How to Open a New Franchise in Dubai

Franchising is a legitimate business method that involves the licensing of trademarks and methods of doing business, or an exclusive right, for example to sell branded merchandise. Franchising (from the French for honesty or freedom) is a method of doing business wherein a "franchisor" authorizes proven methods of doing business to a "franchisee" for a fee and a percentage of sales or profits. In the future the Dubai economy will more likely be filled by innovative and creative franchises which seek to capitalize on their market lead and intellectual property advantage. Franchises fill a market need and therefore, are the fastest growing way of doing business.

 

Dubai franchise market has witnessed supremacy of few big retail conglomerates having multi brands in their portfolio and pre-dominantly the Master Franchisee arrangements but now the trend for small franchisees and sub-franchising is picking up. Dubai has a pro-business environment , whose investor-friendly policies attest to if one considers its infrastructure, corporate taxes, transfer of profits to home countries, entity ownership and availability of large pool of human resources. Businesses located in the multiple free zones enjoy tax exemption. The franchise sector in Dubai gets generous support from the government. The state is promoting the franchise sector to induce growth and development of the small and medium size businesses. Government backed Mohammed Bin Rashid Establishment for Young Business Leaders provides business training to entrepreneurs and also encourages women entrepreneurs. Further, the government established the UAE Franchise Association in 2004.

The Dubai Islamic Bank (DIB) has a program for aid of young UAE citizens under which it extends to them for buying franchise business. Setting up this project need the following; • Business plan business, plan that includes your business overview, competitor review, market trend in the particular service, your core competency, your financial projections, marketing and distribution plans and your funding alternatives. • Franchise Arrangement, an arrangement whereby as a franchisor you license the franchisee, in exchange for a fee, to exploit the system developed by you if acting in the capacity of a franchisor. Generally a package including the intellectual property rights, trade mark logos, patents or designs, trade-secrets and Copy-righted protect your IP assets by Offshore Company and register in UAE Ministry of economic. Register your franchise agreement before a UAE court. You need a reputable Firm to complete this project. Dubai remains the preferred base for franchised operations in the region, given its tax status, the comparative stability of its legal and regulatory systems and it openness to foreign investment, though Most countries in the Middle East region do not have franchise- specific legislation The franchisee market is dominated by a small number of players who take multiple Brands franchise known as Franchise Conglomerates ,with some having as many as 50-55 brands in their portfolio.

Middle East's strategic location has a key role in expanding any business around the world. Franchisors seeking new markets favor the Middle East as a franchising destination as it assures easy accessibility and communication with the surrounding areas. The most moderate estimate of the franchise industry in the Middle East and North Africa put it at $ 30 billion today. It also puts the annual growth of Middle East franchising sector at 27 per cent. This frantic pace provides huge opportunities for franchisors to bring their brands to the region, as this trend is set to continue for years to come, powered by massive consumption appetite, economic growth and record oil prices. In the last decade many Middle Eastern businesses proved to be very successful in the rest of the world with their efficient style, cost management and competitive distinguished products, especially in the retail, food and catering sectors. Successful franchises in Dubai. There are many successful franchises in Dubai of which prominent examples include:

Heritage for Henna - Beauty Franchise Heritage for Henna started in Jumeirah Beach Hotel, Dubai. It was a huge success with foreign visitors and confirmed its owner’s belief that henna decoration has a massive market outside of this region. To maintain quality, Heritage for Henna sets up its own farms in carefully selected regions, where top quality henna shrubs are cultivated. In addition, considerable investment is made to select and train the most talented henna artists. Heritage for Henna provides a wide variety of drawings with traditional, classical, contemporary and modern designs. Unlike other projects that required large space and high rent, setting up a henna salon required only the minimum of 4 square meters. Heritage for Henna provides its franchise partners with a full range of support services that will enable them to manage their projects with a high level of efficiency and profitability.

Furthermore, it offers assistance with the location selection, rental negotiations and installation of decor. At the same time, staff will be selected and trained to ensure that they meet "Heritage for Henna's" high creative and professional standards.

Foot Solutions Health & Wellness Franchise - This franchise provides foot care solutions and use high-tech computer foot scanning equipment to produce a complete line of custom shoe inserts and orthotics. Malridge Master Distributor - Photographic Engraving Franchise - Malridge has developed a unique process for the customized engraving of photographs and graphics on glass surface, while, producing the highest finish and definition. They do photo engraving and personalized engraving on all types of glassware, from crystal awards and trophies to tableware. Apart from the regulars like McDonalds, Burger King and KFC, the 3 biggest growing franchise brands internationally, there are many new casual dining, fast food franchising ventures which seem to be showing interest in the Dubai market.
Egypt's Integrated Food Franchising is promoting its Pizza Conez product, a revolutionary new take on take away. The product is a pizza cone similar to an ice cream cone and it takes five minutes to prepare. The unique selling proposition of this product is that it is portable and has mobility. The fast food products from the US, for example, Pizza Hut and Dominoes have entered the Dubai market but Pizza Conez brand is about authentic Italian ingredients.

London Dairy - Is another food brand looking to increase its presence in the market. London Dairy is a complete Dessert Destination that offers the entire exclusive range of London Dairy Premium Ice Creams, dessert sundaes, pastries, cakes and single origin coffee

 Subway
Subway franchise business is pushing the fast food market to continue the globalization of its company, and there are no plans on stopping in Dubai, with multiple stores opening in Kuwait, Saudi Arabia, and Qatar. There are 60 franchises already present throughout Dubai, and this means tough competition for prospective franchisees in Dubai. Emerging markets are increasingly more important as opportunities for retail franchising in the West diminish because of market saturation and increased competition. Industries in which franchising is mature, offer fewer profits.

For example, fast food, retailing, hotels and other service based industries. Emerging markets are unsaturated, poised for growth and there is increased demand for products and services that embody international standards and quality. There are thousands of different business franchises, and there will be more than one and perhaps many in your chosen business area. Once you have made the decision to buy a franchise business it is difficult to turn back.

A wrong decision takes a few seconds to make, and for some, a lifetime to put right. So do your research. Look at the alternatives. Ask existing franchisees. Ask customers. Ask bank managers. Read the franchise trade magazines, newspapers, websites. Attend franchising exhibitions. Seek the advice and opinions of friends or Business Consultant. Do some local market research to gauge demand for the products and services, to test the reputation of the franchising companies, and to test their claims about pricing and any other relevant business claims or information you've been given. Become an expert before you sign the papers - don't wait to learn about the 'unknowns' after signing the contract and parting with your cash.

These days information is easy to find - don't be shy - look for it - ask and satisfy all of your concerns before you make your decision.

Regards

Winston Wambua

For more information please contact me on

Mobile +971553350517

Email: winstonk@live.com

Skype: Winston.wambua

Why Dubai is still unique for Business

Dubai has emerged as a leading regional commercial hub with state-of-the-art infrastructure and a world class business environment. It has now become the logical place to position your business in the Middle East, providing you with a unique and comprehensive value-added platform.

With its strategic location, 0% corporate and personal income tax and a consistently strong economic outlook, Dubai is the ideal base for multinationals, SMEs and start ups targeting markets in Central Asia, Middle East, Africa, Asian Subcontinent and Eastern Mediterranean with a population of over 2 billion people and a combined GDP of US$ 6.7 trillion. With a friendly beach front international and multi cultural environment and tax-free living and working it’s hard to find a more perfect setting to start a new business or set up a branch office.

Dubai is still unique in many respects: a major cosmopolitan city located in a country that does not levy direct taxes of any kind, has no VAT, and only a 5% customs duty. It is an offshore jurisdiction without the offshore stigma.

Operating a business in the UAE

Under UAE federal law foreign businesses have three main forms to choose from to conduct business in the UAE:

¨ As a local limited liability company;

¨ As a branch of a foreign company;

¨ As a representative office of a foreign company.

Alternatively, six out of seven Emirates (the exception being Abu Dhabi) offer the possibility to conduct business out of a freezone and two Emirates – Dubai and Ras al Khaimah – offer an International Business Company regime.

Free zones

If there is no need to sell goods directly to the local market then setting up in a freezone is often more attractive than setting up as a local company, which requires 51 per cent local ownership. The practice is to allow the provision of services through a freezone entity to the local market as long as a significant proportion of the turnover is realised abroad.

The main advantages of setting up in one of the freezones in the UAE are as follows:

• 100 per cent foreign ownership is allowed;

• A guarantee for 15-50 years against the  future imposition of corporation tax.

• The import of goods duty free provided the goods are not supplied to the local market;
 
• Streamlined procedures: all formalities are typically dealt with through the freezone  authorities instead of the various government departments;

• No restrictions on hiring expatriates.

The freezones each have their own freezone authority. These are profit-making entities. Their main source of income is derived from renting office space, collecting license fees, and providing services to the companies operating in the freezone. In all freezones financial statements need to be submitted to the freezone authorities annually.

The UAE is particularly well positioned to cope with the increasing pressure from onshore tax authorities to provide real economic substance. The UAE freezones offer a very easy and inexpensive way to obtain office space, locate a server, and hire staff:

International Business Companies (IBCs)

Dubai, through its Jebel Ali Freezone, and Ras al Khaimah, through the RAKIA freezone and the RAK Free Trade Zone, both offer an IBC regime. These companies are ideal for holding investments such as shares in local or freezone companies, UAE real estate, or for trading activities outside the UAE. IBCs cannot rent office space or apply for staff visas, and they are not allowed to trade with parties inside the UAE.

All in all, Dubai offers something that to many will sound too good to be true: an unrivalled lifestyle in a business-friendly, no-tax environment, with a strategic location and access to all the services that you would expect to be available in a world-class business Centre.

Winston Wambua

International Offshore Specialist

For more information please contact me on

Email: winstonk@live.com

Skype: Winston.Wambua

Perfect Opportunity on franchising McDonald's

Perfect Opportunity on franchising McDonald's
What are the requirements to open a McDonald's franchise? If you qualify to open a McDonald's franchise and
are willing to invest your time and money it can be a very financially rewarding and life-changing experience.
Facts  about the McDonald's Franchise System
McDonald's has been a franchising company since 1955 and has relied on its franchisees to play a major role in the system's success. McDonald's remains committed to franchising as a predominant way of doing business. Today, the McDonald's franchise is the leading global foodservice retailer with more than 30,000 restaurants, located in more than 100 countries.

If you are considering buying a McDonald's franchise you will most likely buy an existing franchise restaurant. Most franchisees enter the system by purchasing an existing restaurant, either from McDonald's or from a McDonald's franchisee. A very small number of new operators enter the system by purchasing a new restaurant.

Financial Requirements and Start-Up Costs to Open a McDonald's

An initial down payment is required when you purchase a new restaurant (40% of the total cost) or an existing restaurant (25% of the total cost). The down payment must come from non-borrowed personal resources, which include cash on hand; securities, bonds, and debentures; vested profit sharing (net of taxes); and business or real estate equity, exclusive of your personal residence.
Since the total cost varies from restaurant to restaurant, the minimum amount for a down payment will vary. Generally, you need a minimum of $300,000 of non-borrowed personal resources to be considered to open a McDonald's franchise. Individuals with additional funds may be better prepared for additional or multi-restaurant opportunities which McDonald's encourages.
Other Requirements to Open a McDonald's

•Significant business experience - Individuals who have demonstrated successful ownership or management of multiple business units or have managed multiple departments.

•Rapid growth - Individuals who possess the capability to grow rapidly with McDonald's.

•Business plan - The ability to develop and execute a business plan.

•Manage finances well - Ability to manage finances including a thorough understanding
of business financial statements.

•Good management skills - Commitment to personally manage the day-to-day operations of the restaurant business.

•Training - Willingness to complete a comprehensive world class training program and   become proficient in all aspects of operating a McDonald's restaurant business.

•Exceptional customer experience - The capability to effectively manage an organization that recruits, trains, and motivates restaurant employees who deliver an exceptional customer experience.

•Good credit history - An acceptable credit history

Ongoing Fees to McDonald's
During the term of the franchise, you pay McDonald’s the following fees:

•Service fee- A monthly fee based upon the restaurant’s sales performance (currently a service fee of 4.0% of monthly sales).

•Rent - A monthly base rent or percentage rent that is a percentage of monthly sales. McDonald's usually owns the property and also acts as the landlord.

(Source: McDonald's.com) Acquiring a McDonalds Franchise

Once you get through the initial process of being approved for a restaurant franchise and secure your financing, you will sign a lengthy contract with the franchisor. Review the contract with a fine tooth comb before signing on the dotted line. Most importantly, know what can happen if the franchise fails. Are you locked into paying the franchisor a set amount of money each month or year, regardless of success? Who owns the equipment? Will you get any of your investment money back? Don’t assume that because it is a chain it will be an instant success. It still takes hard work and patience.

Winston Wambua

International Offshore Specialist
 
For more information please contact me on

Mobile +971553350517

Email: winstonk@live.com
 
Skype: Winston.Wambua

Super rich hold $32 trillion in offshore tax havens:new study

Rich individuals and their families have as much as $32 trillion of hidden financial assets in offshore tax havens, representing up to $280 billion in lost income tax revenues, according to research published on Sunday.
The study estimating the extent of global private financial wealth held in offshore accounts – excluding non-financial assets such as real estate, gold, yachts and racehorses – puts the sum at between $21 and $32 trillion.
The research was carried out for pressure group Tax Justice Network, which campaigns against tax havens, by James Henry, former chief economist at consultants McKinsey & Co.
He used data from the World Bank, International Monetary Fund, United Nations and central banks.
The report also highlights the impact on the balance sheets of 139 developing countries of money held in tax havens by private elites, putting wealth beyond the reach of local tax authorities.

The research estimates that since the 1970s, the richest citizens of these 139 countries had amassed $7.3 to $9.3 trillion of “unrecorded offshore wealth” by 2010.
Private wealth held offshore represents “a huge black hole in the world economy,” Henry said in a
statement.

Winston Wambua

International Offshore Specialist
 
For more information please contact me on

Mobile +971553350517

Email: winstonk@live.com
 
Skype: Winston.Wambua

The inbound guide summary to US corporate tax

The inbound guide summary to US corporate tax

Foreign investment plays an important role in the US economy. According to the latest data from United Nations Conference on Trade and Development, the United States had more foreign direct investment from 2006 through 2009 than any other country in the world. Majority owned US affiliates of foreign parents produced $670 billion in goods and services, accounting for nearly 6% of total US private output in 2008. In addition, foreign investors in the US invested $188 billion in capital expenditures and $40.5 billion in research and development. Despite the economic downturn, which resulted in a 50% drop in foreign investment in the United States between 2007 and 2009, foreign investment activity in the United States remains strong and has increased by 49% from the economic crisis level it reached in 2009.1 Indeed President Obama affirmed the value of investments by foreign-domiciled companies to the US economy and made a commitment to treat all investors in a fair and equitable manner so that the United States remains the “destination of choice for investors around the world.” 2
As the world’s largest economy, the United States provides abundant opportunities in which to operate, an innovative and productive workforce, excellent infrastructure and lucrative consumer and business-to-business markets. It also delivers a tax code that covers more than 17,000 pages — not to mention common law precedent. Although not all provisions necessarily apply to inbound investors, you must navigate your way through sometimes vague (and often confusing) tax regimes at the national, state and local levels to maximize the possibilities and manage the risks. Missteps and missing information can create undue risk and affect the ultimate success of your cross-border operations. I am here to help.

We know that every business has a unique set of circumstances and attributes that trigger specific tax obligations. That said, there are certain overarching regulations, policies and approaches that can help make the process of doing business in the US smoother. This is designed to provide you with a ready guide to some of that information. However, we urge you to consult with a qualified and trusted advisor before you make any significant business or tax-related decisions to more fully understand what impact the US tax code and financial landscape may have on your corporate entity. Structuring your US business entity and activities;

There are number of ways in which your inbound company can structure business activities in the US, depending upon your business model. What is important is choosing a structure that is compatible with the way the group anticipates operating in the US. Just remember not to do anything purely for tax reasons. That said, there will be tax consequences to your choices, so be sure to consider those in advance as well.

US tax authorities assume that a business purpose exists for so-called “greenfield” opportunities — opportunities that are largely unexplored and undefined. Based on that premise, investors are allowed to arrange their operations as they see fit. Initial transactions in a Greenfield investment are presumed to be for some business purpose and not solely for the purpose of tax avoidance.

Forms of enterprise and their tax implications

How you structure your long-term operations in the US effectively defines how you will be taxed, so the choice can have a potentially significant impact on profitability. US Treasury regulations generally allow many business entities to choose classification as a corporation, partnership or entity disregarded from its parent. There are flow-through entities, unincorporated branches and Limited Liability Companies (LLCs). There are distributor and manufacturer representatives, joint ventures and partnerships. Where will the head office be located and what activities will go on in the US? Each choice has its own implications, complications and criteria. The various ownership structures also have financing, legal liability and growth flexibility issues. So given several viable structures that could work for your business, how do you decide which one to choose? Typical business models include a representative office, branch office or wholly owned subsidiary

Representative office.

A representative office is the easiest option for a company starting to do business in the US. You do not have to incorporate a separate legal entity and you will not trigger a corporate income tax, 5 as long as the activities are limited in nature. That would include such ancillary and support activities as advertising and promotional activities, market research and the purchase of goods on behalf of the headquarters office. A representative office is most appropriate in the very early stages of your corporation’s business presence in the US. Then, you may want or need to transition to a branch or subsidiary structure as your business in the US grow. You and your advisor should periodically review the suitability of your structure and its activities to make sure that you are not inadvertently triggering a taxable presence in the US by exceeding the permissible activities. Branch
A branch structure is similar in nature to a representative office in that it does not require incorporating a separate legal entity. The benefit of having a branch rather than a representative office is that the range of activities that can be performed by a US branch office can be substantially increased. That will, however, constitute a taxable presence in the US, which means that you must annually account for and file US corporate income tax on the branch’s profits. Generally, the branch is subject to a corporate tax rate of up to 35%6 in the US. In addition, any remittance of post-tax profits by the branch to the head office is subject to branch remittance tax of 30%. However, US tax treaties typically reduce the branch remittance tax.

A branch structure is suitable when you anticipate incurring losses in the near future or repatriating profits on a current basis. The US branch’s trading losses can be offset against the home office’s trading profits. In a reverse situation, where the branch is profitable, the parent company may also be subject to tax in the home country on the US profits. Keep in mind that an inbound corporation considering a branch structure may expose a disproportionate share of the parent company’s profits to a higher US tax rate since attributing the profits to branch activities requires arm’s length consideration. There is also a risk that intangibles such as intellectual property and brand identity may build up in the US over time. That could give rise to larger US tax liabilities in the longer term as the group becomes more successful in the US marketplace because these intangibles would necessitate attributing more of the profits to the branch.

Subsidiary

In a subsidiary structure the inbound company incorporates a wholly owned subsidiary in the US, making it a separate legal identity distinct from the parent company. This can be used to cap any risks that may be inherent in a branch option. The profits earned by the US subsidiary would be liable to tax in the US at up to 35%7. Further, the repatriation of profits (dividend distribution) by the US subsidiary to the parent is subject to a withholding tax of 30%. However, US tax treaties typically reduce the dividend withholding tax. The chart on the following page provides a high-level look at some of the considerations specific to each of the three typical models.

Tax treaties, the US has income tax treaties with more than 60 foreign countries, providing substantial benefits by reducing or eliminating the 30% withholding tax on US source FDAP income. In addition, US business profits can only be taxed to the extent that the foreign person’s involvement in the United States rises to the level of a permanent establishment. Generally, a PE does not include activity that is considered auxiliary and preparatory. The threshold for a PE is higher than the threshold of a US trade or business, and an entity that might otherwise be subject to US net tax on ECI can be exempted under an applicable treaty from paying federal income tax if its level of activity does not rise to the threshold of a PE. The exemption from paying tax does not exempt the foreign person from otherwise applicable filing obligations (e.g., an annual income tax return).
What may come as a surprise to treaty countries is that under the US Constitution, treaties and laws passed by Congress are the “supreme Law of the Land” and have equal authority. That means US statutory guidance requires only that “due regard” be given to treaties. In addition, US case law generally supports the idea that precedence be given to the most recently enacted authority. Thus, it is possible for Congress to enact laws overriding existing US treaty commitments. Even when the treaties are upheld, they do not govern taxation by the individual states.

To combat potential abuse of the treaty system, the US tax authorities have tried to limit the extension of treaty benefits to residents of a treaty country that satisfy three conditions:

1. Economic ownership — the resident must economically or beneficially own the income.
2. Tax ownership — the resident must be subject to tax on the income imposed by the treaty country as a resident of that  country. An example of rules limiting treaty benefits due to tax ownership are the regulations regarding hybrid entities under IRC Section 894.
3. Economic nexus — the resident must have a sufficient economic nexus with the treaty country to establish that it is not merely using the country to obtain a tax advantage. Two restrictions on nexus are the Limitation on Benefits (LOB) articles, which define additional qualifications beyond mere residence that must be met, and triangular provisions, which deny or reduce benefits for certain income earned through a third-country PE. US tax authorities limit access to preferential treaty rates to entities that have economic ownership of the income eligible for treaty benefits.

Access to treaty benefits may be limited to the extent that the entity subject to tax does not have an economic nexus with the jurisdiction that is granting treaty benefits. Most US treaties have an LOB article that prevents non-residents from obtaining treaty benefits by establishing intermediary entities in treaty countries.

Controversy, misconceptions and potential trouble spots, Transfer pricing controversy
One consequence of this expanding global marketplace is the increasing potential for double taxation – the result of two or more taxing authorities attempting to tax the same profits because they do not agree with your transfer pricing. Experience tells us that the best plan is to assume controversy will happen and be prepared with a strategy for managing. Among the options are Advance Pricing Agreements (APAs), Competent Authority relief and arbitration.

Accidental expatriates, Employees living and working outside their home country are typically referred to as expatriates. That arrangement would generally involve your human resource department and include a predetermined contract that takes into account the tax and other business ramifications for both the individual and the company, at home and abroad. But what happens when the employee or contractor is sent to the US for only a short-term assignment or immediate business requirement without following formal procedures? Depending upon some clear — and less clear — factors and circumstances, such as length of stay or amount of compensation earned while in the US, you may have created an accidental expatriate.

The activities of these individuals can carry significant risk for you and your employees, primarily:

• Non-compliance with US immigration, tax and social security laws
• Double taxation of business profits by the home country and the US
• Assessment of penalties
• Failure to properly budget and allocate costs
• Employee exposure to taxation related to short-term international business travel

Keep in mind that although our handbook is specific to inbound companies doing business in the US, accidental expatriates can arise in other countries as well. The best approach is not to take any overseas business travel lightly, and to make sure that your local and US human resource professionals are involved in any contract and placement processes.

Treaties and state tax liability foreign investors in the United States should also keep in mind that availability of treaty benefits to offset the federal taxation of income may not necessarily apply to mitigating state income tax. As a general rule, states are not a party to tax treaties between the United States and foreign nations. In fact, some states, such as California, do not recognize the PE article of the US income tax treaties and do not contain any other rules that would exempt income generated by activities in their state from state income tax. For example, assume a Foreign Corporation (FC) sells goods on an arm’s length basis to its wholly owned US subsidiary, a California corporation, (US Sub) on consignment. US Sub then sells the goods on its own behalf to independent retailers and wholesalers throughout the United States. FC has no employees in the US and conducts no other business in the US. Pursuant to the treaty, FC’s US activities may not rise to the level of a permanent establishment, so FC may not be subject to US federal income tax. However, the apportioned net California source income generated by the activities would be subject to California income tax. That means FC would need to file in California to report its worldwide income and apportion that to California based on that state’s tax laws.

Winston Wambua

International Offshore Specialist
 
For more information please contact me on

Mobile +971553350517

Email: winstonk@live.com
 
Skype: Winston.Wambua

 

Guernsey has signed a Double Taxation Arrangement (DTA) with Hong Kong.

It means that Guernsey has now signed 'full' DTAs with seven jurisdictions. In addition to this DTA with Hong Kong, Guernsey has had a DTA with the UK for many years and has signed
DTAs with Malta, in 2012, and earlier this year with the Isle of Man, Jersey, Qatar and Singapore.
The DTA with Hong Kong was signed for Guernsey by the Chief Minister, Peter Harwood, who commented that this was a further important step in growing the business links between Guernsey and the Far East.
The Chief Minister said: "I am delighted to further strengthen our relationship with Hong Kong. The signing of this DTA, combined with the visit of the Chinese Ambassador to the UK to Guernsey this week, recognises the importance attached to Guernsey's business relationship with the Far East. The agreement is expected to bring significant commercial benefits to our finance sector, resolving issues relating to potential double taxation, and leading to greater opportunities for new business."
Guernsey's finance industry has worked closely with its counterparts in China and Hong Kong since 2006, particularly since the establishment of a Guernsey Finance office in Shanghai at the end of 2007. Guernsey signed a Tax Information Exchange Agreement (TIEA) with China in 2010.
In 2011, Guernsey businesses were approved to list on the Hong Kong Stock Exchange (HKEx) and Guernsey's then Commerce & Employment Minister was part of a delegation that visited Hong Kong. Last year Guernsey's finance industry was heavily represented in Hong Kong at conferences such as Super Return Asia and STEP Asia. Today, a number of Guernsey-based firms have offices in Hong Kong, including law firms Mourant Ozannes and Ogier, fund administrator International Administration Group (IAG) and fiduciary services providers Louvre, Nerine and Newhaven.
Fiona Le Poidevin, Chief Executive of Guernsey Finance - the promotional agency for the Island's finance industry, said: "The DTA between Guernsey and Hong Kong further deepens the relationship and offers significant potential for expanding financial services business between the two jurisdictions. The DTA means that individuals or companies with 'home' as one jurisdiction but with interests in the other jurisdiction will have mechanisms in place to prevent them from being taxed by both sets of authorities on the same income. This clarity and certainty on matters of taxation makes it more attractive to conduct business between the two jurisdictions, especially in terms of investment funds, fiduciary services and intellectual property.
"In addition, the DTA will provide increased possibilities for the expansion of Guernsey's financial services business, not just with Hong Kong but also other jurisdictions. Hong Kong is continuing to develop as a major financial services hub in Asia, which is fuelled by the fact that its network of DTAs with other jurisdictions enables it to act as a gateway for business coming into and out of the wider region. As such, the DTA offers the potential to tap into the other parts of Hong Kong's DTA network and therefore attract flows from a broader field of jurisdictions. The DTA with Hong Kong comes less than two weeks after the publication of a successful OECD Global Forum Peer Review report on Guernsey's tax regime in relation to transparency and exchange of information.
The Chief Minister added: "The conclusion of this DTA reflects Guernsey's commitment to meeting international standards of tax transparency and co-operation - underlining the fact that the OECD's Peer Review report earlier this month said that Guernsey had in place all of the elements which it assessed."  The signing of the Hong Kong DTA is Guernsey's sixth since the beginning of 2012, all of which meet the international standards on international taxation.
Rob Gray, Guernsey's Director of Income Tax, said: "As well as creating a mechanism for exchanging requested tax information with Hong Kong, the agreement will assist in resolving issues relating to potential double taxation of both corporate and personal incomes, such as business profits, dividends, interest, royalties, income from employment and pensions." In addition, Guernsey has now signed 41 Tax Information Exchange Agreements (TIEAs), the most recent being with the British Virgin Islands (BVI), signed by the Chief Minister last week. This network of agreements covers the majority of G20 countries and EU Member States.
Guernsey has signed 18 DTAs: Full - Hong Kong, the Isle of Man, Jersey, Malta, Qatar, Singapore and the UK; Partial - Australia, Denmark, the Faroes, Finland, Greenland, Iceland, Ireland, Japan, New Zealand, Norway and Sweden.Guernsey has signed 41 TIEAs: Argentina, Australia, Bahamas, Brazil, British Virgin Islands (BVI), Canada, Cayman Islands, Chile, China, Czech Republic, Denmark, the Faroes, Finland, France, Germany, Greece, Greenland, Iceland, India, Indonesia, Ireland, Italy, Japan, Latvia, Mauritius, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovenia, South Africa, St Kitts & Nevis, Sweden, Turkey, the UK and the US.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Winston Wambua

International Offshore Specialist
 
For more information please contact me on

Mobile +971553350517

Email: winstonk@live.com
 
Skype: Winston.Wambua

Swiss Bank Accounts and the Law Regulations

Swiss Bank Accounts and the Law

In the United States, law enforcement agencies, the judicial system, and even private citizens can gain access to financial information of all sorts. In Switzerland, however, neither a bank's officers, nor employees are allowed to reveal any account or account holder information to anyone, including the Swiss government.
The Swiss banker's requirement of client confidentiality is found in Article 47 of the Federal Law on Banks and Savings Banks, which came into effect on November 8, 1934. The article stipulates that "anyone acting in his/her capacity as member of a banking body, as a bank employee, agent, liquidator or auditor, as an observer of the Swiss Federal Banking Commission (SFBC), or as a member of a body or an employee belonging to an accredited auditing institution, is not permitted to divulge information entrusted to him/her or of which he/she has been apprised because of his/her position."
Exceptions
In order to sidestep this law, there must be a substantial criminal allegation before a governmental agency, especially a foreign one, can gain access to account information. Tax evasion, for example, is considered a misdemeanor in Switzerland rather than a crime.
According to the Swiss Bankers' Association Web site, however, there is also a duty for bankers to provide information under the following circumstances:

•     Civil proceedings (such as inheritance or divorce)
•    Debt recovery and bankruptcies
•    Criminal proceedings (money laundering, association with a criminal organization, theft, tax    fraud, blackmail, etc.)
•    International mutual legal assistance proceedings (explained below)

International mutual assistance in criminal matters

Switzerland is required to assist the authorities of foreign states in criminal matters as a result of the 1983 federal law relating to International Mutual Assistance in Criminal Matters. Assets can be frozen and handed over to the foreign authorities concerned. Assistance in criminal matters follows the principles of dual criminality, specialty and proportionality.
Dual criminality means that Swiss courts don't lift the requirement of bank/client confidentiality unless the act being investigated by the court is punishable under the law in both Switzerland and the country requesting the information. The specialty rule means that information obtained through the arrangement can only be used for the criminal proceedings for which the assistance is provided. The proportionality rule means the measures taken in conducting the request for assistance must be proportionate to the crime.

International mutual assistance in administrative matters

Under these proceedings, the Swiss Federal Banking Commission (SFBC) may communicate information only to the supervisory authorities in foreign countries subject to three statutory conditions:

•   The information given can't be used for anything other than the direct supervision of the banks or financial intermediaries who are officially authorized and can't be passed on to tax  authorities.

•    The requesting foreign authority must itself be bound by official or professional confidentiality and be the intended recipient of the information.

•    The requesting authority may not give information to other authorities or to other public supervisory bodies without the prior agreement of the SFBC or without the general authorization of an international treaty. Information can't be given to criminal authorities in foreign countries if there are no arrangements regarding mutual legal assistance in criminal matters between the states involved.

Taxation

Swiss residents pay 35 percent tax on the interest or dividends their Swiss bank accounts and investments earn. This money is namelessly turned in to the Swiss tax authorities.
For nonresidents of Switzerland there are no taxes levied on those earnings, unless:

Swiss Withholding Tax

There is a 35 percent Swiss withholding tax on interest and dividends paid out by Swiss companies. So, if you invest in a Swiss company such as Nestlé or Novartis, then 35 percent of any dividends will be withheld as a tax regardless of where you live. The same is true if you buy bonds issued by a Swiss company. If you're a Swiss taxpayer (or if your country has a double taxation agreement with Switzerland) then you can claim the tax back. Double taxation is when income is taxed both in your home country, as well as the country in which the income is earned.

EU Withholding Tax

On July 1, 2005, the European Union Withholding Tax came into effect to prevent residents of EU member countries from avoiding paying tax on interest earned on money deposited in foreign banks with very strong banking secrecy laws. The EU goal had been for all countries to disclose interest earnings to the home countries of their bank clients so that that money could be taxed. Several non-EU countries, Switzerland included, didn't agree because it went against their banking privacy/secrecy laws. Now, bank clients who live in the European Union pay a withholding tax on the interest made by certain investments. This tax started at 15 percent and is gradually increasing to 35 percent by 2011. No exchange of information or taxes on capital or capital gains is levied.

Inheritance Tax

If you want to pass on your account to your family (and you're not a Swiss resident) you're in luck because there is no inheritance tax in Switzerland for nonresidents. Your heirs are responsible for declaring the holdings to their country's tax authorities, however. Swiss banks offer the same range of services of other banks: checking accounts, savings accounts, custodial accounts, etc. They also will hold other valuables like stock certificates, gold, silver, and other property for a fee. Like other Swiss accounts, they are protected under Swiss law from any snooping unless you're engaged in criminal activity.

When it's time to make a withdrawal, it can be paid in the currency of your choice. Swiss francs, American dollars, whatever you would like. Unlike American law where law enforcement agencies, the judicial system, and private citizens can gain access to all kinds of financial information under Swiss law, except for extraordinary circumstances neither the bank's officers or the bank's employees are allowed to reveal any information, relative to any account to anyone, including the Swiss government.

No private citizen, or their legal representative can ever receive any type of information about any one's Swiss bank account under any set of conditions. That includes all types of legal proceedings that the Swiss classify as "non-criminal behavior." The Swiss consider tax evasion and many other "crimes" under US law as "political offences." Things like divorce, inheritance disputes and bankruptcy cases are examples of "private matters," and as such the secrecy of the account is protected from any legal action to verify the presence of, or attempts to seize any assets. There are some notable exceptions. Three types of activity which the Swiss consider illegal, and are bound by treaty with the United States to "open" the account for possible legal proceedings are: organized crime activities, drug trafficking, and "insider trading" of securities. In instances of this kind, the Swiss authorities have the final say on whether or not to reveal any information.

The Swiss currently charge a hefty 35% tax on interest earned in Swiss accounts but Americans get 30% of that tax refunded by showing that they're not Swiss residents. To claim the refund there is a catch 22. You must identify yourself, which of course give up your secrecy. If you maintain the account in Swiss francs, and the franc increases in value relative to the American dollar, you may also be liable for a capital gains tax when you withdraw the money and convert it back to United States dollars. If you sustain losses from any decrease in value they are usually not deductible. There are no US restrictions on having Swiss bank accounts, but current IRS regulations require you tell them what foreign accounts you have when you file your annual income tax return. If you answer yes, the Internal Revenue Service requires more paperwork.

Interest earned in a foreign account is still taxable under present US Tax laws, but you usually get to offset foreign taxes that you may be required to pay. Consult with a tax expert to learn what present regulations are since they change frequently and are beyond the scope of this report.

With its long-standing association with the world’s finances, the perception of a Swiss Bank could be one of a series of dated institution, set in their ways and which don’t move with the times and, therefore, could become obsolete in time. This could not be further from the truth. Some older banking institutions do, in fact, get left behind when technology advances at a pace and so cease to exist. Switzerland has long understood the maxim ‘evolve or die’ and, as an offshore jurisdiction, has adapted rapidly to address the changes in modern life and modern banking. In the last few years

Swiss Banks have made huge strides to develop the ultimate in technological offshore banking:
encryption security technologies, electronic funds transfers, internet banking etc. Swiss Banking, if not leading the way, is certainly at the forefront of the modern technological age. Wire transfer of assets and electronic signatures are now the order of business.

Winston Wambua

International Offshore Specialist
 
For more information please contact me on

Mobile +971553350517

Email: winstonk@live.com
 
Skype: Winston.Wambua