Safe outposts

As international regulation brings tighter controls to offshore investing, the leading jurisdictions are setting the pace for safe sanctuary with Chinese interests well in mind, writes Paul Campbell

The wave of international regulation of finance and taxation that began with the aftershocks of Lehman Brothers’ collapse in 2008 is building into a tsunami this year, and many in the offshore world say they welcome it.

“These changes will enhance stability over time,” observes Denise Wong, a partner at Walkers in Hong Kong. International agreements on the exchange of information between tax authorities are “beneficial for the relationship between onshore and offshore territories, and help offshore jurisdictions better position themselves in the eyes of foreign investors, governments and the general public as transparent, reliable and legitimate”.

For Chinese companies and high net worth individuals, the coming changes mean a loss of some of the confidentiality they have come to expect from offshore finance centres, as well as greater oversight by the PRC tax authorities.

Guernsey was one of more than 40 jurisdictions, including neighbouring Jersey, the Isle of Man and other offshore centres such as Cayman Islands, British Virgin Islands and Cyprus that in November agreed to become early adopters of a new common reporting standard, or CRS, for automatic exchange of information on assets held by non-residents with other countries for tax purposes, which was published by the Organisation for Economic Co-operation and Development (OECD) in February.

In August 2013, China became the last Group of 20 nation to sign the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters, with all members of the group due to begin exchanging tax information by the end of 2015.

“Whilst the measure is designed to tackle global tax evasion, all affected individuals should make sure their tax affairs are up to date before the data is exchanged, so that the data match their returns and do not trigger an investigation,” says Jason Collins, a London-based partner at Pinsent Masons.