Turks and Caicos: Country and Foreign Investment Regime

The islands were discovered in the 15th century by Juan Ponce de Leon, a Spanish explorer, but remained uninhabited until 1768 when Bermudians arrived and established a salt panning industry. From 1874 to 1959 the islands were a Jamaican dependency. In 1962 when Jamaica became independent the islands became a British crown colony.

The official and spoken language is English. In 2012 the population is estimated at 46,000 and is largely of black origin. The indigenous population are known as "Belongers". The culture is Afro-Caribbean. In recent years there has been a substantial amount of immigration from other, less successful parts of the Caribbean.

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Turks and Caicos Government

The Turks and Caicos were historically linked to Jamaica and the Bahamas. When Jamaica achieved independence in 1962 the islands shared a governor with the Bahamas .When the Bahamas became independent in 1973 the islands became a British crown colony with their own Governor. The islands are now a self-governing dependent territory of the United Kingdom. The Queen is the head of state and appoints and is represented by a Governor. The constitution of 1975 provided for a ministerial form of Government with substantial internal autonomy. The constitution of 1988 consolidated internal self-rule. Further changes to the constitution in 2006 assigned to Ministers of Government responsibility for the conduct of business in the House of Assembly in respect to: External Affairs; Defence and Internal Security, including the Police Force; and the Regulation of International Financial Services. The new Constitution also makes provision for the establishment of an Advisory National Security Council. This panel consists of: the Governor, the Premier, the Attorney General, the Deputy Premier, and the Minister of Immigration. The purpose of the Council is to make recommendations to the Governor on matters relating to defence, external affairs, the regulation of international financial services, internal security. The Council is also equipped to make recommendations on the exercise of the Governor's functions during a period of public emergency.

Legislative and executive powers are divided between the legislative council, the executive council and the Governor. The legislative council consists of 21 seats of which 15 are popularly elected; members serve four-year terms. The Chief Minister is selected by a majority of the elected members of the legislative council. The executive council functions as a cabinet. It consists of the Chief Minister, six ministers (who are appointed from among the elected members by the Governor on the advice of the Chief Minister) the Chief Secretary, the Attorney General, and the Governor who presides.

Elections in the fall of 2007 saw the PNP retain power, which they had taken from the People's Democratic Movement in 2003, after it had governed for the previous eight years. The next election is expected to take place in 2012.

The Turks and Caicos Islands have a sound legal system relevant to the needs of the jurisdiction. Laws comprise locally enacted statutes (known as Ordinances), English statutes specifically extended to the islands, and where applicable, English common law. The court system consists of a Magistrates Court and a Supreme Court. Practice and procedure are based on English law. Appeal lies to the Court of Appeal and ultimate appeal is to the Privy Council sitting in London.

The Turks and Caicos Islands are normally politically and economically stable and there does not appear to be any movement agitating for independence from Britain, although Chief Minister Michael Misick said in April 2006 that independence is a long-term goal of his Progressive National Party. However, allegations of corruption in the Government in 2009 led the UK to consider re-assuming direct control of the islands. An interim government is currently charged with the day-to-day running of the local administration, with strong input from London.

In August 2009, the ministerial government was suspended for an initial period of up to two years, with a Special Investigation and Prosecution team set up to investigate corruption allegations. In the financial crisis that unfolded, a support package with commercial lenders was brought in, and a short term loan was facilitated by the UK government to cover unavoidable public service commitments.

As part of a constitutional and electoral reform process announced in 2009, a draft constitution containing "measures to embed good governance and sound public financial management firmly in the Turks and Caicos Islands" was released on March 8, 2011. This draft takes as its base the text of the suspended 2006 constitution, and reflects the recommendations of both the Commission of Inquiry appointed to investigate the situation, and those of the constitutional and electoral reform adviser Kate Sullivan, whose final report was also published.

The constitution aims to meet public demand for better public governance by establishing a binding system of governance principles to improve accountability. It will provide for new budget and audit arrangements, and contain a new section to provide more medium and long term information on the finances of the government and the territory. It also aims to allow more public and political engagement in the process of government budgeting, and ensure that government borrowing remains within prudent and transparent parameters.

In addition, the government would be required to make a six monthly report on the state of the public finances and economy, with taxation explicitly required to have prior approval from the Assembly, and all concessions from taxation to be published every six months.

A period of consultation on the draft constitution concluded on May 3, 2011. On July 13, 2011, following a 15-month consultation period a new Turks and Caicos Islands Constitution Order was approved by the Privvy Council. The Order is due to come into force once several milestones have been met.

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Turks and Caicos Economy and Currency

The three pillars of the economy are tourism, fishing and financial services.

Pristine beaches, excellent diving and the islands' location just 90 minutes flying time from Miami have helped the development of the tourist industry. In 2011, the total number of visitors to the islands was up 12.3% on the previous year with 1,009,720. The majority of these were cruise arrivals with a total of 655,497. Out of the 354,223 land based arrivals, 262,142 were Americans. Direct flights from Halifax, Nova Scotia, are expected to raise the numbers of Canadian arrivals during 2012.

There is a small fishing industry based around the export of lobsters and cray fish to the United States.

The introduction of the Companies Ordinance 1981 is widely credited with having kick-started the development of the financial services sector. In 1989 the industry took on a more formal structure with the creation of the Financial Services Commission designed to regulate and supervise all financial services activities. The Commission is headed up by the Financial Services Commissioner who is appointed by and answerable to the British Governor. Representing 7% of the economy, the offshore financial services sector ranks behind tourism as the main source of income in the Turks and Caicos Islands. However, the sector remains one of the key elements of the islands economy providing employment in the public and private sectors.

Due to lack of employment opportunities in the 1960s and 1970s many citizens (known locally as "Belongers") emigrated to the United States and Bahamas in search of work. However due to the growth in tourism and financial services the situation has now reversed itself with "Belongers" returning and immigrants from Haiti and the Dominican Republic providing most of the unskilled labour.

Most food and nearly all capital and consumption goods are imported. Since there are virtually no taxes payable in the islands the major sources of Government revenue include fees from offshore financial services and customs receipts on imported goods.

The Islands' currency is the US dollar.

The Turks and Caicos Islands recent economic success was evidenced by the fact that the United Kingdom stopped providing grant aid for a number of years. However, allegations of corruption within the local government, combined with the impact of the financial crisis and a narrow revenue base have conspired to create a fiscal crisis, and the UK government stepped in to provide USD260m worth of financial support to the island in 2011 in the form of loans and a credit facility. A review of the country's fiscal regime is also leading to the introduction of new taxes. The authorities are aiming to balance the books by 2013.

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Turks and Caicos Entry and Residence

The Government is keen to encourage inward investment and this is reflected in its immigration policy. The immigration authorities welcome qualified persons wishing to establish business enterprises or undertake employment in the islands and as such it is relatively easy to obtain a work permit. However the policy of Government is to promote the employment of local islanders as much as possible and to this end a list of reserved activities has been published to ensure the hiring of Belongers.

The right to reside and work in the islands can be obtained by:

Work permits are granted for up to 3 years at a time and are given to those applicants who can establish that they meet the Government's good health and good character requirements, are capable of financially maintaining themselves and their dependants throughout the duration of their stay on the Islands and who have available for their use a house or apartment. Annual fees vary depending on occupation.

A Permanent Residence Certificate remains valid for the lifetime of the holder, but it can be revoked in certain circumstances. To obtain a certificate an applicant must satisfy the Government he intends to make the Turks and Caicos Islands his principal home, that he is of good character & good health and that he has invested or will invest more than US$500,000 in a business or home on Providenciales (US$125,000 on one of the other islands). The applicant must also pay a fee of US$15,000. A skilled worker who has held a work permit for not less than 5 years can obtain a certificate based on lower investment levels (US$200,000 and US$75,000) and a fee of US$30,000.

To apply for citizenship one must have held a Permanent Residence Certificate for at least 12 months and have been resident in the Islands for at least 5 years. It is unlikely such status will be granted to large numbers of persons primarily because of the very real concerns of the indigenous population that they may become a minority in their own country.

In May 2010, The Turks and Caicos Islands government announced that it had relaxed immigration rules on short-term visitors to the island, the Ministry of Border Control announced that the maximum period that businesspeople and tourists can visit the island without seeking an extension to stay was being extended from 30 days to 90 days.

The change in rules was made in an amendment to the Immigration Ordinance, which was altered to enable immigration officers to allow entry to visitors to "enter and remain for a period not exceeding 90 days." Effective since May 1, 2010, the amendment allows immigration officers to determine the length of a visitor’s stay, but the use of a 90 day tenure is at the discretion of the government. Strict measures will still be in place to deal with any abuse, the Ministry said.

On making the announcement, Clara Gardiner, Permanent Secretary at the Ministry of Border Control and Labour, said: "As we look to bring on economic recovery, it is key that we make it clear that the Turks and Caicos Islands welcome genuine visitors and investors to the islands. Our new 90-day policy is intended to reflect that.”

She added: "For instance, a retired couple from abroad who own property in the islands, who wish to visit for a long vacation, or an investor supervising the setting up [of] a new business, should not be required to reduce their stay, nor apply for multiple extensions. Such visitors are not competing in the local job market, nor do they place a burden on public services, but they do contribute significantly to the local economy and give generously to local charities and community events.

Gardiner concluded: "People like these should be welcomed to these shores. The islands should be encouraging them to plan for an extended hassle-free stay."

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Turks and Caicos Business Environment

The depth of the professional infrastructure servicing the financial services industry is impressive. A wealth of talented Canadian and English barristers are present in addition to lawyers licensed in Hong Kong, USA, the Bahamas and the Cayman Islands. A number of major accountancy firms also have a presence. Telecommunications are excellent.

Under the Business Licensing Ordinance 1983 all Turks and Caicos businesses, whether incorporated or not, require licenses. License fees vary quite widely according to the circumstances, and range from US$300 for agriculture and apartment rental not exceeding four units, to as high as US$13,500 per annum for hotel accommodation with 100 bedrooms or more. Fee levels had not been increased for some years and were raised by 35% to the current level from April, 2011.

An individual who wishes to work on his own account and who does not have a Permanent Residence Certificate must in addition to obtaining an annual work permit obtain a business licence under the Business Licensing Ordinance. Business licences will usually be granted to individuals who demonstrate the necessary qualifications and credentials provided that the business concerned is not in a category restricted to the indigenous population. Examples of restricted business sectors include accountancy, apartment rentals and management, real estate agency, architecture and contracting, among other categories. Business licences are normally indefinite in duration.

Banking confidentiality and secrecy are governed by the Confidential Relationships Ordinance 1979 which provides for penalties and terms of imprisonment for professionals, including government officials, who make unauthorised disclosure of confidential information. The Companies Ordinance 1981 contains similar provisions in relation to exempted companies. Additionally the common law also imposes civil liability for breaches of professional privilege.

The duty to maintain confidentiality does not apply where it conflicts with the provisions of the Mutual Legal Assistance (USA) Ordinance 1991 which was passed to give effect to the treaty made between the United States and the United Kingdom to give assistance in criminal matters. However, this treaty does not extend to fiscal crime; the Islands have not entered into any double taxation treaties and there is therefore no scope for the local authorities to co-operate with requests by foreign investigators for assistance in investigating tax evasion.

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Turks and Caicos Investment Incentive Schemes

The Government has streamlined the business licensing system, designed a responsive immigration policy, extended a variety of duty exemptions and agreed in specified circumstances to provide access to crown land under long term leases at reasonable rents.

In order to encourage the development of tourist and leisure facilities the Government can (previously on the recommendation of the Turks and Caicos Investment Agency ("TCInvest")) grant both long term concessionary leases or conditional purchase leases over government land together with a variety of customs duty exemptions lasting 35 years.

In 1972 the islands enacted the Encouragement of Development Ordinance (last amended in 1994) whereby approved development projects are granted relief from import duties and possible future taxes for a period of up to 35 years. The benefits under this Ordinance may apply to expansion as well as to the original establishment of development enterprises. Similar incentives apply to developments carried out by locals or foreigners on Crown land provided the developments are not for private residences. In such cases Crown lands can be acquired on long term concessionaire leases or in special circumstances on a conditional purchase lease provided the developer completes the agreed improvements and meets other conditions within the option period.

In 1994 the government set up TCInvest to encourage sustainable economic growth by attracting new offshore investment and by encouraging entrepreneurial spirit among the local population. In January 2012, it was announced that TCInvest was to close. According to Governer Ric Todd TCInvest had "run its course."

TCInvest provided debt financing to suitable Belonger controlled projects, identified and promoted investment opportunities on the Islands, provided advice and assistance to the Government on investment policies and negotiated joint ventures and agreements with investors wishing to access the Government's investment incentives. The services provided by TCInvest will now be conducted within the Government as part of the CEO's office.

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