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Singapore – A Preferred Trust Jurisdiction

June 18, 2014 Comments off

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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Isle Of Man First To Sign UK FATCA-Style Agreement

March 17, 2014 Comments off

The Isle of Man has become the first British dependent territory to sign an agreement with the United Kingdom extending the automatic disclosure of tax information.

Isle of Man map

The intergovernmental agreement was signed in London on October 10 by Chief Minister Allan Bell and HM Treasury Exchequer Secretary David Gauke.

It is modeled on the requirements of the Foreign Account Tax Compliance Act (FATCA) introduced by the United States to ensure the tax compliance of its citizens with international interests.

On the current timetable for implementation of the new agreement, the two Governments have agreed to start exchanging additional information from 2016.

Map courtesy of FamilySearch Wiki Commons

The Isle of Man already shares information automatically on personal savings income with the UK and other European Union countries, having been the first non-EU jurisdiction to make a public commitment to this under the EU Savings Directive in June 2009. The Island was also the first to commit, in December last year, to the FATCA-style agreement with the UK extending the scope of automatic disclosure to include, for example, companies and trusts.

The Chief Minister said: “In signing this historic agreement with the United Kingdom we are underlining the message to our neighbors and the wider world that our Island is a responsible center for top quality international business.

“The Isle of Man was the first to strike this agreement with the UK and we are now the first to sign, demonstrating the clear commitment of both countries to the development of a new global standard in automatic exchange.”

Mr Bell added: “Today’s signing is a significant step towards that global standard and further proof that the tax haven moniker in relation to the Isle of Man is well and truly dead, as David Cameron recognized recently in the House of Commons.”

He went on: “The Isle of Man is a forward looking country with a diverse, dynamic economy and a track record of leading the way in the field of international tax co-operation.”

“We have a long-established policy of complying with global standards, and we saw some time ago that enhanced automatic exchange of information on the FATCA model was becoming the new global standard in tax transparency.”

taxmoneyhavens.com

Hong Kong’s Stock Exchange Acceptable Jurisdiction Guides

February 17, 2014 Comments off

The Stock Exchange of Hong Kong, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), has published 20 country guides, one for each overseas jurisdiction that has been formally ruled to be acceptable as an issuer’s place of incorporation.

Hong Kong Night Skyline

The country guide for each acceptable jurisdiction sets out, for example, comprehensive and user friendly guidance on how companies incorporated in the relevant jurisdiction can meet the requirement for equivalent shareholder protection standards in the HKEx’s Listing Rules.

Hong Kong Skyline. Picture courtesy of Base64, Wiki Commons.

“These country guides are aimed to enhance applicants’ understanding of the Exchange’s expectations, practices, procedures and considerations when applying the Listing Rules to overseas issuers,” said HKEx’s Chief Regulatory Officer and Head of Listing David Graham.

“The country guides provide guidance on how the Exchange will consider certain matters under the revised JPS. Where appropriate, we have also added our views and analysis based on the experience we have gained from various applications,” he continued.

The Exchange will in the future update a country guide when it is informed of a material change in the laws, rules or regulations in the relevant acceptable jurisdiction. New applicants and listed companies incorporated in an acceptable jurisdiction are obliged at the earliest opportunity to inform the Exchange of such material changes.

The 20 jurisdictions are Australia, Brazil, British Virgin Islands, Canada (Alberta), Canada (British Columbia), Cyprus, France, Germany, Guernsey, Isle of Man, Italy, Japan, Jersey, South Korea, Labuan, Luxembourg, Singapore, England and Wales, and the United States, both California) and Delaware. A country guide for Canada (Ontario) will only be published at a later date, as appropriate, when another applicant incorporated in Ontario applies for a listing on the Exchange.

taxmoneyhavens.com

Hong Kong Promoted As Intellectual Property Trading Hub

January 6, 2014 Comments off

The Government has formulated an overall strategic framework for promoting Hong Kong as a premier intellectual property (IP) trading hub in the region.

All_rights_reserved

All rights reserved

As determined by a working group, which conducted many rounds of stakeholder consultation over the past few months, Hong Kong’s overall strategy on IP trading encompasses four strategic areas – “namely, enhancing its IP protection regime; supporting IP creation and exploitation; fostering IP intermediary services and manpower capacity; and pursuing promotion, education and external collaboration efforts.”

Courtesy of  Paramount Pictures, Wiki Commons.

The working group will, in 2014, explore specific policies and other support measures under each strategic area for promoting Hong Kong as a regional IP trading hub. In the meantime, two sub-groups formed under the working group will continue to deliberate on ways to spearhead further developments in certain specific areas, focusing particularly on the more specialized subjects of IP valuation, and IP arbitration and mediation.

Some of the initiatives under way and in the pipeline include the setting up of the Original Grant Patent system as a strategic step to help Hong Kong develop as an innovation and technology hub; a review of copyright to strike a balance between its protection and the freedom of expression; and the launch by the Hong Kong Trade Development Council of an online IP trading portal in January 2014 to enhance Hong Kong’s online IP trading volume, capabilities and connections.

A survey on IP trading and manpower in Hong Kong will also be conducted in 2014 to provide statistical and other relevant information to support the working group’s further deliberations.

taxmoneyhavens.com

Liechtenstein to weaken asset and tax protection

July 6, 2011 Comments off

Liechtenstein’s government has recently submitted a proposal for consultation, which aims to extend legal assistance in criminal tax matters by implementing changes to the Principality’s existing legal assistance law and by agreeing to the additional protocol to the European legal aid agreement.

Under current law, providing legal assistance in criminal tax matters is strictly prohibited. Liechtenstein’s government maintains in its release, however, that although there are three exceptions to this, the provisions are currently very limited both as regards their content and as regards the circle of countries with which such requests are accepted.

The government explains that with its declaration of March 12, 2009, Liechtenstein agreed with the states concerned to implement international standards pertaining to an exchange of information in tax matters. It notes that in the tax information and double taxation agreements that have so far been concluded, the Principality has pledged to provide comprehensive mutual assistance, including searches and seizures, some of which fall outside of its own criminal tax proceedings.

Consequently, the government argues that such restrictive legislation in the area of legal assistance in criminal tax matters is inconsistent with its newly adopted strategy and therefore carries a very real risk to the country’s reputation, which, it emphasizes, should not be underestimated.

Liechtenstein’s government has therefore proposed that the scope for providing legal assistance in criminal tax matters be widened. It has also underlined the need to agree to the additional protocol to the European agreement on legal assistance in criminal matters, and suggested that the general fiscal reservation provided for under article 51 of the country’s legal assistance law (RHG) should be removed and replaced by the introduction of a new article 51 paragraph 1 providing that limited legal assistance should also be permitted in the case of tax evasion.

The consultation period is due to last until July 29.

www.taxmoneyhavens.com

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