently have announced their intentions of commencing tax information exchange. The G20 meeting in London on 2 April did not provide encouragement for the future of these non tax financial centers.

In the UK in late May, HM Revenue and Customs is to apply for a blanket order that would legally compel all 500 banks with a presence in the UK to hand over details of customers with offshore accounts.

These changes will be of concern to you and your clients. New Zealand could be an attractive jurisdiction for new structures and for re domiciling existing structures.

Why choose New Zealand?

New Zealand is a premium “onshore” jurisdiction, providing more benefits than traditional “offshore” jurisdictions and is not blacklisted by any country or authority in the World and does not have tax haven connotations. It gains additional credibility by being a member of the O.E.C.D. and the W.T.O., is not part of the EU and is not influenced by the EU Savings Tax Directive. The non forced heirship of assets is attractive to many European clients. No capital gains tax and many other advantages of New Zealand as a jurisdiction are detailed on our web site www.nzsecurities.com

New Zealand has Double Tax Treaties with 35 countries. If dividends, interest or royalties are earned by the New Zealand Foreign Trust or Limited Partnership in any of these 35 jurisdictions then it is possible that the New Zealand Trustee being resident in New Zealand, may limit any withholding tax deducted at source to the lowest rate, which may likely be the final tax payable. (each treaty would require interpretation). By interposing operational companies and carefully selected holding companies (possibly Cyprus as an example), withholding taxes will most likely not be deducted and all proceeds to the N.Z. Foreign Trust may be received tax free.

What New Zealand can offer your clients?

We act in an agency role for many Global Intermediary businesses like yours. You retain the client and we are instructed by you, all correspondence and invoices are between ourselves and your firm.

New Zealand has been providing Foreign Trusts for several years. These English types of trusts when settled by an offshore resident, and where income is sourced outside New Zealand provide tax free income to the trust and the beneficiaries. Private Trustee Companies are generally used, which provides the settlor some direct or indirect involvement in the trustee’s operation. These trusts are also asset security and succession structures.

Almost a year ago, new legislation enabled New Zealand Limited Partnerships to operate. These operate in a similar way to many Limited Partnerships in other jurisdictions. In situations where all the Limited Partners are located out of New Zealand and providing income is also sourced offshore, then the profits are tax free to these Limited Partners. The location of the General Partner can be in New Zealand or offshore. The non tax outcome is similar to that of the New Zealand Foreign Trust, however many more independent parties can be conveniently accommodated in the Limited Partnership.

Our business also provides for clients, New Zealand Offshore Finance Companies which enable many clients to operate banking software and undertake many banking types of activities. Also New Zealand Agency Companies (taxable on a small percentage of income) which contract with an offshore non taxed Principal which receives the major part of the income. We can obtain Certificates of New Zealand Residency for these Agency Companies. (similar to the UK Agency Company concept). We can also arrange for documents to be Notarised and certified with Apostille. We can provide a physical address, and power of attorney for you and can assist with opening a bank account in N.Z. if your client requires this. We can also provide a virtual office for offshore clients. You will find our fees very competitive.

I am a practising Chartered Accountant and can undertake full accountancy and tax services, on behalf of clients.

You may be interested in more information featured on our website www.nzsecurities.com

I look forward to hearing back from you and assisting you with any questions.

Kind regards

Garth Melville C.A., T.E.P., I.T.P.A., A.O.A.
Managing Director & Chartered Accountant
Company Solutions Limited and NZ Securities Limited

Websites:
www.company-solutions.co.nz
www.nzsecurities.com