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JERSEY DIVORCE RULING MAY HELP WEALTHY AVOID BIG PAYOUTS |
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In a landmark judgment, Jersey’s Royal Court has ruled that assets held in offshore trusts could be released to ex-spouses only if the trustees have the power do to so. This is a significant rejection of the approach taken by the English divorce courts where a series of orders have required offshore trustees to pay millions to former spouses e.g. Charman v Charman (see Offshore Investment, Issue 179).
The Jersey case (Mubarak v Mubarak), which is one of the longest running and most expensive litigation cases in English divorce law history, centred around a Jersey-based trust created by the husband and wife in 1997 to benefit themselves and their children. Mrs Mubarak pursued her husband for a GBP4.9 million lump sum payment that was first awarded by the High Court in 1999 and which was to be taken from the Jersey trust. However, the Jersey Royal Court found that it could not enforce the English court order because to do so would require the trustees to do something that was outside their assigned powers.
Divorce lawyers claim that this ruling could make it harder for ex-spouses to gain access to assets held offshore and could encourage the wealthy to shift their savings and large parts of their wealth to offshore accounts shortly before or after they marry. |
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KAZAKHSTAN CUTS CORPORATE TAX RATE |
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Kazakhstan’s President, Nursultan Nazarbayev, announced the approval of new tax and budget codes which will slash the corporate income tax rate in half over the next three years. The new rate will come into force on an annual basis, decreasing from 30% to 20%, 17.5% and 15% by 2011.
Tax relief for small and medium-sized businesses will continue and terms for transfers of losses have been increased to ten years from three years. It was also confirmed that small and medium-sized businesses will no longer have to make advanced corporate tax payments.
Furthermore, Kazakhstan is expanding its double tax treaty network with the recent addition of Slovakia and plans to sign an agreement with Luxembourg. |
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LIECHTENSTEIN IMPLEMENTS THIRD MONEY LAUNDERING DIRECTIVE |
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The European Union’s Third Money Laundering Directive and recommendations of the International Monetary Fund will be adopted into Liechtenstein national law by way of a revision of the Due Diligence Act. The Due Diligence Act (the Act) originally entered into force in 2004 as part of implementation of the Second EU Money Laundering Directive.
Under the new revisions, the government plans to broaden due diligence obligations to include not just the core area of the financial sector but also professions such as statutory auditors, accountants, and tax consultants. The scope of the Act will also be expanded to include relevant activities of natural and legal persons who, within their enterprises, are responsible for the formation of companies, exercise the function of general manager of a company, or make a domicile available.
The scope of due diligence continues to include banks and investment firms, investment undertakings and life insurances, the post office and exchange offices, however, the law will now extend to casinos, real estate brokers, auditors, auditing companies, professional trustees, and lawyers, to the extent that they engage in financial transactions. Due diligence also covers persons and companies dealing in goods, if payment is made in cash and the amount exceeds EUR15,500.
In relation to the reporting requirement in the case of suspicion of money laundering and terrorist financing, the government will adopt international standards. Therefore, a reporting requirement under the Act will apply not only in the case of existing business relationships and completed transactions, but also in the case of attempted transactions. |
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KUWAIT INTRODUCES TAX CUTS FOR FOREIGN BUSINESSES & INCREASES INVESTMENT IN JAPAN |
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The Finance Ministry of Kuwait has enacted a bill that ensures foreign businesses will only be subjected to a 15% flat tax rate on profits. The income tax bill, passed in December 2007 by a 37-17 parliamentary vote, will amend the 1955 tax law which fixed corporate tax rates at their current level of 55%. It is hoped that this move will enhance the country’s investment opportunities, diversify its economy and decrease reliance on oil revenue. The tiny Gulf state is currently largely dependent on oil; 95% of Kuwait’s revenues come from this sector.
Recently it has become clear that Kuwait is running the risk of being left behind the other oil-dependent Middle Eastern states. Official figures show that Kuwait attracted just USD300 million in 2006, whereas the UAE had inflows of over USD18 billion. It is predicted that, as a result of the reforms, close to USD100 billion will be invested in Kuwait over the next ten years.
Kuwait is also increasing investments across asset classes in Asia, with a focus on Japan, China and India. The Kuwait Investment Authority (KIA) has announced that it will be looking at stocks, bonds and real estate in Japan, and all sectors in India and China. Its plans to increase its investment in Japan could take its total commitment to USD50 billion and highlights an investment shift away from the US and the US dollar; in May 2007 Kuwait removed its currency link with the US dollar.
Kuwait and Japan have also agreed in principle to an end or reduction of double taxation on interest, dividends, capital gains and investment income. |
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MALTA & AMERICA SIGN DOUBLE TAXATION TREATY |
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In August 2008, America and Malta signed a new income tax treaty providing for reduced withholding rates on cross-border dividend payments with the elimination of withholding on cross-border dividend payments to pension funds. The treaty provides for withholding at a 10% rate on interest, royalties, and other income. In addition, there is a provision for the exchange of information between the respective authorities to facilitate the administration of each country’s tax laws, thus helping to deter fraud and other abuse.
American investment in Malta is increasing and the agreement has been hailed by the Maltese government as a positive instrument in encouraging American businesses to Malta. In the past two years, Malta has attracted over USD3 billion worth of direct foreign investment and last year exports to the US amounted to EUR246 million with thousands of Maltese already working in American firms. The treaty will also benefit the large Maltese communities living in other countries, particularly the EU and Australia. |
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SAUDI OPENS STOCK MARKET TO FOREIGN INVESTORS |
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The Capital Markets Authority (CMA), which regulates and develops the Saudi Arabian Capital Market, has announced that, for the first time, it will permit foreign investors to buy indirectly shares listed on its stock market (Tadawul).
Non-residents will now be allowed to trade in local stocks by entering into swap agreements with “authorised persons” in the kingdom (i.e. local entities licensed by the CMA). The swap agreements must be fully financed and covered at the time of purchase and are valid for a maximum of four years. However, legal ownership of the shares will reside with the Saudi intermediary. It has not been confirmed whether there will be restrictions on individual shares or the percentage of foreign ownership.
The Tadawul has been one of the most restricted markets in the region for foreign investors, only giving foreigners access to the bourse through the mutual funds sector. |
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UK NUMBER ONE FOR INDIAN OFFSHORE ACQUISITIONS |
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The UK has emerged as the top destination for overseas acquisitions by Indian companies in the first half of 2008, according to a report by Grant Thornton. Acquisitions totalled GBP1.52 billion, compared with GBP930 million in the US and GBP561 million in the Netherlands, with the sale of Jaguar and Rover to Tata Motors helping to boost the value. However, while the UK tops the list in terms of deal value, the US is the number one targeted nation in terms of number of companies bought by Indian entities, purchasing 41 American businesses in the first half of 2008 compared with 20 in the UK.
Following a period of rapid economic growth, Indian firms are buying more foreign companies than ever. In 1998, there were a total of 15 offshore companies purchased by Indian companies, however this year there have already been 161 acquisitions. |
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