Dear Colleague,

This week:

• Tax-news Headlines
• Offshore: Belize
• Offshore: Botswana
• Offshore: Cook Islands
• Offshore: Labuan
• Offshore: Mauritius
• 25% Discount: All Library Content

I hope you find this update useful. Please remember that you can customise your mailing preferences by visiting your own profile page to choose from 29 offshore tax and law subjects in order to receive just the information you want. You can also unsubscribe completely by following the instructions at the bottom of this page.

Kind regards,

Kate James

Offshore
Botswana

Botswana, independent since 1966, has had high growth rates due to sound economic management and its diamond mining industry. With an area of 600,000 sq km and a population of 1.6m, Botswana is bordered by Namibia, South Africa and Zimbabwe. The capital Gaborone has air links to major African cities. With a stable democracy, GDP per head of $11,400 in 2006, and reserves of more than $6bn, Botswana is rated the least corrupt country in Africa by Transparency International.

The Income Tax Amendment Act 1999 created an International Financial Services Centre, whose focus is on the provision of financial services to clients who are domiciled in other countries. Fiscal incentives are provided to financial and non-financial institutions to encourage them to establish in the IFSC to provide these services. The Bank of Botswana is responsible for supervision of IFSC companies.

Undertakings for Collective Investment were brought under the IFSC regime by the Collective Investment Undertakings Act 1999. CIUs can be organised in the form of trusts or investment companies, including variable capital companies and unit trusts. Open and close ended funds are permitted. CIUs are also supervised by the Bank of Botswana.

Botswana has lowish tax rates applied on a territorial basis, but the IFSC allows generous deductions from income before taxation and exemption from withholding taxes on dividends. Capital gains are tax free in the IFSC. Companies in the IFSC are likely to escape anti-avoidance and CFC legislation in many OECD countries.

Learn more in our full Botswana Knowledgebase.

Offshore
Cook Islands

The Cook Islands are a self-governing parliamentary democracy in a loose constitutional association with New Zealand. The Queen is Head of State and New Zealand has a High Commissioner. There is a Prime Minister and a cabinet appointed from among elected members of parliament. The population of 21,750 (July 2007 est.), ethnically similar to New Zealand Maoris, occupies widely scattered islands in the South Pacific half way between New Zealand and Hawaii. The time zone is 10 hours behind GMT. The capital, Avarua, on Raratonga Island, has direct flights to Los Angeles, Hawaii, New Zealand etc. The climate is tropical and there are typhoons in summer.

The economy is import dependent and loose fiscal policies led to 'bankruptcy' in 1996. Some recovery has followed Government cut-backs and assistance from New Zealand. Exports include copra, pearls and fruit. The tourist industry is vital, and the offshore sector is the second biggest source of government revenue. The currency is the New Zealand dollar. There are no exchange controls. Unemployment and inflation are low. There are significant investment incentives available to foreign-owned businesses. The law is based on English common law.

Local taxation consists of a 20% corporation tax, and personal income tax at rates up to 30%. There is VAT of 12.5% and there is Stamp Duty. Withholding tax on domestic payments is 5%, and 15% on payments to non-residents. The Cook Islands have no double taxation treaties.

The offshore sector began quite early in 1981 and there are special regimes for banks, captives and trust management, which is the biggest offshore sector. Offshore companies and trusts do not pay any taxes except for Stamp Duty. Confidentiality is tight, except in cases of criminal activity, which does not include fiscal crime.

FATF Blacklist

In June 2000, the Cook Islands was blacklisted by the FATF as a non-cooperative and harmful tax haven.

In September 2000 the Cook Islands parliament passed the Money Laundering Prevention Act, which provides for the setting up of a Money Laundering Authority, to consist of the government's financial secretary, the commissioner for offshore financial services and the commissioner of police.

In 2003 a series of nine new measures were introduced in the Cook Islands Parliament over the regulation of domestic and offshore financial industries after the cabinet approved the work of an Anti-Money Laundering/Counter Financing Terrorism Committee. The measures include a Financial Transactions Reporting Act, which will require all banks to report local and international money transfers to a central financial intelligence unit.

The Cook Islands were removed from the FATF's list of NCCTs in February 2005. The FATF said that a recent visit had confirmed that the jurisdiction was effectively implementing anti-money laundering (AML) measures.

Learn more in our full Cook Islands Knowledgebase and Cook Islands News sections.

Offshore
Belize

Belize is an independent country within the Commonwealth bordered by Mexico, the Caribbean and Guatemala to the east and south. It is 24,000 sq km in size, with a population of 275,000. The country is, or was, heavily forested. The climate is nearly tropical, and there can be hurricanes. The extremely mixed population is racially harmonious. English is the official language and the main religion is Christianity. The currency is the Belizean dollar, fixed at BZ$2 = US$1.

In Belize's bi-cameral Westminster-style government, the lower house was most recently elected in 2003 and the government is tackling economic problems caused reduced access to privileged markets for sugar and bananas by encouraging foreign investment in manufacturing and the development of mass tourism. The country's structural deficit can only be financed by overseas borrowing, but the Government hopes for debt relief for existing loans. GDP growth was 3.1% in 2005.

In October 2004, the government began implementing a significant tightening of fiscal policy. This has resulted in a reduction in the country’s overall deficit to 3.1% in fiscal year 2005/2006.

By August 2006, Prime Minister Said Musa announced that the servicing of the country's debt, which accounts for 90% of its GDP, was "no longer a viable option" on existing terms, leading to a rearrangement of Belize’s US$900 million external debt stock.

Internal Belizean taxes are moderate, with a small turnover-based tax in addition to 25% corporation tax. Employees pay up to 45% tax on income plus social contributions. There is a variety of offshore schemes, including IBC legislation, a modern trusts law, and an array of free zones and investment incentive schemes. Belize offered 'economic citizenship' until the program was cancelled in 2002, and there is a retired persons regime. International pressure on Belize to moderate its offshore regime in exchange for debt relief seemed to have slackened in 2003.

Telecommunications are state-of-the-art, but too expensive because of the telecommunications monopoly which is holding back development. Recent moves to open up an e-commerce free zone may have come too late for Belize to catch up with more advanced jurisdictions. Air and sea communications are both good, and it may be that Belize's immediate offshore future lies more in expanding its effective and popular free zones than in other directions.

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

Offshore
Labuan

Labuan is part of Malaysia and is well located in the centre of the ASEAN region. 92 sq km in size, with a population of 78,000 (according to the 2000 census), Labuan is mostly flat, with a good harbour and an airport served by MAS and other airlines. Labuan was used by the British as a coaling station during the 19th century, and was eventually incorporated into the Malaysian Federation. Ethnically, Labuan has a mixed Asian population; Bahasa Malaysian is the official language, but English is widely used. The climate is tropical and there are extended monsoon periods.

The Government sees Labuan's future in terms of its financial sector, and in 1990 created the Labuan Offshore Financial Services Agency alongside a batch of 'offshore' laws. Labuan offshore companies can make use of Malaysia's good double tax treaty network, and as a result the island has become the preferred conduit for FDI into a number of local countries including Korea and Malaysia itself. A stock exchange was established in 2000, aiming particularly at the listing of Islamic financial debt issues, and has had considerable successes.

Malaysian taxes are moderately high, although on a territorial basis, but Labuan offshore companies pay either 3% if they trade or nil if they don't. There are many incentives and exemptions which make it possible for most mainland Malaysian profits to be repatriated through Labuan without tax. Many expatriate workers can take advantage of personal tax incentives.

LOFSA is determined that Labuan should become a successful e-commerce hub, and has built e-commerce infrastructure which can be used by incoming e-commerce operations, as well as by the island's new financial markets.

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

Offshore
Mauritius

Mauritius has been an independent member of the Commonwealth since 1968, and became a republic in 1992. The mostly volcanic land area of 1,860 sq km lies east of Madagascar and has a population of 1,250,882 (July 2007 est.), with around 150,000 living in the capital, Port Louis. The climate is sub-tropical; average daily temperature ranges from 17 to 30 Celsius; it can be wet. The time zone is 4 hours ahead of GMT.

The official language is English; the dominant ethnic group is Indo-Mauritian and the most popular religion Hindu. The Government is presidential, with a single elected National Assembly and a Council of Ministers headed by a Prime Minister. The legal system reflects mixed French and British ancestry, and administration can be bureaucratic in the French style.

Tourism has become a major contributor to the economy. The airport has good connections with a wide range of countries. GDP per head of $13,500 (2006 est.) is in a middle range but growth has mostly been around 5% (4.3%- 2006 est.); and unemployment at 9.4% (2006 est.) is on the high side.

Mauritius has quite good land so that sugar became and remains the dominant crop; it still accounts for one third of exports. Apart from encouraging tourism, the Government has tried hard to create a manufacturing sector with a range of investment incentives, free trade zones and a freeport. Garment manufacture has been a particular success. More recently, a financial services sector has developed, including a stock exchange, to take advantage of Mauritius' location offshore India and Africa. The Government is enthusiastic about e-commerce and has built a 'Cyber City'.

Until 1998, the Offshore Company and the International Company (equivalent to an IBC) allowed zero taxation across a range of offshore activities including banking, shipping, insurance and fund management, as well as in the free trade zones. Since a raft of new legislation in 2001 these two types of company are known as Global Business Companies Categories 1 and 2 (GBC1 and GBC2). Mauritius has decided to be a 'respectable' IOFC and there is now a minimum tax rate of 15% in almost all areas. Some dilution of the foreign tax credit applied from 2003. However, Mauritius has tax treaties with more than 30 countries, and they can be combined with the offshore regime to give a good result, especially for trade and investment in India. Mauritius was one of six offshore jurisdictions which wrote 'commitment letters' to the OECD in May 2000 in order to avoid being included on the OECD's list of jurisdictions offering 'unfair' tax competition.

The domestic and offshore sectors are quite firmly separated, although export-oriented domestic manufacturers and service providers get favoured treatment. Otherwise, domestic income tax rates are moderately high, and property transactions are expensive in tax terms.

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