Turks and Caicos Islands: Doing Business In The Turks And Caicos Islands 2014

Overview

1. What are the key recent developments affecting doing business in your jurisdiction?

The period of direct rule by the UK (2009 to 2012) ended in late 2012 with the election of a new local government and the coming into force of a new constitution.

The Turks and Caicos Islands (TCI) economy has stabilised significantly and there has been a return to economic growth. Public finances have improved and business confidence has risen significantly. Tourism and resort developers have returned to the TCI marketplace and a number of large-scale tourism-related construction projects are expected to start in 2014.

On the legislative front, there has been significant focus on taxation issues and regulatory enhancement. Investment-based permanent residency has been reintroduced. On the tourism and real estate front, a new Fractional Ownership Ordinance is expected to have a positive impact on construction and real estate development.

Legal system

2. What is the legal system based on (for example, civil law, common law or a mixture of both)?

The TCI is a common law jurisdiction modelled on the English legal system.

A Magistrates' Court sits in most of the Islands and there is an appeal process from the Magistrates' Court to the Supreme Court. The Supreme Court is similar to the High Court in England and is presided over by a single judge. The Supreme Court exercises first instance jurisdiction in more serious criminal and civil matters that are beyond the Magistrates' Court's jurisdiction.

There is an appeal process from the Supreme Court to the Court of Appeal. The court sits in the TCI in February and August of each year for about two to three weeks, depending on the case load. Appeals can be made from the Court of Appeal to the Privy Council, which sits in England. The Privy Council is the final appellate court.

Foreign investment

3. Are there any restrictions on foreign investment (including authorisations required by central or local government)?

There are no restrictions on foreign investment and the government has a successful open-arms inward investment policy. The Government Investment Unit carries out certain due diligence checks on potential investors.

All businesses require a business licence and there are a number of categories of business licence which, except in exceptional circumstances, are limited to Turks and Caicos Islanders (for example, retail, trucking and car sales).Typically, large scale investments do not face any difficulty acquiring a business licence.

There are no restrictions on foreign investment in TCI real estate. There are no restrictions on foreign shareholders (apart from in the business categories mentioned above).

4. Are there any restrictions on doing business with certain countries or jurisdictions?

There are some restrictions on dealing with countries that are the subject of UK economic sanctions, such as Iran and North Korea.

5. Are there any exchange control or currency regulations?

The TCI uses the US dollar. There are no restrictions on the transfer of money into or out of the TCI. However, funds of over US$500,000 coming into the TCI through local banks must be accompanied by satisfactory evidence of the source of funds, to comply with anti-money laundering guidelines. The threshold figure is set by the banks themselves, and lesser amounts may be subject to enquiry depending on how comfortable the bank concerned is with the particular transaction.

There are no restrictions on, or reporting requirements for, the payment of profits abroad. Hard currency can be taken out of the country.

6. What grants or incentives are available to investors?

The government can provide import and export incentives for establishing new enterprises (or expanding existing ones) that are seen to benefit employment and the TCI's economy (Encouragement of Development Ordinance). The government can grant relief from a variety of duties and fees, mainly on the import of materials to be used in connection with construction projects, but also on exports. The incentives are not restricted to TCI-owned enterprises. Generally, the level of fiscal concessions available to a foreign investor is greater for businesses based outside the main commercial island of Providenciales.

Business vehicles

7. What are the most common forms of business vehicle used in your jurisdiction?

Subject to the obtaining of any necessary business licence or other regulatory consents (the latter particularly in the case of financial services), the main business vehicles used are an:

• Ordinary TCI company limited by shares.
• Ordinary TCI company limited by guarantee.
• Ordinary limited partnership (LP).

The TCI is also an emerging financial centre and TCI exempted companies are widely used internationally for businesses and asset-holding outside the TCI. Trusts are permissible under TCI law, but a trust is not generally regarded as a vehicle through which to conduct direct business (though a trust is frequently the owner of a company which conducts business). Joint ventures are generally created by having either a:

• Shareholders' agreement between the investors (in the case of a company limited by shares).
• Limited partnership agreement (in the case of an limited partnership).

The TCI ordinary company is a flexible vehicle which can be incorporated quickly and which is not subject to onerous or cumbersome regulations. It is the most common vehicle used by foreign investors in the TCI.

8. In relation to the most common form of corporate business vehicle used by foreign companies in your jurisdiction, what are the main registration and reporting requirements?

Registration and formation

A new company must file and register its memorandum and articles of association (charter and bye-laws) with the Companies Registry. It is possible to buy an off-the-shelf company. A company can be incorporated within one day of receipt of instructions. However, it usually takes about one week to have all the paperwork filed and returned from the Companies Registry. Company directors' personal attendance is not required.

Domestic companies must have their registered office in the TCI. Foreign companies doing business in the TCI can be registered under the Companies Ordinance. Certain business activities, such as retail stores, real estate agencies and auctioneers, are limited to TCI nationals (Business Licensing Ordinance).

Reporting requirements

The main reporting requirement is to file an annual return specifying details of:

• Shareholders.
• Directors.
• Officers.
• Capital structure.

There is no obligation to file financial statements.

The government fee for submission of the annual return is:

• US$350 for an ordinary company.
• US$300 for an exempt company (as defined in the Companies Ordinance).

Share capital

Generally, there are no restrictions on a company's share capital. However, certain companies (such as banks, trust companies, mutual funds and insurance companies) must have a minimum share capital. The amount is based on the company's business plan, size and nature.

A company can alter its share capital by ordinary resolution, if authorised by its articles. A company can reduce its share capital by special resolution, if authorised by its articles and confirmed by the Supreme Court.

Non-cash consideration

A company can issue shares for non-cash consideration. A formal valuation is not required but a company can voluntarily carry it out.

Rights attaching to shares

Shares can be issued with any rights or classes that the company determines, subject to compliance with the company's memorandum and articles. A shareholders' agreement can, as a matter of contract between the shareholders, be used to set out rights attaching to the shares vis-à-vis other shareholders. Similarly, restrictions attaching to shares are generally dealt with either in the memorandum and articles of association or in a shareholders' agreement.

9. In relation to the most common form of corporate business vehicle used by foreign companies in your jurisdiction, outline the management structure and key liability issues.

Management structure

A TCI company is managed by a board of directors. All companies must have at least one director and one company secretary, although these two positions can be held by the same person. There is no restriction on who can participate in, manage or direct a company incorporated in the TCI, but managers who are resident in the TCI must have the required immigration status.

Management restrictions

There are no restrictions on foreign managers (other than the requirement to hold the relevant work permit).

Directors' and officers' liability

Directors have both fiduciary obligations and obligations of skill and care to the company. A director who is party to a fraud or to the commission of any tort is personally liable to the injured party. For example, if by order of the directors copyright is infringed, the directors who are parties to the infringement are personally liable, as is the company. The Companies Ordinance also imposes criminal penalties on directors for a number of offences. In the absence of a criminal offence, directors' duties are largely enforced by civil remedies.

Parent company liability

The liability of a parent company is limited to the amount unpaid on issued shares.

Employment

Laws, contracts and permits

10. What are the main laws regulating employment relationships?

The Employment Ordinance 2004 and the Employment Order 1993, govern most employment relationships. It is occasionally necessary to look at national insurance legislation in tandem with the Employment Ordinance in relation to sick payments and benefits. There is a minimum wage, currently $5.00 per hour.

The employment laws apply to foreign persons working in the TCI. The laws do not purport to have extra-territorial effect and so have no bearing on the contract of employment of a TCI national working outside the TCI, unless the employee ordinarily works in TCI and the work outside TCI is for the same employer.

11 .Is a written contract of employment required? If so, what main terms must be included in it? Do any implied terms and/or collective agreements apply to the employment relationship?

An employee must be given a contract setting out the terms of employment within seven days of starting work. The contract of employment can be:

• For a fixed term.
• For a specific task.
• For a probationary period of no more than three months.
• Without reference to any time limits.

In addition, it must specify the:

• Identity of the parties.
• Date on which employment began.
• Date on which continuous employment began, taking into account employment with previous employers that counts towards that period.
• Scale of remuneration.
• The terms and conditions of work.

12. Do foreign employees require work permits and/or residency permits?

Work permits are necessary for all non-nationals. To obtain a work permit, an application must be completed and submitted to the Immigration Board, along with various documents and the appropriate fee. The fee ranges from US$100 to US$10,000, depending on the type of employment. There are a few additional requirements for a self-employed work permit.

A work permit is usually granted for one year. However, a three-year work permit can be obtained. The process takes about ten to 12 weeks. Temporary permits can be obtained at a cost of US$700 and can be renewed for up to a maximum of 42 days.

The employer obtains and pays for employees' work permits.

Termination and redundancy

13. Are employees entitled to management representation and/or to be consulted in relation to corporate transactions (such as redundancies and disposals)?

Employees are not entitled to management representation or consultation in relation to corporate transactions.

14. How is the termination of individual employment contracts regulated?

Termination of an employee's employment must be fair. To be fair, the employer must show the Labour Tribunal that the termination is for any one of the following reasons:

• The employee's capability or qualifications for the job.
• The employee's conduct.
• Redundancy.
• The fact that the employment could not continue without contravention of a duty or restriction imposed by another ordinance.
• Some other substantial reason

The law in relation to unfair dismissal is very similar to England's.

If the employer meets this requirement, the Labour Tribunal will decide whether a dismissal is fair or unfair depending on whether it deems the employer's reason for dismissal as sufficient in the circumstances.

An employee must be given notice of termination, unless he is dismissed for serious misconduct (for example, gross insubordination or dishonesty) and therefore it would be unreasonable to require the employer to continue the employment relationship.

A person who is continuously employed for one month or more is entitled to the following notice periods:

• One week's notice if his period of employment is fewer than two years.
• One week's notice for each year of continuous employment if he has been continuously employed for between two and 12 years.
• 12 weeks' notice if his period of continuous employment is 12 years or more.

Unless contractually bound, dismissed employees have no continuing obligations to the employer once they have left.

If a dismissal is fair, an employee is not entitled to any payments other than for entitlements that have previously accrued but are unpaid at the date of dismissal.

An employee who is unfairly dismissed can take proceedings against the employer:

• In the Labour Tribunal for remedies prescribed by the Employment Ordinance.
• In the courts for wrongful dismissal or breach of contractor discrimination.

The Tribunal can make an order of:

• A basic award
• Reinstatement.
• Re-engagement.
• Compensation, up to a maximum of US$35,000.

Victims of discrimination have civil remedies available to them, including:

• Damages.
• Re-engagement or reinstatement.

15. Are redundancies and mass layoffs regulated?

Employees who have been employed for two years or more are, in a redundancy, entitled to severance pay of two weeks' wages for each year of service. This is pro-rated for an incomplete year.

Tax

Taxes on employment

16. In what circumstances is an employee taxed in your jurisdiction and what criteria are used?

The TCI has no income tax.

17. What income tax and social security contributions must be paid by the employee and the employer during the employment relationship?

Tax resident employees

There is no income tax. Employees are liable to pay National Insurance contributions amounting to 3.4% (salary cap for purposes of liability, US$2600) and National Health Insurance contributions amounting to 3% (salary cap, US$7800).

Non-tax resident employees

Not applicable.

Employers

There is no income tax. Similarly there is no corporate tax. Consideration was given in 2012 and early 2013 to the imposition of VAT and subsequently a services tax was mooted: both proposals have now been dropped. Employers who are individuals are themselves liable to make National Insurance and National Health Insurance contributions on their own account. An employer is also obliged to pay the employer's portion of National Insurance contributions amounting to 4.6% and National Health insurance contributions amounting to 3% for its employees.

Business vehicles

18. When is a business vehicle subject to tax in your jurisdiction?

Tax resident business

The TCI has no direct taxation.

There are no corporate, income, capital gains, sales turn over or profits taxes.

Non-tax resident business

There are no corporate, income, capital gains, sales turn over or profits taxes in the TCI.

19. What are the main taxes that potentially apply to a business vehicle subject to tax in your jurisdiction (including tax rates)?

There are no corporate, income, capital gains, sales turn over or profits taxes in the TCI.

There are several indirect taxes including:

• Customs duty on imported goods, customs processing fees and similar.
• Hotel and accommodation tax on accommodation, food and beverages supplied in designated establishments.
• Stamp duty on the acquisition of real estate.
• Transfer duty on the transfer of equity interests in landholding companies.
• Telecommunications tax.
• Internet tax.

These taxes are consumption based and arise on the relevant transaction or consumption.

In addition, a business vehicle operating in the TCI is liable for:

• Annual company registration fees (currently US$300).
• Business licence fees (ranging from US$150 to US$10,000 depending on the type of business).
• Annual work permit fees on its non-TCI personnel (ranging from US$100 to US$10,000).

Dividends, interest and IP royalties

20. How are the following taxed:

• Dividends paid to foreign corporate shareholders?
• Dividends received from foreign companies?
• Interest paid to foreign corporate shareholders?
• Intellectual property (IP) royalties paid to foreign corporate shareholders?

Dividends paid

These are not taxed in the TCI.

Dividends received

These are not taxed in the TCI.

Interest paid

These are not taxed in the TCI.

IP royalties paid

These are not taxed in the TCI.

Groups, affiliates and related parties

21. Are there any thin capitalisation rules (restrictions on loans from foreign affiliates)?

The TCI has no thin capitalisation rules.

22. Must the profits of a foreign subsidiary be imputed to a parent company that is tax resident in your jurisdiction (controlled foreign company rules)?

There are no controlled foreign company rules.

23. Are there any transfer pricing rules?

There are no transfer pricing rules.

Customs duties

24. How are imports and exports taxed?

The duties on imports apply at rates ranging (mainly) from 5% to 45% (General Tariff Order, Customs Ordinance). Some goods do not attract duty. There are no import quotas. In the past year, the government has increased a customs processing fee charged over and above customs duty to 7.5%. In addition, a tax on freight and insurance charges charged by the shipper to the TCI importer has been introduced, at 15% of the amount of those charges.

Export duties are payable on seafood only.

Double tax treaties

25. Is there a wide network of double tax treaties?

The TCI is not party to any double tax treaties, but has a network of tax information exchange agreements with a number of onshore jurisdictions.

Competition

26. Are restrictive agreements and practices regulated by competition law? Is unilateral (or single-firm) conduct regulated by competition law?

There are no competition laws in the TCI, other than the restraint of trade rules applicable under English common law.

Competition authority

There is no competition authority.

Restrictive agreements and practices

Common law rules apply, specifying contractual terms that amount to an unreasonable restraint of trade, such as unduly broad non-compete clauses.

27.Are mergers and acquisitions subject to merger control?

The TCI Companies Ordinance does not provide for merger. Therefore, transactions of that nature are typically carried out by either:

• Take-over.
• Acquisition by one company of the assets and undertaking of the other.
• The creation of a new entity into which each party to the merger contributes its assets and undertaking in return for the issuance to it of shares in the new vehicle.

These arrangements are not subject to merger control but are subject to the limitations relating to business licensing (see Question 8).

Intellectual property

28. Outline the main IP rights in your jurisdiction.

Patents

Definition and legal requirements. Patents are defined as patents granted under the Patents Act 1949 or under the Patents Act 1997 (of England and Wales), and include a European patent that has effect in the UK under section 77 of the Patents Act 1977.

For a patent to be registered in the TCI, it must have already been registered in the UK. For an invention to be patentable in the UK, it must have all of the following characteristics:

• Be new.
• Involve an inventive step.
• Be capable of industrial application.
• Not be specifically excluded from protection as a patent.

Registration. An application to register a patent is made to the UK Patent Office. Once the application is granted it can be registered with the Registrar of Patents in the TCI.

Enforcement and remedies. Patents are enforced through initiating legal proceedings. A patent holder can sue for damages or seek an injunction to restrain the breach.

Length of protection. The duration of protection is equivalent to that afforded by UK registration (typically 20 years). Therefore, if the UK registration is extended, that extension applies equally to the TCI registration.

Trade marks

Definition and legal requirements. Any sign capable of being represented graphically and of distinguishing the goods or services of one undertaking from those of others can be registered. The right holder's remedies in the case of breach are to sue for damages and/or seek an injunction against the breach and further breaches.

Protection. A trade mark must be registered with the Registrar of Trade Marks to be protected. Unregistered marks can obtain limited protection through registration as a business name in the TCI. In addition, a party using a trade name associated with another could be liable at common law for passing-off.

Enforcement and remedies. Trade marks are enforced in the same way as patents (see above, Patents).

Length of protection and renewability. Protection lasts for 14 years from the time of registration and can be renewed.

Registered designs

The TCI does not have a regime protecting registered designs.

Unregistered designs

Unless the unregistered design falls into one of the protected categories of intellectual property (trade mark, copyright or patent), then it will not have protection in the TCI.

Copyright

Definition and legal requirements. The UK Copyright Act 1911 (Copyright Act) applies in the TCI and covers, for example, original literary, dramatic, musical and artistic works, and film soundtracks. The right holder's remedies in the case of breach are to sue for damages and/or seek an injunction restraining the breach and further breaches.

Protection. Protection subsists automatically without the need for registration.

Copyrights are enforced in the same way as patents (see above, Patents).

Length of protection and renewability. Protection lasts for the life of the author plus 50 years, unless otherwise provided by the Copyright Act.

Marketing agreements

29. Are marketing agreements regulated?

There are no specific laws relating to agency, distribution or franchising agreements.

E-commerce

30. Are there any laws regulating e-commerce (such as electronic signatures and distance selling)?

The Electronic Transactions Ordinance 2001 regulates e-commerce. The main provisions are as follows:

• Electronic records. Electronic documents are given legal effect. Legal recognition is also given to electronic signatures.
• Communication of electronic records. Contracts can be created by electronic means, and practical issues such as place and time of sending and receipt are covered.
• Electronic signatures. A regime is contemplated for authorising service providers to certify electronic signatures. This is dealt with in more detail by regulation.
• Encryption. The government can issue regulations to deal with the use, import and export of encryption programs and products.
• Data protection. There is provision for the voluntary registration of data controllers and data processors. Standards for the processing of personal data can be established by regulation, and volunteers must comply with those standards.
• Intermediaries and e-commerce service providers. Intermediaries are excluded from civil and criminal liability for the information contained in an electronic record, in certain circumstances. Codes of conduct and standards for intermediaries and e-commerce service providers will be introduced, enforced by the relevant ministry.

Advertising

31. Outline the regulation of advertising in your jurisdiction.

Apart from common law rules applicable to fraud and misrepresentation, advertising is not regulated.

Data protection

32.Are there specific statutory data protection laws? If not, are there laws providing equivalent protection?

There is no data protection statute. Common law rules regarding rights of confidentiality and privacy apply. In addition, the TCI Constitution stipulates that every person has the right to respect for his private and family life, his home and his correspondence, and is to be free from unauthorised search. Also, the TCI's Confidential Relationships Ordinance imposes statutory obligations of confidentiality regarding confidential information with respect to business of a professional nature.

Product liability

33. How is product liability and product safety regulated?

All goods sold must be of merchantable quality and fit for purpose (Sale of Goods Ordinance). In addition, the seller of defective goods may be liable in negligence to a party injured or damaged as a result of the defect. There is no government body or official whose function it is to regulate product liability.

Main business organisations

Turks and Caicos Government Investment Unit

W www.gov.tc

Main activities. Gateway for enquiries regarding significant-scale foreign direct investment in the TCI.

Turks and Caicos Government Companies Registry

W www.gov.tc

Main activities. Registration of TCI companies and limited partnerships, overseeing filing of annual returns, and related corporate administration issues.

Turks and Caicos Government Financial Services Commission

W www.tcifsc.tc

Main activities. Regulation of financial services in the TCI, including regulation of company managers, professional trustees, insurers, banks and investment dealers.

Turks and Caicos Government Immigration Department

W www.gov.tc

Main activities. Oversight of the granting of permissions to foreign persons to live or work in the TCI.

Turks and Caicos Government Land Registry

W www.gov.tc

Main activities. Oversight and registration of all TCI real estate dealings and the maintenance of public registers in that regard.

Work permit requirements

Online resources

There are no official websites on which TCI laws are publicly available. Copies of individual laws can be obtained by applying to the Attorney General's Chambers at dadownes@gov.tc. In addition, the following unofficial resources are helpful for online editions of TCI laws:

• www.misickstanbrook.tc
• www.tciyellowpages.com/ordinance-legislation-tci-yellow-pages-turks-and-caicos-islands

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.