Thursday, 5 September 2013

Which offshore jurisdictions will be popular in upcoming year 2013/14?

Which offshore jurisdictions will be popular in upcoming year 2013/14?

Testimony provides imminent and data on company incorporations in offshore financial centers

 Though incorporation activity in the majority of offshore jurisdictions like Cayman, BVI, Hong Kong or Dubai was insignificant down in the second half of year 2012 when compared with the first six months of the year, company Set up in certain jurisdictions offered signs of optimism, according to Appleby, one of the world’s largest providers of offshore legal, fiduciary and administration services.

“There are signs that 2013 will be a watershed year in terms of seeing a universal return to pre-2009 activity levels across the offshore jurisdictions,” said Farah Ballands, partner and global head of fiduciary & administration services at Appleby.

Nonetheless, the on-going weakened economic conditions continued to impact the overall market in the second half of 2012. There were 37,881 new offshore company formations in the jurisdictions covered by the report, a decrease of 3.6% from the second half of 2011, and a deeper decrease of 11% on the preceding six months in 2012 from major jurisdictions.

A short time ago, Cyprus was the most fashionable and attractive offshore economy, while all settlements were made through Baltic banks. Favorable terms, easy registration and service in Russian attracted a lot of clients from Russia and the CIS countries.

 However, everything changes, and offshore jurisdictions either. Requirements related to transparency, control, anti-money laundering and counter financing of terrorism, extension of the tax information exchange practice, and other initiatives, which are implemented primarily by the OECD countries, make offshore jurisdictions closer to low-tax ones, and low-tax jurisdictions — to full-tax ones. A lot of established patterns do not bring any tangible benefits any more, or even become jeopardy for business.

 In the previous year there will be new favorites among offshore jurisdictions. Now, those are usually not traditional offshore economies such as Belize or Seychelles, Dubai but low-tax jurisdictions with elevated reliability and good reputation, i.e. European and Asian ones.

 Kazakh businessmen have found a new partner, a major Asian financial center Singapore, with reliable banks having brilliant reputation, transactions with which are not subject to withholding tax making offshore patterns unprofitable. Ukrainian businessmen have preferred Panama, Hong-Kong, Dubai and Ireland as countries potential for business. Russian businessmen are aiming at such jurisdictions as Hungary, Ireland, Denmark, Singapore, though they do not exclude the previous targets — Cyprus, Netherlands, Switzerland and BVI.

 Now new patterns are emerging, so called ‘sandwich’ patterns involving Irish, Danish, Hungarian firms, as previous ‘sandwich’ patterns like UK—BVI, Cyprus— Seychelles are becoming not extremely reliable. Speaking of trading patterns, the best economies for doing business for the CIS countries will be Singapore, Estonia, Hungary in partnership with the Netherlands and Denmark.

 Trying to avoid high taxes and tax information exchange, business is seeking new offshore or low-tax jurisdictions, beneficial offshore patterns and new banks to replace the Baltic and Cyprus banks. In the next year the offshore business will see high competition struggling for new patterns, where the winner will be the one, who will manage to create the most beneficial, reliable and legally ideal pattern.

 In this tough competition, the advantage will be enjoyed by those, who keep a watchful eye on the changes in the laws, assess the potential of new countries providing positive conditions for operations of offshore companies, create new patterns and seek advice of experts and consultants. Flexibility and inventiveness are the catchwords of the offshore business in the year to come.

Winston Wambua

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