Pacific Course: New Alternative to Old Offshore
In 2017, the classic offshore companies that offer the possibility of full tax exemption (British Virgin Islands, Belize, Panama, Nevis, etc.) became unattractive for Russians because of the steady loss of what was once the benefits there: closed share registers, the possibility of using nominal values, complete lack of company reporting and convenient banking schemes. This year was marked by a surge of hyperactivity in FATF (The Financial Action Task Force on Money Laundering), predicting the imminent end of the offshore industry. Recent events with the banks of Cyprus and the “Panama Papers” make this believe. In Latvia, US companies Navigant Consulting Inc, Promontory Ltd. and Exiger LLC conducted an “independent” bank audit, which led to the closure of Trasta Commerce Banka and confusion among the rest. The increasing pressure of FATF on banks has led to the fact that the usual Latvian banks have become inhospitable. Eastern European countries after joining the EU tightened banking rules. Swiss banks have become particularly conservative for new customers and picky for old ones. It can be concluded that today in Europe you will hide the money, but rather you will lose it. Crafty registrars still trade offshore, but the most honest of them warn that bank accounts are no longer guaranteed.
Pacific Course: New Alternative to Old OffshoreWhat to do in the current situation? We will not discuss this first question of the Russian intelligentsia, as well as the second “who is to blame?”
No one. The era of “clean offshore” is over and they were officially declared dirty, laundry, washing machines, etc. Began a new financial era. It does not matter whether we like it or not, but the course of the financial system has changed radically.
The new course has three notable features: the center of financial activity today moves from Europe to the Pacific region, where the jurisdictions of Australia, New Zealand, and Hong Kong are quite respectable from the point of view of the FATF;
the place freed by the offshore begins to occupy the midspore, and not as a “gasket” for offshore schemes, as it was before, but quite self-sufficient, as the only reasonable alternative to offshore;
Fintech technology is developing, advancing on the primordial territory of the “classic” banks and offering not just computerization of financial calculations, but fundamentally new organizational schemes of work.
The governments of the countries of the Pacific region are making significant efforts to attract international financial resources to their territories, creating advantages for investors, consolidating the positions of the midshore, and developing new financial technologies. Australia is the only one of the developed countries that allows investors to use the negative gearing scheme. If an investor’s expenditures on investments made in the reporting year exceed his income (for example, from renting property, paying dividends, and coupon income on securities), then the net loss he incurred can be deducted from his other taxable income. New Zealand in 2015, under pressure from the United States, cut its quasi-offshore, incl. trust options, but today it offers a unique (and quite legitimate) scheme of a non-banking financial service provider (Financial Service Provider) that runs a range of financial services, once available only to “classic” banks. The Government of Hong Kong has adopted the Corporate Treasury Centers Directive (The Inland Revenue Amendment No 2, Ordinance 2016), which creates favorable conditions for foreign companies, including in terms of taxation.
What is better – offshore or midshore?
Of course, we must not forget that the owners of the new Pacific Midshire are heading for FATF policy, which means that they will have to forget about the old offshore paradise: reporting is necessary, there will be no cheaper denominations, Fintech will require hardware and software support. If you express all of the above in one word, it means appreciation. However, it is worth remembering that the word Pacific also has the meaning “peaceful”, it is reasonable to adapt to the new course, because the midshore world is better than an offshore war, which practically ended with the victory of FATF. In the near future, most offshore jurisdictions will begin implementing the OECD standard for the exchange of tax information in an automatic mode (by the way, Cyprus recently signed a protocol with the Russian Federation).
Pacific Course: A New Alternative to Old Offshore The last in order, but not by value, is the question of the confidentiality of business and personal information and the CIC laws on taking money offshore under fictitious pretexts. Actually, the last phrase already contains the answer to this question. Today’s mid-day working schemes require a legitimate business in the areas of trade, real estate, venture, etc. Today, the idea of hiding money is morally obsolete.
