The economies of the developed Western world, with few exceptions, are projected to continue to experience very low or zero growth for the foreseeable future and this, together with the accumulation of massive debts and social commitments to their populations, have created opportunities for investment.
China, with careful planning and infrastructure development, is projected to become the world’s leading economy by 2020, and to continue a growth rate in excess of three times that of the current rate of most Western economies. China’s amazing success in the past 30 years continues to create wealth and opportunity for Chinese companies and individuals to acquire assets at very reasonable valuations on a globalised basis.
The acquiring of assets outside of one’s territory requires careful consideration and planning. In many countries and regions, including the US and Europe, there are complicated income tax and inheritance tax statutes, many of which are extremely prejudicial to non-nationals.
On many occasions non-nationals are taken by surprise, particularly when the advantages of their investments are eliminated by tax liabilities, penalties and fines.
For example, non-nationals purchasing houses and apartments in the US in their personal names are subjected to a different regime in relation to inheritance tax than nationals.
This places them at a significant disadvantage when property passes by reason of the passing away of a family member. In some cases, in addition to federal tax, certain states impose their own taxes as well.
Structuring investments, whether they are personal or corporate, should be carefully considered prior to making investments outside of one’s country. This is becoming more important, as extracting revenue from non-nationals who have no political say is becoming more and more popular among Western governments.
No income tax
The Cayman Islands, which is one of the world’s leading financial centres, is one of the few remaining free market countries that impose no form of income tax, capital gains tax or inheritance tax.
It has developed a sophisticated infrastructure that is serviced by professionals from around the world.
The Cayman Islands provides an opportunity for corporations and individuals to invest in third-party countries using Cayman Islands structures, which can reduce in a legitimate manner an investor’s exposure to some of the exorbitant tax rates and disadvantages that non-nationals are otherwise exposed to when investing in third-party countries.
Countering illegal activity
The Cayman Islands is recognised by international bodies as having one of the most effective and robust regimes in the world to counteract money laundering, and has entered into numerous tax exchange and information exchange agreements with countries around the world. It continues to update its laws and regulations to meet the continuing challenges that many countries face in counteracting money laundering and other forms of illegal activity.
It is one of the leading domiciles for investment funds, with more than 9,000 funds registered and operated from the Cayman Islands. Its insurance and banking industries have long been recognised globally as industry leaders. Most of the world’s leading banks and financial institutions have a presence in the Cayman Islands.
Permanent residence is available for high net worth individuals and there are a variety of structures, including private trust companies, that can be established for the management and protection of private wealth and worldwide investments.
These wealth management structures can protect assets from expropriation and exchange control regimes. These structures provide an opportunity to make provision for the maintenance and education of family members over generations while maintaining control over day to day investment operations.
Cayman Islands companies and other investment vehicles are able to obtain from the government of the Cayman Islands a guarantee that if income tax or other forms of taxation were to be imposed in the future, those companies and structures would not be taxed for 20 years from the date of incorporation, and that guarantee can be extended from time to time.
As China continues to demonstrate to the world that reasonable regulation, low taxation and careful planning encourage economic development, raise the standard of living for its people and produce wealth for investment, Western developed countries will continue to seek to attract investment from Chinese companies and citizens while at the same time trying to extract from a non-voting population as much as possible by way of taxation.
Sophisticated and secure
These contrasting factors should be considered by those who wish to take advantage of the opportunities that the globalised world now offers. Cayman offers a sophisticated, safe and secure jurisdiction from which to consider putting together structures to own, manage and preserve assets, and from which to make investments on a globalised basis.
Michael Alberga is the managing partner at Travers Thorp Alberga in the Cayman Islands. He can be contacted on +1 345 949 0699 or by email at firstname.lastname@example.org