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Offshore trusts and trust companies
Foreign trusts have been a popular tax planning tool all over the world for many years. A lot of people from United States, Canada and Europe establish them in particular in the Caribbean area and in Liechtenstein and Gibraltar, but in recent years it has become quite popular to establish trusts also in the Pacific-Asian regions (Cook Islands, Nauru, Marshall Islands) or in other jurisdictions.
Their popularity is based on the fact that assets of a certain type (real property, bank account, ships, aircraft, shares, yields, ownership interests in companies, family assets, etc.) can be transferred to a foreign trust without a taxation obligation, whereby it is possible to achieve tax savings and maximum protection of the assets. In certain cases, when the assets are burdened by a tax obligation, the transfer to a trust of the assets may be subject to a lower taxation rate than the direct sale of the assets.
In the case of the United States it was possible, before the adoption of the Tax Reform Act of 1976, to accumulate incomes from foreign resources, which arose in connection with the assets deposited in a trust, without its being subject to taxation in the United States. These trusts were usually established in tax heavens and the income resulting from the administered assets were not subject to any income tax in final consequences. Foreign trusts could accumulate incomes from foreign resources without any tax burden until these incomes have been distributed in favour of trust beneficiaries. The beneficiaries were mostly the United States citizens.
For the above mentioned reasons thus the tax position of foreign trust beneficiaries was much more advantageous than the position of domestic trusts established in non-tax-liberal jurisdictions ( U.S.A., Canada, England, etc.). The importance of international financial centres is proven by the fact that 2/3 of the existing liquid world capital is found in offshore jurisdictions, and 1/3 of the world capital is deposited or administered through trusts. International financial centres are more and more used by multinational companies, professional providers of financial services, individual investors as well as by entrepreneurs from all over the world who are searching for a safe place for their profits, savings and assets. Last but not least they are searched for also by persons with higher incomes who want to protect their assets and practise tax planning.
At present it is Asset Protection Trusts that are founded most often. This type of trust is followed by Charitable Trusts serving for public benefit purposes, which are also founded quite often.
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>> A specific purpose offshore trusts
- Belize off-shore trust. With its English common law background, Belize has proven fertile soil for the development of offshore Trust.
- Nevis International Exempt Trust. The use of international trusts has become increasingly imaginative and prolific and remains an integral element in estate planning and asset protection. The Ordinance governs the establishment and operation of international trusts. When combined with an NBCO, users can create powerful asset protection vehicles. Under the Nevis International Exempt Trust Ordinance, the international trust can be created with only one trustee and the settlor or trustee of the trust may also be named as a beneficiary.
- Cook Island asset protection Trust. the Cook Islands enacted the world's first asset protection trust law A key feature of the Cook Islands International Trusts Act (1984) is that the settlor of a trust may establish a spendthrift trust in which the settlor is a beneficiary. In the United States and England, a common law doctrine developed to prevent trust settlors from enjoying the benefits of a spendthrift trust. Cook Islands as preferred situs for BVI Unit Trusts
- Dominica Trust exempt insurance: Dominica also has some of the newest offshore legislation in the world and is technologically more advanced than many other jurisdictions. Exemption from all local taxes, duties and other similar charges.