Get the Facts Straight! Barbados is Not a Tax Haven

The Press, both internationally and locally, is often maligned when it deals with matters of national importance in an aggressive way, even though, in the majority of instances, careful research of the facts often support the questions posed or views espoused.

Even in the most reputable of newspapers, however, there are times when such criticism is deserved; when bias creeps in, and half-truths are insinuated while the critical facts are ignored, sacrificed at the altar of profitability; when selling more newspapers becomes more important than telling the whole story, lest truth might destroy a chance to break a story on a hot topic. This lapse in good journalism is no more evident than in times where seemingly sensational news has broken, and the temptation to get ahead of a story can go even beyond the imperative of selling more papers to corrupt journalistic mores.

Such is the case, we believe, with two articles appearing over the last weekend in the Canadian Press, both of them fuelled by the recent “Panama Papers” imbroglio, and both attempting to label Barbados as a tax haven allowing Canadian companies to evade taxation in Canada, as a result of Canada’s Double Taxation Treaty with Barbados, and their exempt surplus programme. Both articles erroneously suggest that money can be “parked” in Barbados away from Canadian or American tax authorities — nothing could be further from the truth — and that the result of this is, and will continue to be, higher taxation for Canadian residents, clearly appealing to a sore spot in the psyche of a population who already see themselves as heavily taxed, and to the Canadian ethos of fair play and doing the right thing.

For those in possession of all of the facts, the subtle deception of an experienced journalist can easily be detected, but for the millions of uninformed readers in this Internet age, they can do little else but follow the carefully manipulated pseudo-facts and open-ended questions which will lead them, inevitably we fear, to the wrong conclusions. In hard economic times, those conclusions can coalesce and bring pressure to bear on already economically beleaguered Governments to make changes that are inimical to the greater good of their countries.

Successive Governments of Canada have clearly recognised, on the one hand, the increasingly competitive nature of conducting international business, and on the other hand, the import of the considerable research conducted by their own University of  Toronto (Professor Hejazi, 2007, 2015), as well as by US Universities Harvard (Professors Desai and Foley, 2008) and Michigan (Professor Hines, 2008, 2009). That is, the use of a reputable, well-regulated, treaty-based international financial centre conduit, like Barbados, by Canadian companies investing abroad, is net positive for the Canadian economy in the long run, and that the benefits outweigh the more immediate loss of taxation in the home country, typically seen in the use of a double taxation treaty. Interestingly, none of this sizable body of research was mentioned in either article.

Our purpose today, though, in highlighting these articles, is not to address the shortcomings of the Canadian press, who are but following what has become an unfortunate trend in sensationalist journalism almost everywhere else in the world. Rather, it is to call on the Barbados Government to recognise that the 300-plus years of Canada/Barbados trade and international business-relationship could be at risk, and that urgent action is required on their part to spearhead a determined effort to ensure that the new Liberal Government of Canada is in full possession of all of the facts, and fully appreciates the value of the Barbados/Canada international business connection. This matter needs to be addressed at the highest level, and with the highest priority, before uninformed opinion is allowed to fester and misdirect electoral pressure, resulting in considerable damage to both our own and Canada’s economic future.

Source: The Publisher of the Barbados Advocate

Invest Barbados to Host Investment Seminars in Mexico and Colombia

Date: 2016-07-05
Duration: 3 day(s)
Location: Latin America

Register now for seminars in Mexico and Colombia.

Invest Barbados (IB) continues its promotional outreach over the coming weeks to market Barbados as an international business and financial services jurisdiction of choice, this time with two investment seminars planned for the fast growing Latin American market.

The first Investment Seminar will be held on Tuesday, July 5, 2016, at the Presidente Intercontinental Hotel, Mexico City, Mexico, from 8:00 a.m. to 12:00 noon, while the second seminar will be held on Thursday, July 7, 2016, at the JW Marriott, Bogotá, Colombia from 8:00 a.m. to 12:00 noon.

Last year, IB’s first seminar in Colombia was considered to be successful and productive by all participants.  At the time, Hon. Donville Inniss, Minister of International Business, Industry, Commerce and Small Business Development, who led the Barbados delegation to explore investment linkages with the jurisdiction said, “We have committed to expand our wings into the Latin American market. I can tell you the business is growing out of Mexico, Venezuela and certainly we are now making a greater push to the rest of the South American continent.”

Stemming from the discussions between Minister Inniss and Colombian government officials, Avianca Airlines commenced direct, weekly flights from Bogotá to Bridgetown in 2015.

This year, the Barbados delegation, will again be led by Minister Inniss.  The visits aim to raise Barbados’ profile as a desirable location both for Mexican and Colombian investors as well as global investors making investments into Mexico and Colombia.  The mission also aims to strengthen the linkages with the tax advisors, attorneys and service providers in both countries. Several persons from the banking, legal, insurance, tourism and other business sectors in these countries are expected to attend. View the programmes for the seminars in Mexico and Colombia.

Barbados currently has a Double Taxation Agreement in force with Mexico and has initialed a Tax Information Exchange Agreement with Colombia that is awaiting ratification.

Register now for the seminars in Mexico and Colombia.   For further information, you may contact Mr. Ezra Catwell, Director – Investment Facilitation at ecatwell@investbarbados.org.

Source: http://www.investbarbados.org/eventsmain.php?view=Invest+Barbados+to+Host+Investment+Seminars+in+Mexico+and+Colombia

Cyprus Amends Intellectual Property Tax Regime in Line With OECD Rules

Cyprus proposed new legislation for its intellectual property (IP) tax regime, known as the IP box regime. This is an amendment of the regime introduced by Cyprus in 2012, bringing it in line with new EU requirements and OECD rules against base erosion and profit shifting.

While the amended IP box regime may not benefit businesses quite as extensively as before, it still gives Cyprus a competitive edge and safeguards Cyprus’s future as a centre for IP structuring.

In brief

The Ministry of Finance (MoF) announced on 30 December 2015 that it will promote amendments to the current Cyprus Intellectual Property (IP) tax regime in order to introduce a new IP tax regime as from 1 July 2016. The new IP tax regime will be fully aligned with the conclusions of the OECD’s Base Erosion and Profits Shifting (BEPS) Action 5 report released in October 2015.

The MoF announcement states that maximum possible transitional arrangements are intended. Therefore, it is expected that IP already benefitting from the current Cyprus IP tax regime by 30 June 2016 will continue to receive the current benefits for a further 5 years, i.e. until 30 June 2021. A much shorter transitional period to 31 December 2016 is expected in the case of IP which is acquired, directly or indirectly, from related parties at any time in the first six months of 2016, unless at the time of acquisition such IP was already benefitting from an IP tax regime.

Under the new IP tax regime a narrower range of IP assets will qualify as compared to the current IP tax regime.

The current Cyprus IP tax regime leads to a competitive effective corporate tax rate of 2,5% (or lower) for qualifying incomes earned on a broad range of qualifying IP assets. Although not referred to in the MoF announcement it is expected that the planned new Cyprus IP tax regime will retain the benefit of the competitive effective corporate tax rate of 2,5% (or lower) but only a portion of the income will qualify. The qualifying portion of the income is expected to reflect the research and development (R&D)expenditure undertaken by the IP owner itself (or outsourced to unrelated parties) as compared to the total R&D expenditure required to develop the asset.

In detail

The MoF announced on 30 December 2015 that it will promote amendments to the current Cyprus IP tax regime in order to introduce a new IP tax regime as from 1 July 2016. The new IP tax regime will be fully aligned with the conclusions of the OECD’s BEPS Action 5 report released in October 2015. The OECD’s Action 5 report has been endorsed by the G20 and OECD countries and further endorsed by the Council of the European Union which in December 2015 invited the EU’s Code of Conduct Group (Business Taxation) to follow the report’s approach.

The MoF announcement states that maximum possible transitional arrangements are intended. Therefore, it is expected that IP already benefitting from the current Cyprus IP tax regime by 30 June 2016 will continue to receive the current benefits for a further 5 years, i.e. until 30 June 2021. A much shorter transitional period to 31 December 2016 is expected in the case of IP which is acquired, directly or indirectly, from related parties at any time in the first six months of 2016, unless at the time of acquisition such IP was already benefitting from an IP tax regime.

The current Cyprus IP tax regime leads to a competitive effective corporate tax rate of 2,5% (or lower) for qualifying incomes earned on qualifying IP assets. Qualifying income currently includes royalties, gains on disposal of IP and IP infringement compensation. Qualifying assets are currently broadly defined and include, for example, copyrights (which may take any of the following forms: literary works, dramatic works, musical works, scientific works, artistic works, sound recordings, films, broadcasts, published editions, databases, publications, software programmes), patented inventions, trademarks (and service marks) as well as designs and models that are used or applied on products. A narrower range of IP assets will qualify under the new IP tax regime as compared to the current IP tax regime, expected to include patents and computer software.

Although not referred to in the MoF announcement it is expected that the planned new Cyprus IP tax regime will retain the benefit of the competitive effective corporate tax rate of 2,5% (or lower) but only a portion of income will qualify. The qualifying portion of the income is expected to reflect the R&D expenditure undertaken by the IP owner itself (or outsourced to unrelated parties) as compared to the total R&D expenditure required to develop the asset.

Although not referred to in the MoF announcement it is expected that the planned new Cyprus IP tax regime will retain the benefit of the competitive effective corporate tax rate of 2,5% (or lower) but only a portion of income will qualify. The qualifying portion of the income is expected to reflect the R&D expenditure undertaken by the IP owner itself (or outsourced to unrelated parties) as compared to the total R&D expenditure required to develop the asset. In line with BEPS Action 5 recommendations it is expected that Cyprus will spontaneously exchange information (under existing international agreements) on taxpayers who benefit from the transitional arrangements of the current IP tax regime if the IP entered the current IP tax regime in the period 7 February 2015 – 30 June 2016.

The Takeaway

Given the political agreement at EU level, such a move by the Cyprus Authorities to amend the current IP tax regime to be in line with the OECD’s BEPS Action 5 was expected. We welcome the Cyprus Authorities intention to provide for the maximum possible transitional arrangements (until 30 June 2021, the latest) so as to give taxpayers stability in the medium term. Taxpayers should consider whether there is IP not currently benefitting from the current Cyprus IP tax regime which they wish to introduce to the current IP tax regime by 30 June 2016 in order to take advantage of the transitional rules until 30 June 2021, should the IP be eligible. We expect that in the coming months more detail will be announced by the Cyprus Authorities on the new IP tax regime.

Source: https://www.pwc.com.cy/en/publications/assets/direct-tax-newsletter-n-1-2016.pdf

Cayman Islands Introduce Limited Liability Company Legislation

Limited liability Company Law 2016 was passed into law on 8 July 2016

Now it is possible to:

  • Form and register a new Cayman Islands limited liability company (LLC)
  • Migrate an entity organised in another jurisdiction into the Cayman Islands as an LLC
  • Convert an existing Cayman Islands company into an LLC; and
  • Merge an existing Cayman Islands exempted company into an LLC.

The introduction of the Cayman LLC legislation is in response to demand from the US financial services industry, and is intended to compete with the Delaware limited liability company offering.

Introduction

The Cayman Islands have now brought into effect the long-awaited Limited Liability Companies Law, 2016 (the “LLC Law“) which introduces a new Cayman Islands limited liability company (an “LLC“). The LLC Law was published on 8th June 2016 but had not been brought into effect until 8th July 2016 in order to provide the Companies Registry with sufficient time to implement internal systems for dealing with registration of new LLCs. The Companies Registry is currently undertaking pilot testing of its internal systems and has advised that it expects to be able to accept registration applications for new LLCs before 15th July 2016.

Key Features of Cayman LLCs

  • An LLC formed under the LLC Law will be similar in structure to that of the Delaware LLC as the LLC Law is broadly based on the Limited Liability Company Act in the State of Delaware. However the LLC Law has also preserved the broad legal principles applicable to Cayman Islands companies and the rules of equity and common law. Section 3 of the LLC Law expressly states that: “The rules of equity and of common law applicable to companies registered in the Islands, as modified by the Companies Law and any other Laws in force in the Islands applicable to such companies, shall apply to a limited liability company, except in so far as such rules and law or modifications thereto are inconsistent with the express provisions of this Law or the nature of a limited liability company”.
  • An LLC is a corporate entity which has separate legal personality to its members.
  • Formation of an LLC is straightforward. It requires the filing of a registration statement with the Companies Registry and payment of the requisite Government fee.
  • An LLC must have at least one member. It can be member managed (by some or all of its members) or the LLC agreement can provide for the appointment of persons (who need not be members) to manage and operate the LLC.
  • The liability of an LLC’s members is limited. Members can have capital accounts and can agree amongst themselves (in the LLC agreement) how the profits and losses of the LLC are to be allocated and how and when distributions are to be made (similar to a Cayman Islands exempted limited partnership).
  • An LLC may be formed for any lawful business, purpose or activity and it has full power to carry on its business or affairs unless its LLC agreement provides otherwise.
  • An LLC may (but is not required to) use one of the following suffixes in its name: “Limited Liability Company”, “LLC” or “L.L.C.”.
  • The following statutory registers are required to be maintained for an LLC but, similarly to the requirement for a Cayman Islands exempted company, only an LLC’s register of managers is required to be filed with the Companies Registry:
    1. a register of members;
    2. a register of managers; and
    3. a register of mortgages and charges.

The register of managers and register of mortgages and charges are required to be maintained in a manner similar to the register of directors and register of mortgages and charges for a Cayman Islands exempted company.

  • Subject to any express provisions of an LLC agreement to the contrary, a manager of the LLC will not owe any duty (fiduciary or otherwise) to the LLC or any member or other person in respect of the LLC other than a duty to act in good faith in respect of the rights, authorities or obligations which are exercised or performed or to which such manager is subject in connection with the management of the LLC provided that such duty of good faith may be expanded or restricted by the express provisions of the LLC agreement.

Expected Benefits of the New LLC Vehicle

Under the LLC Law, it is now possible to:

  • Form and register a new LLC;
  • Convert an existing Cayman Islands exempted company into an LLC;
  • Merge an existing Cayman Islands exempted company into an LLC; and
  • Migrate an entity formed in another jurisdiction (e.g. Delaware) into the Cayman Islands as an LLC.

It is expected that the new Cayman Islands LLC structure will be attractive for general partner entities and other carried interest distribution vehicles. It may also prove attractive for management company entities and possibly for offshore funds in order to align the rights of investors between onshore and offshore investment funds in a master/feeder structures