Factors Which Influence the Choice of an Offshore Jurisdiction
Once a need for use of an offshore financial centre has been determined, the actual choice of jurisdiction is often the most important decision to be made.
The provision of financial services is a specialised area and depending on the underlying intention and ultimate goal a jurisdiction with appropriate and workable laws, professionals with experience and expertise, and a wide choice of reputable banking, investment, corporate and related services will need to be considered. In evaluating an offshore centre the following traits and characteristics must be examined:
- a politically and financially stable government and economy with a tested track record
- geographical and convenient accessibility and suitable time zones
- wide choice of reputable banks
- modern and reliable communications
- applicable low-tax or tax-free environment
- appropriate official language
- quality of legal and accounting professional services
- sensible and effective regulation and supervision
- high ethical standards in government, the professions and commerce
- laws which are clear and fair, applied by a competent judiciary
- a recognised Stock Exchange
- relevant Tax Treaties
Guernsey as an Offshore Jurisdiction
“Guernsey has a “can do” attitude to business. The Island”s entrepreneurial spirit, its skilled and committed workforce and its outward-looking approach have resulted in many centuries of commercial success” – is the introduction paragraph to Guernsey on the Commerce and Employment section of the States of Guernsey web page. This is further followed by “historically there has been a strong mutually beneficial relationship between Guernsey and the City of London. This remains, even as Guernsey sees new business from the traditional introducer centres of the UK (in particular, the City) and Europe increasingly being supplemented by inflows from further afield, including the “emerging” markets of China, India and Russia.”
This has all evolved because Guernsey has built a reputation for being well regulated, cooperative and transparent. This is reinforced by the fact that external agencies such as the International Monetary Fund (IMF), Organisation for Economic Cooperation and Development (OECD) and the Financial Stability Board (FSB) continually place Guernsey within the very top tier of international finance centres globally.
Guernsey”s mature, innovative and service-oriented financial services sector is based on a balanced range of providers broadly comprising:
- Fiduciary services (trust and company administration)
- Asset Management
- A Guernsey Registry for company formation and intellectual property
- An independent stock exchange – the Channel Islands Stock Exchange (CISX)
- A bespoke training facility – the GTA University Centre
Listing percentage wise the Channel Islands Stock Exchange possibly has the highest exposure to property than any other exchange. This does not take into account the large number of investment funds managed or administered in Guernsey which are registered in other jurisdictions such as the Cayman islands and Ireland. The Tax Treaty with the United Kingdom allows offshore and non-domicile residents and companies to make tax efficient investments not only in property but also into other asset classes. This diversification thus gives Guernsey a distinctive advantage in the supply of experienced professional services.
In the promotion of individual jurisdictions by service providers the tendency is always to “knock” the competition. It is however true that the various offshore jurisdictions are different but all, in one way or another, have their good and bad points. Guernsey, backed up by its high level regulatory regime, is however a preferred service provider in listed and unlisted funds, individual investment portfolios and general administration. The trust and fiduciary industry together with company management expertise not only competes with these other jurisdictions on a like for like basis but has been held in high esteem by independent commentators, legal, accounting professionals and asset managers. Testament to this is the continual introduction of business to Guernsey by these professionals.
Capitalisation of the terms and conditions of the Tax Treaty between the UK and Guernsey have been tried and tested over the years and it is important that laid down procedures are followed to ensure that no commercial transactions can be brought into question should there be any scrutiny by any applicable tax authority. Please refer to a note published by Cannon Asset Management Limited entitled “Management and Control, Effective Management and Permanent Establishment”.