Dear Colleague,

Tax shelters have traditionally been the preserve of rich families and corporations wanting to turn today's highly taxed income into tomorrow's lowly-taxed capital gains.

Forests (expensive to set-up and slow-growing) are a perfect tax shelter, more especially because they are environmentally friendly. Many countries give beneficial tax treatment to forests, which makes an already tax-efficient investment even more interesting.

See the forest finance section a bit further down in this update for further information.

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• Offer: Tax Shelters For Investors Intelligence Service
• Offer 2: Forest Finance Report
• Content: Offshore E-Commerce
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• Offshore Jurisdiction: Vanuatu

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Kind regards,

Kate James

Featured Report
Tax Shelters for Investors: Forest Finance

What is a tax shelter?

The ideal tax shelter traditionally turned income into capital without taxation. Such mythical beasts used to exist in no-tax offshore jurisdictions, but they were not usually to be found in high-tax countries, and when sighted were rapidly hunted down by heavily armed tax inspectors.

Most governments do however provide tax-friendly regimes to support particular economic activities they regard as beneficial, or alternatively allow tax-planning to continue if it delivers a public benefit. Forestry falls into both these categories: everyone loves trees, which are seen as environmentally valuable, provide recreational amenities, are beautiful, and even have a useful product. Many countries therefore offer tax-breaks to investors in forestry, or allow tax-efficient forestry investment to continue.

The basic tax equation with a forest is that you have to maintain it over a long period, during which the costs involved (often including the financial carrying cost of the investment) are deductible from taxable income. Yet there is no income from the forest until it matures, perhaps after 30 or more years. Then it can either be sold for a lump capital sum, or cropped over a period of time to provide an income. At the minimum, payment of tax will have been shifted many years into the future; at best, tax will be payable at a far lower rate than would have been due on the original income.

After a period in the late 1990s in which forestry investment fell out of favour, a report in December 2004 said that it was again attracting attention. According to the study by the Global Institute of Sustainable Forestry at Yale University, institutional investment in timberland increased from about $1 billion in 1989 to about $14.4 billion in 2002, the most recent year covered by the study. Moreover, between 1988 and 2003, annual returns from timberland reached 15%, according to the NAREIF Timberland Property Index, outpacing both the bond and equity markets. For these reasons, investors, which include some of America’s largest pension and endowments funds like Calpers, Harvard and Yale, have been increasingly attracted to timber, investing through Timberland Investment Management Organisations, or TIMOs.

Another key attraction of this type of investment is the fact that forest plantations capture and store CO2 which is one of the main gases involved in the 'Greenhouse Effect'. It has been said that plantations can absorb and store up to 10 tonnes of CO2 per hectare per year. This ability is known as carbon sequestration. As calls worldwide continue to grow for some form of carbon tax system, forestry investors and forest owners are likely to benefit.

CLICK HERE to learn more.

Featured Offshore Jurisdiction
VANUATU

Internet TV Showcases Vanuatu To Global Audience, by Mary Swire, Tax-News.com, Hong Kong 01/02/2007

British Promise Subsidies To ACP Countries, by Robert Lee, for LawAndTax-News.com, London 08/11/2006

Vanuatu Registry Stays On QUALSHIP 21, by Mary Swire, for LawAndTax-News.com, Hong Kong 04/10/2006

Vanuatu is a group of tropical islands on the eastern seaboard of Australia, off the coast of Queensland, with a mostly Melanesian population of 210,000. The 80 islands are mountainous, and some are volcanic. There are international airports on the two main islands; most connections are to Australia. The islands had British/French governance until independence in 1980; languages are English, French and Bislama (pidgin). The time zone is GMT plus 11 hours. There is a uni-cameral Parliament with a Westminster-model Prime Ministerial government and an elected President. The legal system is based on English common law with some civil law influence.

Vanuatu's economy, historically based on agriculture and fishing, is now dependent on tourism and financial services. Cruise liners call at the two deep-water ports. GDP of $2,900 per head is low and growing rather slowly, partly due to adverse climatic and geological conditions. There is a strong contrast between the relatively sophisticated capital Port Vila, with its expatriate workers, and the subsistence economy of most of the Ni-Vanuatu islanders. Most goods are imported, and high import duties are a main source of Government revenue. The currency is the Vatu (VT), fixed against a dollar-based currency basket. In mid-February, US$1 was approximately equal to VT104.00.

There is no direct taxation in Vanuatu. Import and export duties, registration fees, business license fees, stamp duty and a tourist turnover tax generate Government revenue. The offshore sector is well-developed, with the IBC-style International Company being the entity of choice. Banking, insurance, trust management and electronic gaming are the most important activities.

Vanuatu has no tax treaties, and no international mutual assistance treaties. There is domestic legislation to counter money-laundering and which enables international co-operation with investigators. However, privacy is good with statutory protection, and there is no crime of tax evasion since there are no taxes.

Learn more in our full Vanuatu Knowledgebase and Vanuatu News sections.

A growing number of eCommerce merchants are looking to expand into foreign markets, but growing from a domestic online business to a global one often sends panic across the top-level of an organization.

Click here to read this special article contributed by First Atlantic Commerce, Bermuda