The Evolution of Offshore Banking: INTAX Russia 2013


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The offshore banking business model and how it has evolved and changed over the last 5 years. This is the INTAX forum presentation given by Joy Godfrey, Director of Cititrust International Limited in Russia, 2013.

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The Evolution of Offshore Banking: INTAX Russia 2013

  1. 1. CITITRUST INTERNATIONAL INC. The New Offshore Business Model INTAX Forum – Moscow – September 2013
  2. 2. Little or no tax information exchange British Virgin Islands Company + Swiss bank account British Virgin Islands/Belize Company +Russia +Cyprus Little to no international co-operation The “pure” offshore approach
  3. 3. The United States OECD Austria and Luxembourg EU The British Virgin Islands Swiss Cyprus Automatic Information Exchange The NewBanking Secrecy Savings Directive Multilateral Convention forComplianceExchange Foreign Account Tax Automatic Act The
  4. 4. Introduction of restrictions into the New thin Luxembourg, New transfer capitalization Cyprus and pricing rules pricing rules Netherlands treaties among others
  5. 5. The implications of non-compliance European Union legislation Money laundering legislation
  6. 6.    Increased real estate taxes Increased information exchange Considered in the UK Non-domicile    Has implemented FATCA Reintroduced the inheritance tax Increased compliance requirements    Banking secrecy The Switzerland-Russia treaty The Cyprus-Russia treaty
  7. 7. Confidentiality The new Corporate Services Delivery Mechanism Avoiding triggering anti-avoidance legislation Legally compliant treaty positions Employing tax offshore structures
  8. 8. Avoiding antiCost-benefit Maximising Standing up to considerations treaties to avoidance reviews from tax reduce taxes legislation authorities
  9. 9. Confidentiality - do you really have it? Belize Offshore Trusts can be used to provide confidentiality Legal Professional Privilege (LPP)
  10. 10.      Both countries host Canadian Low tax jurisdictions Westminster style constitutions banks – Canadian Imperial Bank Both countriesEnglish common Canadian and have double tax of Commerce (CIBC) & Royal treaties law persuasive Bank of Canada (RBC)
  11. 11. Under the Luxembourg Barbados Double Tax Treaty withholding Luxembourg withholding tax on dividend payments to the British taxes paid to Barbados company in Luxembourg are: 0% Virgin Islands and other offshore companies: 15% Dividends - 0% Interest – Withholding Tax 0% Royalties – Withholding Tax 0%
  12. 12. The Model Luxembourg  Full dividends and capital gains exemption under Luxembourg participation exemption regime  No Withholding Tax on dividend Belize IBC payments to Barbados from Luxembourg Barbados Company Barbados  Full dividends exemption under Barbados participation Luxembourg Company exemption regime  Exemption of capital gains on the sale of shares of Lux Co. Russia  No WHT on the dividend payments to Belize IBC.  A Belize International Business Company (IBC) forms a Barbados Company  The Barbados company acquires shares in a Luxembourg company
  13. 13. The Model The domestic US trust is US tax compliant  The structure works for US and non- US citizens US Non-US  The US domestic trust has Beneficiary Beneficiary access to US double tax treaties  US Domestic Trust US courts Asset protection of  The wealth under the offshore insurance contract can be held Belize Offshore using a zero tax vehicle like Variable Insurance Belize IBC  Wealth is accumulated and Belize in a protectedIBCs zero tax environment  Tax-free distributions possible 5    A US company forms a tax compliant US domestic trust The trust acquires Belize offshore life insurance
  14. 14. 5 The Model      Belize IBC is zero tax vehicle Barbados IBC is a low taxed vehicle Barbados IBC is used to access the Luxembourg-Barbados treaty Luxembourg company is used to access the Luxembourg-Russia treaty The Mandatorily Redeemable Preference Shares (MRPS), if properly drafted, is treated as debt UK Company for Luxembourg tax purposes and treated as equity in Barbados.  Dividends are treated as interest expense  Dividends are tax-free in a Barbados Branch Barbados IBC  Treaty benefits from Russia Operating Company to Luxembourg apply Luxembourg Company
  15. 15. The Model Double Taxation Treaty Barbados/Luxembourg exempts income attributable to the Barbados branch. UK Company  In addition, assets attributable to the Barbados branch are exempt from net worth tax in Luxembourg Company Luxembourg  Secured by an advance clearance Branch Barbados letter  Interest income will be taxed in Barbados branch when paid. No Operating Company taxation if interest income is accrued     A Luxembourg company forms a branch in Barbados The UK company contributes cash or receivables to Luxembourg company for shares which allocates such assets to the Barbados branch Barbados branch lends to the group of companies
  16. 16. The      Model Double Taxation Treaty Barbados/Canada exempts income attributable to the Russian Russian Barbados branch Company Company In addition, assets attributable to the Barbados branch are exempt from tax in Canada Canadian Trust Canadian banks in Barbados are used to custody assets in Canada Barbados Branch There is no capital gains tax in Barbados Assets Assets are protected under Canadian law 5  A Russia company forms a Commercial Trust in Canada  The Barbados branch then manages the assets of the Canadian Trust
  17. 17. CITITRUST INTERNATIONAL INC. Belize City, Belize +(501) 223 3738