the evolution of offshore banking: intax russia 2013
DESCRIPTION
The offshore banking business model and how it has evolved and changed over the last 5 years. This is the INTAX forum presentation given by Joy Godfrey, Director of Cititrust International Limited in Russia, 2013.TRANSCRIPT
CITITRUSTINTERNATIONAL INC.
EVOLUTIONThe New Offshore Business Model
INTAX Forum – Moscow – September 2013
The OldOffshore Model
Little or no tax information exchange
The Old Offshore Business Model
British Virgin Islands
Company + Swiss bank
account
British Virgin Islands/Belize
Company +Russia +Cyprus
Little to no international co-
operation
The “pure” offshore approach
EVOLUTIONARYThe Offshore Business Model over the last 5 years
Swiss Banking SecrecyAutomatic Information Exchange The OECD
Multilateral Convention for Automatic Exchange
The United StatesForeign Account Tax Compliance Act
The British Virgin IslandsCyprusAustria and Luxembourg EU
The New Savings Directive
CHANGESTo Russian tax law over the last 5 years
New transfer pricing rules
Introduction of restrictions into the Luxembourg, Cyprus
and Netherlands treaties among others
New thin capitalization pricing
rules
CONFIDENTIALITY Issues to consider when you have cross border activity and relationships
The implications of non-compliance
European Union legislation
Money laundering legislation
CHANGING the way offshore business is conducted
The United Kingdom
Increased real estate taxes Increased information exchange Considered in the UK Non-domicile
The United States
Has implemented FATCA Reintroduced the inheritance tax Increased compliance requirements
Cyprus & Switzerland
Banking secrecy The Switzerland-Russia treaty The Cyprus-Russia treaty
The NewOffshore Model
21st CENTURYFeatures of the NEW offshore business model
Avoiding triggering anti-avoidance legislationEmploying tax treaty positionsConfidentialityLegally compliant offshore structuresThe new Corporate Services Delivery Mechanism
DESCRIBING the brand NEW offshore business model
Cost-benefit considerations
Standing up to reviews from tax
authorities
Avoiding anti-avoidance legislation
Maximising treaties to reduce
taxes
CONFIDENTIALITYGuarantees with the NEW offshore business model
Confidentiality - do you really
have it?
Legal Professional
Privilege (LPP)
Belize Offshore Trusts can be used to provide
confidentiality
Tax Systems
Low tax jurisdictions Both countries have double tax
treaties
Banking Systems
Both countries host Canadian banks – Canadian Imperial Bank of Commerce (CIBC) & Royal Bank of Canada (RBC)
BARBADOS & BELIZESovereign Jurisdictions
Legal Systems
Westminster style constitutions Canadian and English common law
persuasive
BARBADOS LUXEMBORGDouble Tax Treaty
Luxembourg withholding tax on dividend payments to the British Virgin Islands and other offshore companies: 15%
Under the Luxembourg Barbados Double Tax Treaty withholding taxes paid to Barbados company in Luxembourg are: 0%
Dividends - 0% Interest – Withholding Tax 0%
Royalties – Withholding Tax 0%
Sample Structures
BARBADOSBarbados-Luxembourg Holding Structure
Basic Structure
A Belize International Business Company (IBC) forms a Barbados Company
The Barbados company acquires shares in a Luxembourg company
Belize IBC
Barbados Company
Luxembourg Company
Russia
Benefits of the Model
Luxembourg Full dividends and capital gains
exemption under Luxembourg participation exemption regime
No Withholding Tax on dividend payments to Barbados from Luxembourg
Barbados Full dividends exemption under
Barbados participation exemption regime
Exemption of capital gains on the sale of shares of Lux Co.
No WHT on the dividend payments to Belize IBC.
The NEW Model
5 US-BELIZE Wealth Management Structure
Non-US Beneficiary
US Domestic Trust
Belize Offshore Variable Insurance
Belize IBCs
US Beneficiary
Basic Transaction Steps
A US company forms a tax compliant US domestic trust
The trust acquires Belize offshore life insurance
Benefits of the Model
The domestic US trust is US tax compliant
The structure works for US and non- US citizens
The US domestic trust has access to US double tax treaties
Asset protection of US courts The wealth under the offshore
insurance contract can be held using a zero tax vehicle like Belize IBC
Wealth is accumulated and protected in a zero tax environment
Tax-free distributions possible
The NEW Model
5BARBADOS Barbados-Luxembourg MRPS Structure
Basic Structure
Belize IBC is zero tax vehicle Barbados IBC is a low taxed vehicle Barbados IBC is used to access the
Luxembourg-Barbados treaty Luxembourg company is used to access the
Luxembourg-Russia treaty
The NEW Model
UK Company
Luxembourg Company
Barbados Branch
Operating Company
Benefits of the Model
The Mandatorily Redeemable Preference Shares (MRPS), if properly drafted, is treated as debt for Luxembourg tax purposes and treated as equity in Barbados.
Dividends are treated as interest expense
Dividends are tax-free in a Barbados IBC
Treaty benefits from Russia to Luxembourg apply
BARBADOS Finance Branch
Basic Transaction Steps
A Luxembourg company forms a branch in Barbados
The UK company contributes cash or receivables to Luxembourg company for shares which allocates such assets to the Barbados branch
Barbados branch lends to the group of companies
UK Company
Luxembourg Company
Barbados Branch
Operating Company
Benefits of the Model
Double Taxation Treaty Barbados/Luxembourg exempts income attributable to the Barbados branch.
In addition, assets attributable to the Barbados branch are exempt from net worth tax in Luxembourg
Secured by an advance clearance letter
Interest income will be taxed in Barbados branch when paid. No taxation if interest income is accrued
The NEW Model
5
CANADIAN Asset Protection Model
Basic Transaction Steps
A Russia company forms a Commercial Trust in Canada
The Barbados branch then manages the assets of the Canadian Trust
Canadian Trust
Barbados Branch
Assets
Russian Company
Russian Company
Benefits of the Model
Double Taxation Treaty Barbados/Canada exempts income attributable to the Barbados branch
In addition, assets attributable to the Barbados branch are exempt from tax in Canada
Canadian banks in Barbados are used to custody assets in Canada
There is no capital gains tax in Barbados
Assets are protected under Canadian law
The NEW Model
CONFIDENTIALITYConfidentiality while complying with Anti-Money Laundering (AML) can be
achieved using Belize Offshore Trusts
See us after the presentation for a discussion…….
CITITRUST INTERNATIONAL INC.
Belize City, Belize
+(501) 223 3738
www.cititrust.biz