There is a growing awareness in Asia of the products and services which offshore centres can provide to Asian high net worth individuals (HNWs). An offshore jurisdiction provides a third-country location from which Asian families can protect and even enhance their wealth for the benefit of future generations.
However, what we are still finding is that many in Asia still equate offshore with only those jurisdictions in the Caribbean and in particular, the British Virgin Islands (BVI) and the Cayman Islands. Asian clients and their advisers need to understand that offshore extends beyond those jurisdictions and indeed, not only are there other international finance centres but these offer a very different and in many cases better proposition.
For example, the European-based British Crown Dependency of Guernsey is able to provide Asian clients with a full service proposition in a tax-neutral environment with close proximity and strong links to the City of London. Guernsey is recognised by international organisations as meeting robust regulation and tax transparency standards. These are attributes which have gained added significance in the wake of the global financial crisis and provide extra comfort to both clients and their advisers.
In addition, it is our understanding that while the initial, upfront costs of doing business in Caribbean jurisdictions may be less than using Guernsey, in fact, over the longer term, the expense is likely to be comparable.
THE GUERNSEY OFFERING
During the last 50 years, Guernsey has established itself as a leading international finance centre. Today, the four main pillars of the Island’s finance industry are:
- Banking: There are 32 licensed banks holding more than US$138 billion of deposits.
- Fiduciary services: There are more than 150 licensed fiduciaries, ranging from multinational organisations to independent, boutique operations.
- Investment funds: There are 50 fund managers, administrators and custodians with total net asset
- value of funds under management and administration of US$424 billion.
- Insurance: The island is the largest captive insurance domicile in Europe and number four globally.
Businesses in these sectors are supported by a network of professional services, including multi-jurisdictional law firms and global accountancy practices. Supervision is provided by the Island’s financial services regulator, the Guernsey Financial Services Commission.
Guernsey Finance — the promotional agency for the island’s finance industry — has long recognised that there is significant opportunity to increase business from Asia given the growth of wealth in the region. As such, we established an office in Shanghai in 2007 and this has been followed by a number of Guernsey-based firms developing their own presence in the region.
For example, law firm Ogier has offices in Hong Kong and Shanghai, Mourant Ozannes is now established in Hong Kong and Collas Crill has set up in Singapore. In addition, fiduciaries Louvre, Nerine and Newhaven have established offices in Hong Kong and Richmond Fiduciary Group has opened an office in Shanghai.
Guernsey has a long and strong heritage in providing asset protection, succession planning and wealth planning for globally mobile families through the use of companies and trusts. The trust concept originates from and has been used successfully for many years in common law countries such as the UK and the US. It is less familiar in civil law jurisdictions such as China and as such, makes many uncomfortable with the perceived lack of control over their wealth and assets. Guernsey can address these concerns. First, within the arrangements of a standard Guernsey trust there are special provisions which allow for the Settlor to take control of the wealth or assets. Secondly, the use of a structure involving a Private Trust Company (PTC) and a purpose trust gives the Settlor greater control. (It should be stressed though that, aside from the tax implications, there are dangers in the Settlor controlling the wealth or assets, especially if they are inexperienced in managing such affairs.) However, we are aware that despite these assurances, some advisers and clients still believe that a trust is not the right option for them. Therefore, at the start of this year, we introduced the Guernsey Foundation. The foundation is a structure rooted in civil law and as such, we expect it to be particularly attractive to clients from those jurisdictions, such as Asia. This is especially due to the fact that the specific provisions of the Guernsey legislation mean that our version is much closer to the civil law model than those being offered by other common law jurisdictions.
Guernsey is also in the process of establishing an aircraft registry for the wealth management sector’s overseas clients. This will be separate from the current Guernsey Registry which offers quick and cost-effective company incorporations. Its offering is set to be enhanced by a number of revisions due to be made to the Guernsey Company Law, including provision for companies to be named using any recognised alphabet, including Chinese characters (rather than just English).
The Guernsey Registry is also home to the local Intellectual Property Office which, at the end of the last year, achieved a world-first: Guernsey became the first jurisdiction globally to recognise image rights in law and provide them with a register. This will be particularly attractive to high-profile individuals, including those from the world of sports and entertainment. These clients will also be able to tap into Guernsey’s wider wealth management offering, including the island’s mature banking sector. It provides products ranging from retail banking and savings through international wealth management and private banking to institutional business and specialist lending. Importantly, it also services the other financial services sectors on the island.
These banks include the international operations of major groups headquartered in the UK, US and Switzerland. However, we believe that there is significant scope for an Asian bank to use Guernsey as an offshore hub to service the private banking needs of mobile Asian individuals and families.
WHY GUERNSEY ?
Guernsey’s vast experience as an international finance centre means we are tried and tested but we are also dynamic and forward-thinking, as demonstrated by the fact that we pioneered the cell company concept, which is now used throughout the wealth management sector, including by family offices. Guernsey was one of the first jurisdictions to regulate trust companies (although the trusts themselves are not regulated) and assessments by the IMF continue to verify that the island is working to robust international standards. The Guernsey government also continues to ensure that we adopt international standards of tax transparency. The island was within the first wave of jurisdictions placed on the OECD/G20 ‘white list’ in April 2009 and today Guernsey has signed Tax Information Exchange Agreements (TIEAs) with 42 jurisdictions, including China. Further, Guernsey also continues to extend its network of Double Tax Arrangements (DTAs). Guernsey signed a DTA with Singapore in February and with Hong Kong in April. However, even in advance of those coming into effect we have a corporate tax regime where all financial products used by our international clients are either taxed at 0 per cent or are tax exempt.
A DIFFERENT PRO POSITION
The Asian market has traditionally used offshore centres in the Caribbean but this article highlights to clients and their advisers that Guernsey provides a different proposition which is more in tune with the future d
GUERNSEY AT A GLANCE
- Situated in Europe between the UK and France
- British Crown Dependency
- Not part of but has a special relationship with the European Union
- Currency: British pound sterling (GBP)
- Same timezone as the UK
- Links to both London and Europe
GUERNSEY AS A FINANCIAL CENTRE
- OECD/G20 ‘white list’
- Signed 42 TIEAs, including China
- New DTAs signed include Singapore and Hong Kong
- Regulation commended by IMF
- The Banker rankings: No 2 Specialist Finance Centre (Published Sptember 2012)
- Global Financial Centres Index: No 2 Offshore Finance Centre (31st overall) (Published March 2013)