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attractive location for Indian holding compa-
nies looking to diversify business interests into
Jersey professionals have been
the UK and Europe. Indian nationals are now
able to invest up to $200k per annum outside of
India. This has opened up the opportunity for a
encouraged by the increasing
range of private wealth management work.
Finance centres have also needed to embrace numbers of legal and finance
the requirements of international bodies such as
the OECD which has been engaged in its ‘harm-
professionals based in the emerging
ful tax competition’ initiative, the objective of
which is to achieve a global level playing field
based on high standards of transparency and
markets turning to Jersey in support
effective exchange of information in tax mat-
ters. In response to these international moves,
of their investment planning and
Jersey has, for example, been committed to the
principles of exchange of information on
asset structuring
request and transparency since as far back as
2002. seen to increase its powers to obtain informa- Foundation formulation
However, this international pressure on juris- tion about offshore bank accounts, most Already this year in Jersey the Island has intro-
dictions to provide greater information on their notably following the Court ruling won by duced enhancements to its company laws,
client’s financial affairs has led to widening con- HMRC in 2007. This case related to informa- launched rules that enable promoters to set up
cern amongst high net worth clients that the tion held about clients in the UK with offshore unregulated funds which complement the
privacy of their affairs may no longer be guar- bank accounts. hugely successful regulated funds regime, and
arcus Butel
anteed. This has, in turn, led to considerable The industry believes that HMRC would not finalised new legislation which will enable
debate amongst those who advise wealthy generally be able to compel information to be foundations to be formed in the Island for the
clients about the threats to confidentiality posed disclosed by Jersey subsidiaries and/or branches first time.
by the demands for greater transparency from of UK institutions, providing always that the Foundations, which will be available in
tax authorities. relevant information was not held in the UK. Jersey alongside existing vehicles such as com-
But it is possible for jurisdictions to adhere to Although the position has not been tested in the panies, trusts and limited partnerships, may be
international standards and to co-operate with Island, this is the view of Jersey legal experts of particular interest to international investors
international moves to combat fiscal crime, familiar with an understanding of Irish and and their advisers in respect of long-term
whilst maintaining a client’s right to privacy English civil case law. financial planning.
and confidentiality. Unlike a trust a foundation is a distinct legal
It is worth considering the differences in the Tax transparency entity similar to a company, although it has no
rules that exist between jurisdictions. There are As an essential element in tax transparency and shareholders. The powers of the foundation
some financial centres that rely on banking as an integral part in the fight against money will be exercised by a council, one of whose
secrecy laws to uphold the privacy of financial laundering and fiscal crime, and to meet OECD members must be registered under the
affairs. However, such centres are attracting an principles of transparency, a new model agree- Financial Services (Jersey) Law 1998 to conduct
increasing level of negative publicity regarding ment has been created, known as the Tax financial services business of this type. The
assets linked to illegal activity which hide Information Exchange Agreement (TIEA). foundation’s charter will need to be lodged
behind a cloak of secrecy. As a result, there is Many financial jurisdictions are signing with the Registrar’s department of the Jersey
mounting pressure for them to abandon the agreements with individual countries and Jersey Financial Services Commission, setting out the
secrecy barrier. is amongst them. To date, the Island authorities name and broad objectives of the foundation.
There are other centres which do not rely on have negotiated agreements with the USA, We anticipate that the foundation vehicle
secrecy laws, including many jurisdictions Netherlands and Germany. It is important to will appeal to clients based in civil law territo-
which are familiar to British expatriates. In this recognise that tax authorities can only use ries where they are less familiar with the trust
respect, Jersey is not a secretive jurisdiction, as it TIEAs in specific cases where the requesting concept. It will also be an effective financial
protects the rights to privacy and confidentiality authority is able to demonstrate that there is a planning vehicle for those clients who want to
of financial information relating to law-abiding need to obtain information, and that all other maintain more personal control of the assets. It
citizens without the need for banking secrecy means to discover the information they require has some of the attractions of a trust vehicle
laws. has been exhausted in their own territory. and some of the benefits of a company struc-
It is possible in Jersey’s view to support the ture, including separate legal status. This
Client confidentiality concept of greater transparency in financial should enhance its appeal to private clients and
Jersey embraces the concept of transparency in affairs, whilst at the same time adhering to orig- their advisers who may not previously have
its regulatory practices and it is acknowledged inal and long held principles that the financial considered Jersey as a location to shelter assets.
for doing so by international bodies and law affairs of legitimate, law-abiding clients are Whilst the need for a stable and secure envi-
makers. This does not mean, however, that pri- sacrosanct. ronment will be paramount, investors also need
vate and confidential data about clients held Alongside the need to demonstrate stability choice. The flexibility of regulation, the widen-
solely by institutions in Jersey is accessible and and the challenging issues of transparency and ing scope of legislation and the growing spe-
will be disclosed. On the contrary, Jersey has information exchange, financial centres will cialist skills prevalent in jurisdictions such as
always upheld the principle of confidentiality of continue to compete on their ability to innovate Jersey help to provide the choice that investors
client affairs. and enhance their commercial environment so seek. Diversity and specialization are also
Some may question whether the Island can that they are more attractive for international essential ingredients in successful international
continue to do this when the HMRC has been investors. finance centres.
www.investmentinternational.com January 2009 Investment International
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