The TIEA between China and Guernsey signed on 27 October 2010 together with MOU has been effective from 17 August 2011 and enforces from 1 January 2012.
Globally, there are more than 50 jurisdictions with a tag as International Finance Centre and is frequently used by tax planners. Guernsey, being an unfamiliar jurisdiction and IFC to Chinese, but caught attention by China State Administration of Taxation (SAT), could really mean some particulars that Guernsey could offer to wealth management and tax planning by Chinese. Early in 2007, uernsey a leading centre for fiduciary expertise has been pointed out in a magazine published by Guernsey Finance, frankly, Trust Fiduciary Service in Guernsey has a reputable name. In fact, the total ?97 billion holdings, total value of ?274 billion in fund, 33 licensed banks, 154 fiduciary licensees and 748 captives cells on this island with 62 sq.km in land size and 60,000 for population could shock everyone.
Anything Unique to Guernsey?
Guernsey is an independent English speaking, low tax jurisdiction. Whilst Guernsey forms part of the British Isles, it is not part of the United Kingdom and has its own legislation, judicial and tax system. Guernsey has solid trust heritage, it can be traced to the 18th century and its English common law sources almost as far back as the 12th century. Guernsey trusts have statutory protection under local trust laws. The Trusts (Guernsey) Law 2007, which came into effect from 17 March 2008, supersedes trust legislation enacted in 1989 and becomes currently effective legislation on Guernsey Trust Fiduciary Service.
Compared to trusts in BVI and Cayman Islands, such law specified rules promote non-charity purpose trust and remove limits on the length of a trust duration. In addition, the Trusts (Guernsey) Law 2007 clarifies the circumstances under which information has to be given to Beneficiaries and abolishes liability of Directors of Corporate Trustees, sets a limit at 18 years on action against a trustee, and rules that any order, judgment or finding of law or fact of the Court in an action against a trustee founded on breach of trust is binding on all beneficiaries of the trust equal to a trustee. All above rules maximize the protection of trustees in exercising and realizing trust purpose with minimum disturb.
Unlike other jurisdictions, Guernsey has enacted legislation specifically to promote the use of non-charitable purpose trust. When using offshore structures to assist in tax, estate planning or company restructuring, it may be of considerable assistance to create a trust in which no company, or individual, has a beneficial interest. Further, the industry highly skilled workforce is complemented by a network of sophisticated legal, accounting, tax and actuarial advisers, making it an ideal home for Purpose Trusts.
As to Trust?subject to a few minor exceptions, there is no taxation charged by the Taxation authorities in Guernsey on income or capital gains provided the settlor and the beneficiaries are not resident of Guernsey. There are no restrictions on the number of trustees of Guernsey trusts. Trusts may be imported or exported with minimal formality as there are no public filing requirements for trust deeds in Guernsey.
Apart from the characters listed above, the creative use of cell companies in Guernsey is a must-read concept as globally, Guernsey pioneered the Cell Company (CC) concept. Following from the introduction of the Protected Cell Company (PCC), the CC concept has been further enhanced by the innovation of the Incorporated Cell Company (ICC).
Other than undertaking licensed activities, there is no restriction on what a CC can be legitimately sued for. This has opened up the full scope of what CCs can achieve. PCCs and ICCs, whilst similar, have structural difference and one sort of CC may be more suitable than another depending upon the circumstances. The benefits may include but not limited to?
Alternative to traditional group holding structure:
An ICC can achieve economies of scale by providing a common administration hub and framework. Cells can be integrated or migrated offering greater flexibility.
Private trust companies and family office situations:
Private Trust Companies (PTCs) allows family or professional advisors to participate on the PTC board can be extended further through cellular companies. Assets can be segregated according to risk or ownership participation, assisting in the management and enjoyment of the required assets.
Family governance and succession planning:
Different assets and beneficial interests can be apportioned between cells to help segregate entitlements whilst preserving the advantages of the pooled cellular framework.
Multi-purpose vehicle:
For an entrepreneur with diverse affairs, the cellular multi-purpose vehicle approach offers a unique administrative hub with ultimate flexibility.
Private investment funds:
Holding separate family investments in different cells but as part of the same corporate structure will allow investment managers greater freedom in managing their mandate, and in particular with regard to risk.
Real estate ownership:
Diverse real estate ownership through cells allow easier risk, financial and estate management.
Intellectual property and royalty ownership:
Income and royalties can be segregated in different contracts. Franchises or IPR leases can be undertaken from different cells.
Obviously, Guernsey Trust together with its pioneering CC concept could offer a wide range of fiduciary service to clients, and could be more suitable to Chinese for family governance.
