Protect Your Assets

Your UK pension is one of your most valuable assets but it's taxable in the UK.

Imagine if you could take control, save tax and invest in whatever you choose.

If you have lived or will be living outside the UK for 5 years or more then it is possible to transfer your UK pension to an HMRC approved offshore scheme.

Contact us to find out how:
info@SovereignGroup.com

Yacht Registration

Yachts can be registered in many different jurisdictions around the world and using a variety of different ownership structures.

Making the right choice will minimise your costs and enhance the enjoyment and the value of your vessel.

Making the wrong choice could mean extra taxes and costs - and could seriously limit your options for financing, sailing or chartering out.

RegisterAYacht.com is dedicated to getting it right. Our team of in-house lawyers can provide all the necessary legal expertise and we have associate offices in all the major shipping jurisdictions.

We cannot promise you fair winds but we can guarantee you plain sailing!

Intelligent Offshore Planning

The Sovereign Group designs and implements fully compliant offshore strategies to meet the specific personal or business needs of our clients - whether it is setting up and licensing an online casino, or providing tax planning advice to gaming operators and operatives.

We can incorporate structures in all jurisdictions, and our worldwide network of offices provide global coverage from a local point of delivery. Sovereign has an in-depth knowledge of gaming issues in all leading jurisdictions and also offers a wide range of supporting services.

Intelligent offshore planning can reduce your personal or business expenses. Contact Sovereign and let us put you in the picture.

gaming@SovereignGroup.com
or call +350 200 76173

International Defence Exhibition (IDEX) 2011 promises to be the biggest ever arms exhibition in the Middle East

Abu Dhabi: Come February 2011 the 10^th edition of the International Defence Exhibition (IDEX), IDEX 2011 promises to be the biggest ever defence systems exhibition outside the US. With exhibitors flocking to IDEX, largely due to its ability to attract business not only from the U.A.E., but also from the larger Middle East and North African region besides Asia.

Defense spending in the Middle East has been constantly growing, because all countries want to stay abreast with modern military technology to ensure that their military capabilities are wider and more effective. A recent study by Frost & Sullivan on 'The Middle East Defense Market' reveals that the defense spending in the Middle East region is expected to surpass $100 billion by 2014.

The substantial chunk of spending in Middle East is going to come from Saudi Arabia, Iraq and the UAE. Faced with internal security challenges, plus the need to solidify its borders, Baghdad will invest an average of $12.5 billion annually through 2015 towards the advancing development of the Iraqi Security Forces (ISF). While Iraq provides a robust market opportunity due to the ongoing ISF rebuilding process, the scale of investment in the Gulf region is spearheaded by Saudi Arabia’s $60 billion package of approved U.S. Pentagon’s government-to-government Foreign Military Sales (FMS) agreements to upgrade its air fleet with new and refurbished F-15 jet fighters and new helicopters. Mirroring the Saudi efforts, the UAE is also undertaking a modernization of its Air Force. This modernization includes an approved FMS agreement for the purchase of 60 AH-64D Apache helicopters. The UAE is also in the process of considering successors for its fleet of Mirage 2000 jet fighters in what may ultimately prove to be a 60-unit buy worth up to $10 billion. Additional areas that the UAE may seek to upgrade include littoral protection and air defense.

For 2010 combined GCC defense/security investment was $68.3 billion. Forecast International, market research company, expects that total to increase to $73.4 billion in 2011 and continue growing to $82.5 billion by 2015.

As the Middle Eastern economies emerge from recession and oil price nudges the $100 mark, IDEX 2011 is expected to announce series of defence contracts over the five-day event in Abu Dhabi in February 2011.

Establishing a presence in China: A brief overview of supporting structures

Trading relations between the Netherlands and China are well entrenched. Even before the founding of the People's Republic of China, Dutch traders, through the Vereenigde Oostindische Compagnie, established outposts in Asia including those in China, Canton, and Taiwan.

The Netherlands are currently one of China’s largest trading partners in the EU. Major Netherlands export to China includes petrochemicals, machinery, transport equipment, food, high technology and fossil fuels. China's export to the Netherlands includes toys, clothes, and electronics. It is, therefore, not surprising that, from January to November of 2010, of the top ten nations and regions with investment into China (as per the actual input of foreign capital), Holland ranks at number nine with USD911m.

These operations are taking advantage of two main areas of opportunity or perhaps a combination of both. The first is the setting up of operations for the sourcing or production of goods for export. China’s cheap and increasingly sophisticated workforce, excellent shipping and port services and a well-tried modus operandi, has resulted in the label “Made in China” becoming ubiquitous on a diverse array of goods. Secondly, China’s rapid economic development has created a growing market for raw materials, sophisticated manufacturing products and systems, consumer goods and professional services.

The basic decision on how to establish a presence in China turns on whether an organisation needs to issue invoices for goods or services from within China. If no such need exists a Representative Office (RO) could be the appropriate solution.

The RO offers an inexpensive way to establish a permanent presence in the country to provide access to the China market. A RO can generally be used for conducting market research, quality control, purchasing, marketing and sales administration for sales conducted between China and the parent company as well as administration for Group activities elsewhere in China.

ROs must be located in Grade A, government approved buildings and will need a lease of a minimum of one year. The immediate parent company of the RO must have existed for at least two years prior to the RO registration. It is generally possible to purchase an existing clean Hong Kong company for this purpose if desired. The number of foreign staff is limited to four only though there is no restriction on local staff. If local staff are employed, they need to be hired and paid via a government recognized organization approved for this purpose.

Where an organisation does have the need to issue invoices within China they have a choice between Joint Ventures (JV) or Wholly Foreign Owned Enterprises (WFOE).

The choice between a JV and a WFOE depends on whether the organization will have a local Chinese partner. Where a Chinese partner does exist the operation could be structured as a JV. JVs are further subdivided into equity JVs and contractual JVs. An equity JV is a partnership between a foreign and a Chinese organization and needs to be approved by the China government. The overseas investor is allowed to contribute a maximum of 25% of the total registered capital, and profits are divided accordingly. The strategies must be in compliance with state economic development programmes. With a contractual JV, all liabilities, rights, and responsibilities are agreed upon in a contract, and things like the division of profits are not dependant on the proportion of shares held.

A Wholly Foreign Owned Enterprise (WFOE) is often the chosen method of operation as no local Chinese partner is necessary.

A WFOE is a Chinese limited liability company that is wholly foreign owned and limited by its registered capital which is generally a combination of equipment and cash. The amounts of cash required and ratio between equipment and cash vary depending on the location and business activity. The required minimum registered capital was previously USD140,000 and although this requirement was removed in 2006, the authorities still view this as the bench mark when approving new WFOE’s. Generally, the test would be that the minimum registered capital should be sufficient for the WFOE to maintain itself until it is self sustainable. Critical to the successful set up of a WFOE is the careful drafting of the company articles as these define what a WFOE will and will not be able to do in its trading and financial operations.

In addition to the above, the parent company of a WFOE will generally be required to pay the registered capital in full upon registration OR 20% of the registered capital within 3 months from the issuance of the business licence with the outstanding capital required to be paid in within 2 years. There are restrictions on numerous business activities in China and these are regularly changed.

For a firm wishing to enter the China market the complexities of the operation can at first seem extremely bewildering. Not only are there the normal concerns of business viability and cost structures but issues are further compounded by the various types of entity through which an operation can be set up in China. Each of these has its own set of operating restrictions and tax treatments. Furthermore there are literally hundreds of special economic zones offering special rates and tax concessions which differ from state to state, city to city, and at times from district to district. China also divides foreign goods and services into three categories - encouraged, accepted and prohibited, all of which can command different approaches to their establishment. China’s legal and accounting system is run on very different lines to the West. Reliable information is not easy to find and China is rapidly overhauling its legal, financial, accounting and tax systems to meet reform programmes. All this means that a potential investor is faced with daunting obstacles in setting up his operation. Some see the above as a barrier to entry.

However, provided the business plan is well thought through and the method of entry is based on sound advice, the rewards can be tremendous. Whatever method is followed to establish a presence in China, China has become too important economically to ignore.

This was written by Frederik Van Schalkwyk.

Fiscal Representation In Portugal

Just in case you missed it, here is a great article, Fiscal representation in Portugal. Written by the Portugal office of The Sovereign Group for the Hey Portugal blog, which is aimed at the expats living in Portugal.

Purchasing Property in Hong Kong

An article written by Howard Bilton, explaining what you need to know about purchasing property in Hong Kong.

There is much enthusiasm in Hong Kong for investment in property. Companies can go bust and their shares and bonds become worthless. Property will always have a value and it’s safe to say that any piece of Hong Kong property will be worth more in 10 years than it is now although it may be a roller coaster ride. . There is a shortage of housing here exacerbated by the government’s policy to release land slowly to maximize the price. The government announced a special stamp duty designed to curb property speculation and cool an overheating market. By way of reminder buyers and sellers are jointly liable to pay a special 15% tax on property sold within 6 months of acquisition, 10% if held between 6 and 12 months and 5% if sold within 24 months of purchase. Why not release some more land instead? Ultimately the market will only calm down if there is sufficient supply to meet demand. A properly analyst friend recently estimated that annual demand for new properties was 40,000 units and only about 15,000 units come on to the market each year so the cause of the rapid rise in prices seems clear enough.

The special ‘tax” is unlikely to make much difference. For those purchasing properties of a higher value or for investment it has probably always been the case that it is prudent to purchase in the name of a company and pay corporation tax on rental income rather than personal tax. This is due to the differing treatment of interest payable on loans taken out to purchase the property. An individual may only get a tax deduction of up to HK$100,000 in mortgage interest every 7 years and only for a loan on their primary residence. The deduction will have little impact on those purchasing more expensive properties and has no application to anybody purchasing property for investment. If a company makes the purchase it pays profits tax not property tax and all expenses in relation to the property are deductible from income. This is a rather compelling reason to purchase through a company.

Corporate ownership allows for anonymity. An individual purchaser’s name will appear on the public property register but it is relatively easy to disguise the true ownership of a company. Ownership of a company can easily be rearranged by transferring the shares and allows the special tax to be avoided because there is no transfer of title in the property. In some countries a transfer of the shares in a property owning company is treated and taxed as though it was a transfer in the property itself. This is not the case in Hong Kong. The government have not enacted any legislation with that effect so the special tax is relatively easy to avoid. In fact the government has always had legislation at its disposal which could have a similar effect to the special stamp duty. As long ago as 2008 the Financial Secretary indicated that a rapid purchase and sale of a property would be treated as trading in property and gains would be taxed as income not capital gains. The former is taxed the latter is not. Be aware of this possibility. This measure is similar to the position for foreign investors in UK property. Non residents of the UK are not subject to UK CGT. if an Hong Kong resident purchases UK property and exploits it by renting it out then on resale there will be a capital gain produced which is not taxable in the UK. However, if that same investor buys property and then sells it rapidly he can be considered as producing income from trading in property and would therefore have to pay UK income tax on the profit.

Frequently those going to live in a higher tax country are faced with estate duties and global taxes on income and capital gains. Often a solution to that problem is to transfer assets into a trust or foundation prior to arrival in the new country. Being able to achieve that by a transfer in shares of a company is much cheaper and easier than trying to rearrange title to the property.

A Hong Kong company can be used to purchase Hong Kong property but it will be frequently more advantageous to use an offshore company and register it in Hong Kong if necessary. Transfers in the shares of an offshore company can be made completely free of tax and stamp duty. Transfers in the shares of a Hong Kong company attract stamp duty, albeit at low levels, and some other costs and expenses.

Either way there are substantial advantages to corporate ownership so investors would be wise to consider this option but legislation and tax systems change rapidly and without notice so it would also be wise to check with your advisors before proceeding.

Abu Dhabi to raise FDI to 23% of GDP by 2030

Abu Dhabi to raise FDI to 23% of GDP by 2030

Abu Dhabi economy in recent years has made major steps to diversify its economy away from oil revenues into petrochemicals, steel and aluminum. The multi-billion dirham projects are in line with Abu Dhabi's Economic Vision 2030 that aims for sustainable growth on a solid economic basis.

According to Abu Dhabi's Urban Planning Council some $200 billion (Dh734 billion) will have been pumped by 2013 into various infrastructure projects. The idea behind Abu Dhabi's economic diversification is that if oil prices go down, there will be other sources of income to compensate for the loss in oil revenue.

However, oil revenues are still an important source of revenue for the emirate, contributing 49 per cent to the GDP. Experts say that Abu Dhabi's economic growth momentum will gain traction in 2011 from surging international oil prices and fast-improving global business confidence which will help boost the emirate's non-oil income as well.

Abu Dhabi also has identified aviation and high-end business and leisure tourism as key elements in its economic growth strategy and is judiciously investing income from oil exports to become a major regional aviation hub.

If you are a potential investor, Abu Dhabi does offer lucrative investment opportunities. Many foreign and local investors are using offshore structures to ride the wave of Abu Dhabi’s Economic Vision 2030. Contact us if you already have investments in Abu Dhabi or planning to invest, we will assist you in protecting your investments through offshore structures.

Article by the Chairman in HK Golfer

If you go to page 34 you will see an article by our chairman, titled "Don't lose control". A great read for those thinking about setting up your own Private Trust Company

Open publication - Free publishing - More golf

US signs tax treaty with Panama

US signs tax treaty with Panama

The US and Panama signed an agreement, on 30 November 2010, to exchange tax information. It will permit the US and Panama to seek information from each other on all types of national taxes in both civil and criminal matters for tax years beginning on or after 30 November 2007.

"Today, we are ushering in a new era of openness and transparency for tax information between the United States and Panama" said US Treasury Secretary Timothy Geithner in a statement after a meeting with Panama's vice president and minister of foreign affairs, Juan Carlos Varela.

Last year, some Democratic lawmakers who had criticised Panama as a tax haven demanded that Panama sign a tax information exchange agreement with the US before Congress voted on the free trade pact.

The new tax information exchange agreement, upon entry into force, will provide the US with access to the information it needs to enforce US tax laws, including information related to bank accounts in Panama.

Find out how The Sovereign Group can help you more via our main website.

Swiss reject wealth tax proposal in referendum

Switzerland’s voters rejected, on 28 November 2010, a proposal to increase taxes for the nation’s top earners, following the recommendations of most national leaders.

In a referendum, 59% of voters turned down the proposal by the Social Democrats to enact minimum taxes on income and wealth. Residents would have paid taxes of at least 22% on annual income above SFr250,000 ($249,000), according to the proposed changes.

Switzerland’s executive and parliamentary branches had rejected the proposal, saying it would interfere with the cantons’ tax-autonomy regulations. The changes would also damage the nation’s attractiveness, the government, led by President Doris Leuthard, said before the vote.

Keep up to date with The Sovereign Report.