JFSC Shares Findings from its 2011 Inspection Programme

The Jersey Financial Services Commission has this week released its business plan, which contains an interesting insight into inspections made during 2011.

In relation to Trust Company Business, 47 registered persons were assessed.  Whilst many businesses were found to be in good order, examiners identified a small but not insignificant number of businesses where a poor corporate governance and an inadequate control environment had led to potentially serious issues. In these cases safeguarding directions were put in place, in some cases requiring reporting professionals to be appointed to fully assess the extent of the issues. This use of external assessors mirrors the situation in the UK, where the Financial Services Authority has issued an increasing number of Section 166 notices, requiring an independent review of controls within business where there may be a concern. 

Where serious issues are identified, the JFSC applies heightened supervision, or, in a small number of cases, has required the closure or sale of a business.

Clearly, everyone involved in the industry would prefer to avoid situations where drastic action is necessary and it is the practice of the JFSC to give guidance where it sees common issues within regulated business which require attention.  Two “Dear CEO” letters were issued by JFSC in relation to trust company business during 2011. The first commented on the fact that an increasing number of applications to incorporate Jersey companies evidenced insufficient due diligence and documentation of associated risks having been taken by the trust companies prior to submission of the incorporation request, particularly where the business was involved in a high risk territory or an inherently high risk activity.  The JFSC was concerned that the applicants were, in effect, trying to use the incorporation process as confirmation that the Registrar felt the risks to be acceptable, whereas this decision is the responsibility of the regulated entity.

The second letter shared with Industry some examples of issues identified concerning “COBO only” and private fund structures, namely conflict of interest issues, investor suitability and an absence of adequate disclosures.

Having been forewarned about these issues, trust companies will need to ensure during 2012 that they have paid full attention to the guidance being given by JFSC if they are to avoid action being taken.

The Funds Supervision Unit undertook 34 on-site examinations during 2011. Common themes coming out of 2011’s examination programme included a lack of appropriate due diligence on promoters and other parties in relation to new funds; a failure to demonstrate proper oversight by the board; and a failure to comply with all the requirements of the Island’s anti-money-laundering regime.

In my experience the JFSC is one of the more proactive and tough regulators in the industry.  Where it finds issues that require attention, it is not afraid to highlight them in order to see standards raised.  Whilst in a perfect world one could argue that it would be better if the JFSC was able to report having found no major failings during its inspection cycle, this is unrealistic in practice.  There will always be room for improvement and a regulator which is uncovering where those areas are is far more effective than one whose main concern is to be able to show a “clean” report to the world.  Jersey is not always an easy jurisdiction in which to work from a regulatory perspective, particularly for relatively small fiduciary businesses, as the compliance requirements are stringent, but as the world becomes increasingly suspicious of “secretive” offshore centres, the ability to show a transparent and prudent approach is all the more important.

deVere's Green acquires 24% of STM Group, in gamble on Maltese QROPs growth

Last month Nigel Green, the founder and CEO of IFA group deVere, acquired a 24% stake in STM Group, the Manx incorporated AIM-listed fiduciary services business, in an audacious gamble on what action HMRC would take in relation to QROPs. 

STM Fidecs is perhaps best known as a provider of QROPS, having been one of the first companies to develop the schemes in Malta, which was approved by HM Revenue & Customs as a jurisdiction to which UK pensions could be transferred in 2009.  STM has also developed other pension-related solutions, including one which is designed to enable the transfer of UK pensions of individuals retiring to or returning to the US, and another which enables expatriate UK pensioners to move their pensions between a number of different countries, without incurring additional fees.

In acquiring a stake in STM (via an issue of new Ordinary Shares in the company issued at 17.5p per share), Green appears to have been gambling on the fact that QROPs changes to be announced by HMRC would lead to an increase in the QROPs market in general, and in particular an upturn in clients moving their pensions to Malta, where STM is a leading player, at the expense of other competing jurisdictions such as Guernsey and the Isle of Man.  His belief that Malta was likely to win where other might suffer was based largely on the fact that Malta is within the EU and has an extensive double-tax treaty network. 

Green was presumably confident that the QROPs market in Malta was indeed set to boom, as by most other measures STM was going through a very difficult period.  The company reported pre-tax profits having fallen by more than half and revenue falling to below £10 million.  Only £600,000 of the total revenue related to QROPs business, and there would therefore need to be a very significant spike in this area of the business for it to be material enough to turn around the fortunes of the company, which has felt a significant negative impact from the Eurozone crisis.

Whether or not the investment, (which cost Green £1.59m) was good value for money remains to be seen, but it seems that at least some of his investment assumptions were correct.   As previously reported, earlier this month HMRC removed the vast majority of Guernsey’s QROPs from its approved list and Malta may well be a beneficiary in the future of some of the business which might otherwise have gone to Guernsey.  However, HMRC seems to have left other territories such as the Isle of Man unscathed, at least for now, so Malta still faces some stiff competition from other jurisdictions which are well established in the market.

However, it is believed that Green was also looking to exploit some synergies between STM and deVere.  STM is looking to develop and build upon its distribution network and deVere is well placed to be a very important sales channel for STM, particularly given deVere’s current push into the US market.  According to a deVere press release last month, it has used QROPS for “almost half” of all the £1.3bn worth of pensions which it has transferred to offshore jurisdictions.

STM’s shares are currently trading at 25p which is almost double the recent low of 13p, but still a very long way off the hey-day back in 2007, when they were worth 73.5p.

Ireland proposing a Model Agreement for implementation of FATCA

The Irish Funds Industry Association has announced that the country’s tax authorities are in discussions with their US counterparts over the possibility of entering into a "model agreement" for implementing America’s Foreign Account Tax Compliance Act (“FATCA”).

In February, the US announced that they had agreed on an intergovernmental agreement with 5 countries, whereby financial institutions in these countries would forward the data on American account-holders to the governments of the respective countries in which their accounts are held, rather than having to make the disclosures directly to the IRS. The five countries concerned are the UK, France, Germany, Ireland and Italy. 

The concern for jurisdictions which have a significant amount of multi-jurisdictional work (most of the world's key international finance centres, whether onshore or offshore) was that it would be complex to have different reporting formats and bases for each country in which the accounts are held, and therefore the prospect of a model agreement for Ireland whereby the data would be passed across on a consistent basis and in the same format will be welcome news, particularly for the country’s fund management industry, which is of great importance to the economy of the jurisdiction. According to the IFIA, Ireland experienced the highest net inflows of UCITS of all fund domiciles in 2011, attracting some €62bn, nearly €50bn more than the next most successful territory.

The model agreement would not in any way alter or deviate from the obligation to make the FATCA reporting, but would in practice make it logistically somewhat easier to comply.

It is hoped that the model agreement will be in place by the end of June 2012.

FATCA compliance is an issue which is currently exercising the brains of many in the international finance community.  There is concern starting to emerge that trust companies in particular are ill-prepared for the potential impact of the new regulations, and that the regulations are not yet well understood in detail.  I know from my own experience with trust companies that many do not have IT systems in place which would permit easy identification or reporting of individuals who may be caught by the reporting requirement. Most would be able to identify if their clients were born in the USA or currently had a principal residence there, but not many of the standard systems would be able to pick up green card holders, or those with secondary residences in the US.  The task of identifying and then tracking this information throughout the lifetime of a client relationship is likely to be onerous, and detractors complain that FATCA is likely to lead to some institutions concluding  that it is simply easier not to deal with US individuals.  That might be a possibility in the realms of private wealth, but is not really a feasible option for fund managers and administrators.

Since the announcement of the intergovernmental agreement with the first 5 territories in February, some other jurisdictions, such as Guernsey, have expressed a desire to come to similar arrangements, but as yet there has been no official word on how well talks are progressing.

Seminar on Current Trends in Offshore Mergers and Acquisitions

As can be seen from prior postings on this Blog, the trust sector is currently facing a period of unprecedented activity.  Increasing global regulatory requirements and more complex international client structures requiring multi-jurisdictional servicing capability, are driving a period of consolidation in the sector which will have an impact not only on the parties directly involved in the consolidation, but on anyone who is competing to win business in the sector.  

On Wednesday 2nd May a seminar to be held in Jersey will give insight into current merger and acquisition activity in the sector, and will explore some of the practical, legal, financial and regulatory issues surrounding buying, selling and merging fiduciary businesses.  Hosted by leading offshore firm Mourant Ozannes and regulatory and compliance specialist Kinetic Partners, and with additional contributions from Deloitte and myself, the seminar should be of interest to anyone who is interested in tracking market trends and issues in the sector, those considering non-organic expansion of their business or those who may look to take external investment or sell their business at some point in the foreseeable future.

A few spaces remain for the seminar, which will commence at the Hotel de France in Jersey at 3.45 on 2nd May.  For further information, or to register for the event please contact Emma Pallot on +44 1534 676 473 or  at Emma.Pallot@mourantozannes.com.  

Triple Whammy for Guernsey

Guernsey has suffered the third blow to its international finance business in a matter of weeks.  First came the removal of the Low Value Consignment Relief for imports to the UK from the Channel Islands, then came the de-listing of the vast majority of the Islands’ QROPs, and now the EU Code of Conduct Group on Business Tax has ruled that Guernsey's zero-10 tax regime is harmful.

The EU made similar rulings on the systems in Jersey and the Isle of Man last year, but after changes were made to the deemed distribution provisions in both Islands’ systems, they were approved in December 2011.  Guernsey will now have to make similar amendments, but there will be some frustration from within the Island’s finance industry that the Island is now subject to a further period of uncertainty and delay, whereas if it had taken the same course as Jersey and the Isle of Man last year, the matter could have been resolved far sooner.  The Island had felt that the operation of its own deemed distribution provisions were sufficiently different to those of Jersey and the Isle of Man that it might succeed where they failed, but it turns out that this was a forlorn hope – something which had been predicted by a number of commentators.

There is no reason to believe that Guernsey cannot or will not make the necessary changes and eventually get the approval of the EU authorities, but uncertainty regarding taxation is something which clients strongly dislike, and it may discourage the establishment of business in the Island in the meantime.

Guernsey Treasury and Resources Minister Deputy Parkinson, said that the changes that the Island will need to make to comply with the Code of Conduct Group’s criteria "...would result in an increase in our deficit and we would probably have to take other corporate tax measures to compensate.”  Estimates have put the cost of complying with the criteria at around £10 million, which will be a significant blow to an Island still calculating the cost of the LVCR and QROPs losses.

Controversy builds over Lord Blencathra's Cayman Islands role

Controversy is brewing over the position of Tory peer Lord Blencathra, who is both the Cayman Islands representative in London and a member of the House of Lords.   Speculation is growing that he may face an investigation into whether he has breached parliamentary rules by accepting a paid position to lobby for Cayman’s financial services industry, as the issue has been referred to the Committee for Standards in Public Life by Labour MP Paul Flynn, a politician who is openly hostile to tax havens.  

As might be expected, the Cayman Islands Government and Lord Blencathra have strenuously denied that there is any problem with the arrangement, as they maintain that no rules were breached and that the Foreign and Commonwealth Office knew about the appointment.

However, the issue is fairly complex.  Guidance on the Code of Conduct for Members of the House of Lords says they may not accept any payment in return for parliamentary services, including "making use of their position to arrange meetings with a view to any person lobbying Members of either House, ministers or officials."  It has been reported by The Independent that Lord Blencathra had tried to introduce MPs who are hostile to tax havens to members of a Cayman delegation visiting London, and that he has lobbied Chancellor George Osborne to reduce the air passenger duty to the Cayman Islands.

Lord Blencathra does not believe that his actions breach the Code because he sees a distinction between lobbying Parliament (which he claims not to do), and lobbying the Government which he does admit to doing.  The Code of Conduct Committee will have to rule on whether Blencathra’s view is correct, but even if he is found not to have technically breached the Code his Cayman Islands role is an embarrassment to the Tory party, which is keen to be seen to be cracking down on tax avoidance.  

The Lib Dems, who are partners with the Conservatives in the UK's Coalition Government, are certainly angered by the row.  Tim Farron, the Lib Dem party president has said, "With all the controversy surrounding lobbying and tax at the moment, it's astonishing that a Tory peer is now the lead advocate in Britain for one of the world's biggest tax havens. While the Coalition is trying to make the rich pay their fair share, this exposes an element of the Conservative Party which wants to keep helping their wealthy friends hide their money from the taxman.”

Osborne sets £17billion target for tax evasion recovery

UK Chancellor George Osborne has reportedly increased the pressure on HM Revenue & Customs to catch companies and wealthy individuals evading tax. According to the UK press, he has written to HMRC chief executive Lin Homer, setting a target of raising £17bn this year from “catching out” tax cheats - £3.1 billion more than was achieved last year.

The Chancellor has suffered a number of public relations disasters recently – from the popular outrage over the reduction in the top rate of income tax, to the introduction of the so-called “pasty tax” and the “granny tax”, to revelations by the Treasury that almost one in ten people in the UK earning more than £10m per year is paying less than the 20% basic rate of income tax.  As a consequence, it would appear he feels under pressure to be seen to be clamping down on tax evaders and businesses who take advantage of loopholes to reduce their tax bills.

Stamping out tax evasion is not a controversial thing to do but setting financial targets for HMRC to achieve which encompass tax avoidance will be more controversial.  There is a fine line between arrangements which are legitimate and bona fide ways to minimise a tax bills, and those which over-step the line to become illegal avoidance or evasion.  Having financial performance targets for HMRC will be bound to increase their motivation to challenge schemes which may be within the letter, if not the spirit, of the law.

Anson Group and Bordeaux Services call off proposed merger

Anson Group Limited, which announced in September 2011 its intention to merge with Bordeaux Services (Guernsey) Limited, has now stated that the merger will not proceed. No reason was given for the change of plans, but it was stated by Mr john Le Prevost, Chief Executive of the Anson Group, that “it did not rule out future co-operation between the two groups” and the two groups will continue for the time being to operate independently from each other but from shared premises.

Subsequent to the termination of the merger talks, Anson Group has appointed Professor Richard Conder as its new chairman and Mr Melville Trimble as a new director.

In a period of significant consolidation in the fiduciary industry, it is likely that Anson and Bordeaux may now be the target of other companies wishing to talk to them about joining forces to establish critical mass.

Guernsey QROPS singled out by HMRC for attack

Guernsey’s worst fears were confirmed last week when HMRC delisted more than 300 of the Island’s QROPS, leaving only 3 approved schemes on the official list. 


The Island is particularly aggrieved that it seems to have been singled out for attention, as many of the other offshore jurisdictions which also offered QROPS to non-residents (third country QROPS), such as the Isle of Man and Jersey, have come through the recent rule changes with the majority of their schemes intact.
Fiona Le Poidevin, Deputy Chief Executive of Guernsey Finance, the promotional agency for the Island’s finance industry, was at a loss to explain why Guernsey seems to have been singled out by HMRC.  She said:


“HMRC’s amendments to its legislation contained in the UK Budget were clearly focused on targeting abuses in the system and Guernsey has always upheld itself as a model of compliance with the QROPS regulations. The other major change within the new regulations was that schemes must treat residents and non-residents alike in respect of tax treatment and Guernsey took quick and decisive steps to introduce a new category of pension scheme, known as s157E, which, by extending the tax exemption on pension benefits to Guernsey residents, was designed to meet the revised criteria for a QROPS.


“Therefore, it is confusing and frustrating that HMRC has now delisted almost all Guernsey schemes while most of those from other jurisdictions remain listed as QROPS. We accept that HMRC has the right to make its own rules regarding the treatment of UK tax relieved schemes but it needs to be an open and fair process. However, the current actions have been introduced without warning, lack transparency and appear discriminatory. Indeed, HMRC seems to have set aside its own rules to meet an unpublished policy objective.


“The whole situation is made even more puzzling by the fact that HMRC’s original consultation document admitted that the changes would have a ‘negligible impact on receipts’ to the UK exchequer.”


The fact that HMRC has chosen to take action despite an apparent belief on its part that it will not raise much, if any, revenue for the exchequer has echoes of the recent removal of the Low Value Consignment Relief for Channel Islands imports to the UK.  This was another clear example where the UK government appears to have taken a politically motivated decision to be seen to clamp down on “tax havens” even where there is likely to be no palpable benefit to HMRC or the UK economy as a consequence.  This trend should be a worry for all offshore jurisdictions, which in the past have been able to rely on hard facts (such as those in the Edwards Report) to defend their position and illustrate the indirect benefits they bring to the UK economy.  The difficulty for these small territories is that there is at present a strong anti-globalisation, anti-capitalist lobby which has been successful in building something of a wave of antipathy towards the offshore industry.  The offshore jurisdictions feel very aggrieved that the level of debate is often fairly fatuous and ill-informed, but nevertheless the politicians (and probably above all a Tory led coalition government) are terrified of appearing to pander to rich and powerful businesses at a time of austerity and therefore find it easy to win brownie point by closing down apparent “loopholes” even when there is no economic sense in doing so.


Indeed, the Guernsey representatives are arguing that if HMRC does not change its stance, then the likely impact is that business will move to more remote jurisdictions and as a consequence, the monies from QROPS in the Island which currently flow back into the City of London may also be lost. 

Guernsey braced for QROPS hammer-blow tomorrow

Since 2006 QROPS (qualifying recognised overseas pension schemes) have been big business for offshore jurisdictions because HMRC permitted any non UK resident to transfer their UK pension fund to a QROPS in an overseas location and thereby avoid the compulsion to purchase an annuity by the age of 75.  This could avoid a potential UK tax charge of up to 82 percent upon death, and was free of UK inheritance tax.

Whilst some QROPS require you to be resident in the jurisdiction to which you wish to transfer your benefits, others such as those established in Guernsey have no such restriction, allowing expats to choose a tax friendly regime to suit their personal circumstances.  This led to Guernsey becoming a leading offshore provider of the schemes.

But is seems that HMRC are not happy with the way in which QROPS have been used as an inheritance tax planning tool, rather than a genuine means of providing a retirement income, and in recent months they have been changing the rules to try and prevent the schemes being used for tax avoidance purposes. 

Emergency adjustments to Guernsey’s system were made earlier this year after a UK warning that if a jurisdiction offered tax advantages that were not intended to be available under QROPS rules, it would exclude them from registration.  It was hoped by the Island that this would satisfy HMRC but now the Island fears a further attack as HMRC has indicated that it is set to change its regulations again in order to prevent a significant proportion of Guernsey’s pension schemes being recognized as QROPS.

HMRC has confirmed that when it republishes its list of approved QROPS on Thursday 12 April 2012 it will only include a Guernsey scheme if it is for ‘Guernsey residents only’.  It is not clear at this stage whether other offshore jurisdictions such as Jersey and the Isle of Man will be equally negatively impacted by the changes, although it is understood that New Zealand has also been specifically targeted.


In addition, HMRC has indicated that it is set to further change its regulations in order to disqualify Guernsey’s new s157E pension schemes from being recognized as QROPS.  These had been introduced specifically as an attempt to meet the last raft of requirements introduced by HMRC.
This will be a massive blow for the Island, where 200 jobs are estimated to depend on the QROPS market, and comes soon after the Island has lost its fulfillment industry following withdrawal of low value consignment relief from the Channel Islands. 


The only silver lining in sight is that the changes to the QROPS rules will not be retrospective, so that those who have already established their QROPS in Guernsey will be permitted to keep them there, and to benefit from the tax advantages.  

Orangefield acquires Luxembourg's TASL

Orangefield has today announced the acquisition of Luxembourg based TASL S.A. a specialist in accounting, company management and corporate legal services incorporated in 2003 by Stéphane Weyders . This is Orangefield’s fourth acquisition since 2011, and comes only a month after its acquisition of Fidelico in Cyprus. 

TASL’s 15 strong team of professionals will join the 60+ staff in Orangefield’s Luxembourg office.

Orangefield has been growing strongly through a combination of organic growth and acquisition and now has over Euro 10 billion of assets under administration.  

AIB to close Jersey and IOM operations, with 168 job losses

ALLIED Irish Bank is to shut its operations in Jersey and the Isle of Man by the end of next year with the loss of 168 jobs (112 in the Isle of Man and 56 in Jersey).


The troubled Irish banking group says that the closures form part of an overall plan to ‘become a smaller, domestically focused bank’.  The Jersey trust company operations of AIB were sold to Capita last year.

Guernsey to learn its zero-10 fate on 17th April

It has been confirmed that the EU Code of Conduct Group will discuss Guernsey’s zero-10 corporate tax regime at its next meeting on 17 April.

Guernsey is the only one of the three Crown Dependency islands not yet to have received the Code Group’s approval for its zero-10 scheme, and is keen to get the issue resolved as soon as possible, because uncertainty regarding taxation is perceived by many to be a significant bar to new business. 

Guernsey was excluded from the Code Group’s initial review of zero-10 schemes in Jersey and Isle of Man because it committed to undertake a formal reassessment of its corporation tax regime, with a view towards possibly replacing it with a new system.  This plan was later abandoned, and so the Island’s corporate tax system is being considered anew by the Code of Conduct Group.

If the Group is happy with Guernsey’s existing taxation arrangements, then it is possible that the island could have its scheme approved by the end of June.  However, the review is no mere rubber stamping exercise. Jersey and the Isle of Man only got their zero-10 regimes approved after changing the rules relating to deemed distributions.  Guernsey is trying to argue that it does not need to make similar changes, because its zero-10 regime is sufficiently different that it already meets the standards.  If it does not succeed with this argument, the finance industry in the Island will be unhappy at the prospect of further delays in clarifying the Island’s corporate tax system.  The local politicians will therefore doubtless be having an anxious Easter.

Vistra acquires FTC Trust in the Netherlands

Vistra continues its rapid expansion with the announcement that it has acquired FTC Trust in the Netherlands, following approval of the deal from the Dutch Central Bank on 14 March 2012. 


Founded in 1990, FTC Trust has offices in Amsterdam, The Hague, Antwerp and Brussels from where it international clients with company formation, management, domiciliation and corporate services.

FTC Trust has nearly 400 clients split between the high net worth and corporate sectors, with 22 staff and an expected turnover in 2012 of nearly €4 million.

The acquisition will bring Vistra's staff numbers in the Netherlands to 60, with FTC Trust expected to be rebranded under the Vistra umbrella during the second quarter of this year.  


Over the past couple of years Vistra has been growing strongly, through a combination of organic growth and acquisitions, and now employs more than 350 professionals in 19 jurisdictions.

Walkers rocked by law firm departures following sale of its trust company

The politics of law firms owning subsidiary businesses have always been complex, as partnerships are far from ideal structures within which to hold valuable capital assets.  It came as no great surprise, therefore, to see Walkers selling its trust company business to Intertrust. 

What has come as something of a bigger surprise is the fall-out for the remaining firm.  7 partners and 3 associates from Walkers’ legal practice have this week jumped ship and joined fierce rival, Maples and Calder.  

Walkers partners Julian Ashworth, Heidi De Vries, Sheryl Dean, David Marshall, Philip Millward and Gwyneth Rees, and senior associates Philip Dickinson, Patrick Head and Lucy Nicklas will all be joining Maples' Cayman Islands office as soon as their existing contracts allow them to do so and the necessary immigration approvals have been obtained. Partner Tim Clipstone will be joining the firm's BVI office. In a relatively small jurisdiction, a move of 9 lawyers in one go will have a significant impact, particularly given that they are all funds lawyers.  It will leave the Walkers fund team very badly depleted.

Reading between the lines of the carefully worded statements put out by both firms involved, it seems that the partners who have left are all salaried rather than equity partners.  As such, they are unlikely to have benefited materially, if at all, from the sale proceeds and will doubtless be unhappy that any expectation of income in the future from trust company business will have disappeared (at least until any restrictive covenants have expired and the firm is free to set up a new fiduciary business).  It does not take a rocket scientist to work out that there will always be winners and losers when a partnership asset is sold, and the most likely ones to feel aggrieved are those who failed to make it to equity partnership in time.  However, other firms have managed the transition in the past without such significant protest and Walkers might have expected to be able to weather any period of unhappiness without such a major loss of manpower.  Walkers must now be reflecting on why their experience has been so different.

The whole situation does demonstrate the need for very careful handling of these situations.  Walkers is not the first offshore law firm to sell its fiduciary business and nor will it be the last.  There are many reasons why law firms do tend to arrive at a point where strategically it makes sense to sell a subsidiary business and it is a tricky balancing act to achieve this without destabilising the parent law firm.  In some cases this may involve sharing sale proceeds outside of the equity partner group, so that there is not such a stark contrast between the winners and losers. In others it may involve a restructuring of the remaining law partnership, as some firms take the view that it is easier to relax the rules on equity participation or other forms of profit sharing if that does not entail giving away an interest in a large capital asset.  And in other cases it is simply a question of excellent communication to explain why, strategically, a sale is the right thing to do, and why the future still looks exciting for those working in the legal practice.  It can be achieved, and has on many occasions.  But it is far from easy, as Walkers’ experience this week has so ably demonstrated.

Vistra opens in Mauritius

Vistra, the rapidly expanding trust and corporate services group, has today announced that it has opened a new office in Mauritius to target the growing opportunities in the region and in particular in the African and Indian markets.

Vistra believes Mauritius offers an excellent gateway for clients seeking investment structuring solutions for African markets,and will also offer significant opportunities to target inbound and outbound investments in the Indian economy.

Orangefield puts a vote of confidence in Cyprus with acquisition of Fidelico

After a torrid period for Cyprus, during which the Island has been battling hard to avoid the need for a bail-out primarily due to its exposure to Greek debt, things at least seem to be looking up a little for the territory as an offshore jurisdiction. 


In February the Russian Duma approved a double taxation agreement with Cyprus which will remove Cyprus from Russia’s “black list” of uncooperative territories. The black list was introduced following an amendment in the tax code which permitted the repatriation of dividends from foreign subsidiaries of Russian companies tax free, but not from countries which were on the black list.  As a jurisdiction which has historically done a lot of its offshore finance business with Russian entities, being on the black list had posed a significant problem for Cyprus.


The comprehensive DTA contains information exchange procedures based on the OECD model and preserves many of the beneficial tax arrangements that had previously existed under the existing Treaty between the two countries.  There is, however, one major change to the pre-existing Treaty which will not be so warmly welcomed by the finance industry and this relates to the taxation of capital gains on the sale of shares in real estate companies. The pre-existing Treaty provides for the country of residence of the selling entity to have the taxing right (e.g. Cyprus for Cypriot companies selling shares in Russian property companies), but under the new arrangements the gains should be taxable in the country where the real estate is situated.  This will not be good news for Cyprus, but there is a “grace period” of four years following the enactment of the DTA during which the new rules shall not apply.   Notwithstanding having had to concede ground on the property issue, it was still very much in the interests of Cyprus to enter in to the DTA and to secure the other Russian business which it conducts.


The DTA was signed as long ago as October 2010 and was (not surprisingly) quickly ratified in Cyprus, but the Russian Federation took some time before doing the same.  Even after the approval by the Duma, the wheels will continue to turn fairly slowly, as the DTA is expected to become effective only in January 2013.  Nevertheless, it is important for confidence in the long term prospects for the jurisdiction, and it appears that the positive message is working, with finance industry businesses continuing to invest in the Island.


Last month Orangefield, the mid-sized fund administrator and corporate services provider, acquired Fidelico, a Cypriot corporate service provider.  Orangefield Group now has approximately two hundred and fifty employees and its confidence in the future of Cyprus will be a welcome boost to the Island’s finance industry morale.