Question

Some of the innovative programs country have to encourage international investors including grant programs and other incentives. Find an article discussing some of the best financial incentives countries are offering to set up shop within their shores.

Answer 1

For businesses and well-heeled investors, moving offshore has long provided an array of benefits—tax neutrality being paramount among them. Despite the new complexities, offshore tax havens retain much of their popularity with businesses and investors.

THE CARIBBEAN

The Bahamas

Hundreds of financial institutions and trust companies have set up shop in The Bahamas, attracted to its long history of parliamentary democracy, easy incorporation rules for offshore companies, anonymity statutes built for maximum investor privacy, and a minimum requirement of one shareholder and one director. Companies face no direct taxes in the country, with the government supported, in part, by fees on licensing.

In early 2018, the country was briefly added to the EU’s tax haven “blacklist,” which highlights countries that fall short of European Union tax transparency standards. However, fast action by the government led to removal from the list just two months later.

In spite of the recent EU activity, The Bahamas had previously received praise for its commitment to fighting cross-border fraud and securities violations. In 2013, it was the first Caribbean nation awarded “A” Status by the International Organization of Securities Commissions for the strength of its regulatory standards.

Bermuda

Like its fellow British territories in the Caribbean, Bermudahas leveraged attractive tax policies, a highly experienced financial services sector, and business-friendly officials to cement its status as a destination for offshore subsidiaries and funds. It’s been an especially popular locale for the insurance industry—particularly reinsurance providers who have made the island the third largest reinsurance center in the world.

Yet Bermuda is facing regulatory and legislative headwinds. First, the U.K.’s new corporate transparency rules may force officials to register corporate entities that had previously enjoyed almost complete anonymity. (As with the Caymans and the British Virgin Islands, Bermuda is opposing the changes.) And the recently enacted U.S. tax law closeda critical loophole that gave foreign insurers based in Bermuda significant tax advantages.

Notably, however, major Fortune 100 companies continue to locate subsidiaries in Bermuda—suggesting that the island will remain a significant force in limiting tax liability for many years to come.

The British Virgin Islands

The British Virgin Islands is perhaps the world’s leading offshore incorporation locale, with more than 400,000 active companies counting subsidiaries there.

In 2017, research by the islands’ government showed that offshore companies based in the British Virgin Islands have assets worth more than $1.5 trillion. With a well-respected financial sector and no corporate tax, the islands have been, since the 1980s, a go-to haven.

New U.K. corporate transparency rules and European Union and U.S. regulatory pressure may dampen corporate enthusiasm to some extent in the next few years. Yet, the islands have proven resilient in the face of past compliance efforts, passing laws in 1984 and 2004 that not only helped satisfy international concerns of the time, but that also made the locale even more attractive to businesses.

Cayman Islands

For the moment, the Cayman Islands retain their place among preferred destinations for offshore funds. The islands offer an attractive corporate infrastructure—a stable government, an advanced legal system, pro-business policies—and no corporate or income tax. The government earns its money through licensing fees paid by offshore enterprises.

As previously noted, the Caymans are under increasing pressure to reform privacy rules to encourage greater transparency, and regulatory fears have led some companies to set up shop elsewhere. In most of the recent EU and U.K. actions, corporations and the jurisdiction’s leaders have been given until 2020 to comply with new regulations. The next two years may well determine whether the Caymans will remain an offshore powerhouse.