issue twenty eight 2october8 2007 Bahamas Bahrain British Virgin Islands China Denmark Dubai Germany Gibraltar Hong Kong Isle of Man Malta Mauritius The Netherlands Netherlands Antilles Portugal Singapore South Africa Switzerland Turks & Caicos Islands United Kingdom Uruguay introduction 3 contents 4 european news 28 5 usa + caribbean news 6 asia + pacific news 7 legal news 8 fiscal news profile: 9 Private Trust Companies – Technical briefing 10 contact + info © The Sovereign Group 2007 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of The Sovereign Group. The information provided in this report does not constitute advice and no responsibility will be accepted for any loss occasioned directly or indirectly as a result of persons acting, or refraining from acting, wholly or partially in reliance upon it. Sovereign Trust (Gibraltar) Limited is licensed by the Financial Services Commission – Licence No: FSC 00143B. Sovereign Trust (Isle of Man) Ltd is licensed by the Isle of Man Financial Supervision Commission as a Corporate Services Provider. Sovereign Trust (TCI) Limited is licensed by the Financial Services Commission – Licence No: 029. Sovereign Group Partners LLP is regulated by the FSA – No. 208261. introduction The Sovereign Asian Art Prize his year’s Sovereign Asian Art Prize, and a cheque for US$25,000, has been awarded to Kumi T Machida for her work entitled “A Boy and a Girl”. The Sovereign Art Prize was presented at a gala dinner and auction for 330 guests held at the Hong Kong Four Seasons Hotel on Friday, 21 September. Generously sponsored by Louis Vuitton, the event raised US$400,000. The funds raised this year will be applied towards a programme run by the Hong Kong Youth Arts Festival that teaches disabled children how to paint, and towards setting up an art school within the M’Lop Tapang project in Cambodia, a community-based organisation that aims to empower street children by giving them access to learning tools and resources. Both these projects will give opportunities to children who would ordinarily have none. The Sovereign Art Prize has now become an established fixture on the Asian art scene and the entry standard this year was particularly high. On behalf of the Foundation, and all the people who benefit from its charitable contributions, I’d like to say a big thank you to everyone involved in this year’s event. The Pope pontificates Pope Benedict XVI recently denounced the use of tax havens and offshore bank accounts by wealthy individuals, saying that this reduces tax revenues for the benefit of society as a whole. I do not doubt his sincerity, or his right to speak out on this or any other issue of concern.2 But it 8 should not be forgotten that the pontiff does not pay any personal income tax and that the Vatican is, in effect, a tax haven itself because it exempts all its income from taxation. If only we could open an office there! Sovereign recruitment As a result of business expansion across the Group, Sovereign is actively looking for qualified professionals to assist senior management teams in several of our worldwide offices. Applications from new, or recently qualified, lawyers or accountants are especially welcome, but we would also be chairman interested to hear from more experienced professionals – particularly those with an established client following. Anyone who is interested to learn more about the opportunities currently available within Sovereign can find more information, and application procedures, on our website. Caruana wins fourth straight term in Gibraltar Just before going to press, Peter Caruana was re-elected as Chief Minister of Gibraltar for a fourth consecutive term. His party, the Gibraltar Social Democrats won 49% of the votes beating his main rival, the GSLP/Liberal Alliance led by former Chief Minister Joe Bossano who secured 45% of the vote. Mr Caruana’s most notable achievement during his last term of office was to steer the Rock towards an historic agreement with the UK and Spain which normalised relations with Spain over the Rock and should allow for greater prosperity for the Gibraltar financial sector. Congratulations to Mr Caruana. Sovereign Insurance Services Limited (“SIS”) Sovereign is delighted to announce that its new insurance subsidiary, Sovereign Insurance Services, is now open for business in Gibraltar having just received a licence from the Financial Services Commission. SIS is headed up by Steve Armstrong, who has over 27 years insurance experience in both the Australian and UK insurance markets, having held a number of senior management positions with leading insurance firms. The new company has been established specifically to assist Sovereign clients with their insurance related affairs, following a clear demand for this service. Contact [email protected] for more details. Howard Bilton BA(Hons) Barrister-at-Law (England, Wales & Gibraltar) Professor of Law, St. Thomas School of Law, Miami, USA Chairman of The Sovereign Group page 3 european news Gibraltar to go for low flat corporate tax regime Chief Minister Peter Caruana announced, in the Budget on 26 June 2007, a significant move establish a residential address and reside in away from a “zero-10” tax strategy, in favour of a flat low tax regime, probably set at 10%. Gibraltar for a minimum of 30 days in each calendar year. It also abolishes category 3 Under a zero-10 system, first introduced by the Isle of Man on 1 July 2006, all companies and 4 status for new entrants. qualify for a zero rate of tax except financial services companies, which pay a 10% flat tax. Guernsey is due to introduce a zero-10 system on 1 January 2008, and Jersey one year later. From 1 July this year, the minimum tax pay- able by Category 2 Individuals is increased Caruana said Gibraltar would instead introduce a flat corporate tax by mid-2010. “We are from £14,000 to £18,000 while the taxable moving away from zero tax to low tax. An internationally competitive tax rate is an important income level increases by £10,000 to attraction for business. Our philosophy remains that a low tax rate encourages investment £60,000. Existing Category 3 and 4 status and delivers wealth," he said. individuals will retain that status until June “This will most probably be set at 10%, but in 2009 – unless their certificates lapse sooner any event not higher than 12%. This will be – but taxes for the former will rise from similar to arrangements that exist in Ireland, £10,000 a year to £15,000, and the matter Cyprus, Malta and other EU countries." from £5,000 to £7,500. In the meantime the corporate tax rate is to Sovereign Comment be reduced from 35% to 33% for the 2007/ This announcement has helped to clarify matters 2008 tax year, and to 30% for the following although there has been disappointment that year. He further signalled the intention of a corporate tax rates are not further reduced europe further reduction the year after that to 27% in before 2010. The HNWI residency programme anticipation of the flat low tax rate in 2010. has also now been clarified. There is a significant amount of top end property development in The tax cuts are intended to lessen the effects Gibraltar at present, and Cat 2 Status may be of the phasing out of the existing tax-exempt of particular appeal to expatriates presently company regime, which the European Com- living elsewhere, such as the Middle East. mission challenged on grounds that it breach- Sovereign is able to handle such applications ed EU state aid rules. Gibraltar has agreed as well as providing ancillary services including to end the regime by 2010. yacht registration. Contact the Gibraltar office Cyprus and Malta for more information on this innovative resi- gain Euro entry The Budget included changes to taxes im- dency programme and for introductions to posed on Category 2 Status Individuals, who property developers. 2EU finance ministers8 at the ECOFIN meeting on 10 July 2007 gave final approval for Cyprus and Malta to enter the Eurozone on 1 January 2008. This brings to 15 the France introduces Fiducie trust structure number of countries sharing the single European currency. The French government, by Decree 2007-725 of 7 May 2007, has introduced a new structure The two islands have taken various measures to – the so-called Fiducie – which is in many respects similar to the English law trust, although meet EU economic rules; Cypriot workers accepted its role is more limited. lower wage rises to avoid inflation, while Malta paid off debt to cut its budget deficit. The fiducie is an agreement whereby one or lowered from 60% to 50%, and tax relief of Portuguese finance minister Teixeira dos Santos more constituents (settlors) transfer assets, up to 20% is offered on mortgage interest chaired the ministers monthly meeting in Brussels rights, or collateral to a fiduciaire (similar to rate repayments during the first five years. because Portugal holds the rotating presidency of the a trustee) who agrees to manage them for a European Union until the end of the year. given period of time (not to exceed 33 years) The fiscal package also introduces some tax He said: "Cyprus and Malta will join the Euro on 1 and to return the assets to certain designated breaks to those paying the wealth tax known January next year. I would like to congratulate these beneficiaries on termination of the fiducie. as the ISF. Those subject to the ISF will be two countries for this achievement, which is the result allowed to invest in small- and medium-sized of appropriate policies." The constituent, the fiduciaire or third parties enterprises and be credited with an equivalent Sovereign Comment can all be designated as beneficiaries.