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This distortion is evident to those working in the trust and corporate services industry and it is clear that recent journalistic criticism of the BVI does not mention any of the following developments:
Clearly some of the papers leaked to the press are disturbing and will lead to official investigation - but what the news broadcasters do not reveal is what proportion of the files they have obtained disclose prima facie evidence of wrongdoing.
Those working in the international financial community know that the criminal abuse of BVI companies is relatively rare, although reputable service providers remain very vigilant, and continue to be dismayed on the occasions that press revelations reveal apparently poor "KYC" procedures.
It is also important to consider the typical uses of offshore companies in the context of taxation. Typical uses include:
In all cases, it is accepted and acceptable that a significant benefit is tax neutrality. This is not a euphemism for tax avoidance. Today, most people would agree that tax must be paid somewhere on trading profit, capital gain or other income streams. International tax planning in the BEPs era recognises that tax must be paid on income generation, but such planning aims to ensure, as far as possible, that in cross-border business transactions, tax is paid only once on the income concerned (such single level taxation being paid either in the country of residence of the recipient, or at source), or with maximum possible relief from double taxation. Any double or multiple taxation of the same income without relief discourages international business and therefore economic growth in national economies. The OECDs global network of double taxation treaties (of which the UK has the largest number) strives to mitigate such multiple taxation in order to drive economic growth from international business. The positive impact of international tax planning and double taxation treaties should not be underestimated. The OECD itself has stated that millions of people have been lifted out of poverty by the use of taxation treaties, and this has contributed to social and human betterment. BVI companies cannot and do not interfere with the taxation of profits at source, and neither can they prevent multiple taxation. But BVI companies do not add another layer of taxation and so can be used to receive and hold post tax income and capital in a tax neutral and politically and financially stable environment. This is a welcome facility for the global economy, particularly in the context of international transaction, involving parties from different countries who want a neutral legal and fiscal forum.
In the wake of the most recent leaks there has also been much adverse publicity concerning the use of BVI companies to own UK residential property of high value. When assessing the rightness or otherwise of such ownership, it should not be forgotten that all offshore companies acquiring residential property must pay Stamp Duty Land Tax (SDLT) on acquisition. There is no question of tax avoidance in terms of SDLT. In fact, since March 2012, the rate of SDLT paid by offshore companies acquiring UK residential property has been at the higher rate of 15%. This rate now also applies to residential properties of modest value (those worth more than £500,000). This alone is a very welcome bonus to the UK Exchequer. Furthermore, BVI companies (and all other offshore companies) now also pay an annual ownership tax in the UK, and a capital gains tax on disposal of the UK properties they own. The detail of these taxes is of course under-reported in the press, because it does not provide the headlines they seek.
Jordans conducts "KYC" checks on its clients and introducers as required by applicable anti-money laundering laws and regulations referred to in this note. Such legislation has been driven by powerful supra-national bodies such as the EU and the OECD, as well as the USA. This "KYC" certainly adds to the costs of offshore company formation and management, but it is a cost that well-informed clients and introducers are happy to pay and is today a real safeguard against the criminal misuse of professional corporate and trust services.