Category Archives: Far East Tax & Money Havens

China launched international banking network

The US domination of the global banking system coming to an end ?

ChinaMoneyImage

 

International payments for trade are typically routed through the US banking system in New York, and settled in US dollars.

China launch CIPS (China International Payments System).

Image Chinese Yuan courtesy of Prison Planet, Wiki Commons

 

 

A few years ago China started working on an alternate competing system whereby international payments no longer needed to clear through the US. It’s called the China International Payments System (or CIPS) and it was launched early October 2015 

So far CIPS is just been being provisionally tested; 11 out of 19 banks using it are Chinese and state-owned. But many banks, particularly in Europe, have already agreed to join the network.

If successful, CIPS could take a substantial market share from the US banking system, giving foreign banks and governments less and less reason to hold US dollars and US government debt.

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Macau Offshore Haven

Macau is a former Portuguese colony and was administered by Portugal from the mid-16th century until late 1999 when it was ceded to China. Macau became the second Special Administrative Region after Hong Kong.

Macau by night

In 2002, the government of Macau enacted a law from 2001 which legalized gambling, and offline casinos opened up. Macau’s Internet gambling sector was regulated in 2003.

Today, Macau is the gambling center of Asia. Its offshore financial sector is growing but still is nowhere near the size of Hong Kong.

 

Macau by night courtesy of Inamoka, Wiki Commons.

 

Macau Incorporation

Macau has many different types of corporate structures available, allowing for a wide range of liability.

  • Unlimited Liability Company (S.N.C.)
  • Mixed Liability Company by Quotas (S.C.)
  • Mixed Liability Company by Shares (S.C.A.)
  • Limited Liability Company by Quotas (L.D.A.)
  • Limited Liability Company by Shares (S.A.)
  • Limited Liability Company by Sole Owner (S.U.L.)

Macau companies are exempt from tax on the first 200,000 MOP (Macau pataca), or roughly $25,000 USD, and the next 100,000 MOP is taxed at 9%. Remaining income is taxed at 12%.

Unlike Hong Kong, there’s no territorial taxation system in Macau. Worldwide income may be subject to tax. However, under the Offshore Regime of Macau, companies can be fully tax exempt if they do not operate in MOP currency, do not target Macanese persons, and do not focus on other Macanese companies.

Unlike Hong Kong, where you pay tax depending on the source of income, Macau has taken a different approach of either full tax exemption or full tax liability.

There is no sales tax (VAT) in Macau.

The Offshore Regime creates two types of offshore operations: Offshore Commercial Service Companies and Offshore Auxiliary Services Companies. Both are designated International Business Companies (IBC), but are significantly different from the IBC legislation of Belize, Seychelles, and so on.

The differences between Offshore Commercial Service Companies and Offshore Auxiliary Services Companies lie within their scope of operations. While auxiliary services companies can only perform duties for holding or parent companies, commercial service companies are free to conduct business with anyone. Auxiliary companies pay a lower annual fee—between 4,000 and 10,000 MOP less per year.

All companies in Macau—even those registered under the Offshore Regime—must prepare and file financials. The costs of forming a regular or offshore company in Macau are higher than in Hong Kong, but not by much.

Residents are liable for income tax on salary from employment with Macanese companies or salaries paid into Macau, which means that if you work remotely for a foreign company, you pay no tax. This can be used to live and work tax-free in Macau.

There is no capital gains tax, capital duty, capital acquisitions tax, inheritance tax, wealth, or sales tax.

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The U.K. to join he Chinese-led Asian Infrastructure Investment Bank as a founding member and CIPS the alt. to SWIFT ?

The government of the United Kingdom just announced that they would be applying to join the Chinese-led Asian Infrastructure Investment Bank as a founding member.

Shanghai by night

The United States currently dominates the global financial system. But after years of sanctions, wars, debt, money printing and regulations, the rest of the world are  looking for an alternative.

 

The soon-to-be-live Chinese International Payment System (CIPS) will provide a way for banks to transfer funds to one another without having to use the US banking system or the US dollar.

Shanghai by night courtesy of Wiki Commons

China is also the initiator behind both the BRICS development bank (called the New Development Bank, or NDB) as well as the Asia Infrastructure Investment Bank (AIIB). Both of these are multilateral development banks that aim to end the dominance of the western-controlled World Bank and IMF.

NDB includes all the BRICS nations– Brazil, Russia, India, China, and South Africa.

Founding members of the AIIB include China, India, Indonesia, Kazakhstan, Mongolia, etc. They’re typically all rapidly growing and/or resource-rich developing nations.

New Zealand was the first western nation to join AIIB in October 2014, and Britain has just announced its intention to become the second.

The signatories to the NDB and AIIB charter documents want to create an alternative to the United States dominance of the global financial system by launching these new development banks and an alternative payment system together.

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Singapore – A Preferred Trust Jurisdiction

High net worth individuals (“HNWIs“) around the world have traditionally regarded Switzerland, London and New York as the main global wealth management hubs. However, over the last 5 years, Singapore is increasingly regarded by such HNWIs as a serious alternative to these traditional centres.

Singapore Skyline

In 2011, assets under management by Singapore-based managers have reached 1 trillion US dollars. This article briefly highlights the key factors making Singapore a rising jurisdiction amongst HNWIs for the setting up of trusts for their wealth management purposes.

 

Picture Singapore Skyline, courtesy of Nick Socrates Wiki Commons.

 

Robust Regulatory Regime:  Singapore trust law is based substantially upon English trust principles. The principal statutes governing trusts that are most relevant to the private banking and wealth management industry are the Trust Companies Act1 and the Trustees Act2.

The Monetary Authority of Singapore (“MAS”) is the regulator of trust companies under the TCA, and supervises the complementary activities of trust services, private banking and wealth management in Singapore.  The TCA imposes mandatory licensing for all corporations that carry on or hold themselves out as carrying on any “trust business”3 in Singapore.  The licensed trust company is required to appoint at least two resident managers with certain minimum credentials and who must be approved by the MAS after a “fit and proper” test to ensure their suitability for the role.

Well Defined Legal Framework for Trusts: The Trustees Act was amended to facilitate and promote wealth management in Singapore through the use of trusts and trustee services.  This is part of the Singapore government’s broader aim to enhance Singapore’s position as a leading financial and wealth management centre.  Salient provisions of the Trustees Act include:

(a) Reservation of power permitted: Section 90(5) of the Trustees Act expressly provides that no trust or settlement of property on trust shall be invalid by reason only that the settlor reserves certain powers to himself.  The powers concerned are those of investment or asset management.

(b) Promotion of Singapore trusts to foreigners:  Under the Trustees Act, a person who is a non-Singapore citizen nor non-Singapore domicile is excluded from forced inheritance and succession rules, provided the trust is governed under Singapore law and the trustees must be resident in Singapore. This would allay fears by foreigners about the enforceability of such trusts in Singapore due to forced heirship rules in their home jurisdictions.

(c) Rules against perpetuities addressed:  Under Section 27(2)(b) of the Trustees Act, the validity of a trust extends to 100 years unless a shorter period is specified in the trust, in order to address the rule against perpetuities for trusts.

Confidentiality:  Singapore has enacted comprehensive secrecy and confidentiality provisions to the Banking Act, Chapter 19 of Singapore (“Banking Act”)4 and the Trust Companies Act5 to offer protection to the personal information of banking clients and settlors and beneficiaries of trusts. That said, these secrecy laws are subject to Singapore’s commitment to assist the international community in combating against money laundering, terrorism financing and tax evasion.

Friendly Tax Environment:  Singapore has a territorial tax system (only Singapore-sourced income is subject to Singapore income tax) and only taxes foreign-sourced income upon its remittance (or deemed remittance) into Singapore. Capital gains are not subject to tax in Singapore and estate duty was abolished in 2008. Singapore’s highest personal income tax rate is 20% whereas its corporate tax rate is flat at 17%.  In addition, Singapore has an extensive network of double taxation agreements with over 70 jurisdictions.  Qualifying Foreign Trusts (“QFTs”), which are trusts created in writing where the settlor and beneficiaries are neither citizens nor residents of Singapore or are foreign companies, enjoy attractive tax exemptions.  To enjoy the tax exemption, the QFT must be administered by a Singapore licensed trust company.

Open Economy and Sound Economic Policies: Singapore’s greatest competitive advantage is the openness of its economy. It has been regularly rated as one of the world’s freest economy, and easiest jurisdiction to carry on business by the World Bank.  There is no exchange control, and the exchange rate of the Singapore dollar is managed by MAS, against a basket of currencies of its main trading partners, with the objective of keeping inflation low and maintaining the purchasing power of the Singapore dollar.  Global financial institutions (including private bankers) and fund managers are attracted to Singapore due to its competitive tax incentives for the financial and wealth management industry.

Moving Forward

The wealth management industry in Singapore continues to be in an exciting phase of growth, notwithstanding current global economic uncertainties. Singapore has set its sights on attracting the world’s wealthiest to its shores.  With its open economy, well-defined legal and regulatory framework, and tax neutrality, Singapore is well positioned to be the premier wealth management hub in Asia, acting as the gateway for the world to tap Asian investments and to the world for Asian investors.


1 Chapter 336 of Singapore (“TCA”).

2 Chapter 337 of Singapore (“Trustees Act”).

3 “Trust business” is defined widely to include acting as trustee for an express trust, administering an express trust, creating an express trust, and arranging for any person to act as a trustee for an express trust.

4 Under Section 47 of the Banking Act, a blanket prohibition exists against disclosure of “customer information” by a bank (or any of its officers) to any other person except as expressly provided in the Banking Act.

5 Similar provision prohibits disclosure of information regarding a “protected party” (which is defined as, in relation to a trust company, a trust for which the trust company provides trust business services and includes the settlor and beneficiary under the trust) by a licensed trust company (or any of its officers) to any other person, except as expressly provided in the TCA.

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Hong Kong Tops World’s Fastest Internet Ranking

A new global report on internet connectivity says that Hong Kong continues to have the fastest average peak internet speed, and that it has the third-highest average connection speed.

Hong Kong star Ella Koon

Cloud service provider Akamai found that Hong Kong has an average peak internet speed of 65.4Mbps, ahead of South Korea, Japan, and Singapore. However, South Korea came first for average connection speed, at 22.1Mbps, while Hong Kong came third, after Japan, at 12.5Mbps. Further, 81 percent of Hong Kong’s connections were above 4Mbps, and 38 percent were above 10Mbps.

The UK was ranked 14th for average connection, at 9.1Mbps; 77 percent of the country’s connections were above 4Mbps, and 27 percent were above 10Mbps. By comparison, Spain’s average connection was 6.9Mbps, with 71 percent above 4Mbps and 14 percent above 10Mbps.

 

Hong Kong star Ella Koon. Picture courtesy of Wiki Common.

Meanwhile, Australia’s average connection was 5.5Mbps, with 51 percent 4Mbps and 8.1 percent above 10Mbps.

Akamai’s figures refer to the third quarter of 2013. The company explains that it has a globally-distributed Intelligent Platform made up of a distributed network of servers and intelligent software, which delivers over two trillion interactions daily. The Platform allows Akamai to gather large amounts of information on many metrics, including connection speeds and network connectivity/availability issues, and the data is published quarterly in the company’s State of the Internet Report.

The company describes the report as a “key reference for those involved in broadband initiatives around the world, whether at an industry or government level.”

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