Martin Priest of St Peters Trust Company Limited Guernsey and Ekaterina Shalupova of St Peters (International) Limited, London and Moscow, look at how Guernsey has become an attractive alternative for Russian clients.
Guernsey has evolved into an international financial centre over the past 50 plus years. During this period the many thousands of professionals providing diverse advice and services have gained extensive experience in their field.
There are many reasons for Guernsey having become and continuing to be a successful international financial centre which include:
- Political stability - Guernsey has experienced over 800 years of independence, having pledged allegiance to the English Crown but not the English Government, in 1204. It is not a member of the European Union, although it has been granted a special status whereby it is included for the purposes of freedom of movement of goods.
- Guernsey is internationally recognised as one of the best regulated financial centres in the world. As well as regulating banks, insurance service providers, fund managers, it is one of the few jurisdictions which not only regulates but licenses trust and corporate service providers.
- The basic rate of personal taxation has remained at 20% since the 1950s with no capital gains tax, inheritance tax, gift or wealth taxes being imposed.
- It is clear that proper and effective management and control (using the Island's extensive pool of expertise) can be exercised there without adverse implications, the standard rate of corporate taxation being 0%.
- It has up to date and innovative legislation with regard to trusts, foundations and companies. The latter includes a provision to establish protected and incorporated cell companies as well as those with both guarantee and shareholder members.
- It has extremely good communications links into London, where much international business is undertaken.
- It is financially stable with no significant government borrowing or locally established banks, which the Island would be required to support in the event of problems arising.
In this world of increasing uncertainty, political instability and financial strains elsewhere, Guernsey is in an enviable position. As a result it has to be seen as an ideal location in which to establish and administer, trusts, companies and foundations by individuals who wish to ensure that assets are protected and managed in a professional and discreet manner.
Traditionally, Russian clients have used jurisdictions such as Cyprus and the British Virgin Islands, the former benefitting from a double taxation treaty with Russia. Effective structuring used to be relatively simple.
However, the advent of Russian Controlled Foreign Company legislation and the likelihood of the Common Reporting Standard being introduced within the next few years, together with political instability, international sanctions and conflicts means that many Russians are looking for more sophisticated structures in order to protect assets for themselves and future generations.
Guernsey is ideally suited, for the reasons set out above, to be able to assist such individuals, using the expertise of its many trustees, corporate service providers, asset managers, bankers, insurers, etc, who provide a full range of services that can be effectively coordinated from Guernsey, as well as evidencing that proper and effective management and control in a tax neutral environment.
Guernsey's positon contrasts with a number of other jurisdictions that have been under attack and/or have had financial and political stability issues over recent years. There is no reason why Guernsey's position as a top quality, stable, well regulated, international financial services centre should not continue.
An original version of this article was published in RBCC Bulletin, December 2015.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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