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Let’s face it. In the popular imagination, offshore financial centres don’t have the best reputation. Shell companies, tax evasion, secret dealings – you name it!
However, the public perception of offshore financial centres is at least ten years behind the times. “Tax havens” – the way you knew them from James Bond movies – political scandals, or media investigations such as the “Panama Papers” are, in fact, a dying breed. The connotations attached to this pejorative label are now so outdated as to make it an anachronism to even use the term.
The truth is, nowadays you’d be hard-pressed to find a place where you can hide from the tax authorities and law enforcement agencies of your home country.
This article will examine:
How did this come about?
Why does it matter to you?
What’s the reason our firm is shouting this message from the rooftops?
The next five minutes will open your eyes to a new reality in the world of wealth management and financial services. Judging by the enquiries and questions we receive from prospective clients, for many readers this will be entirely new – and we tried our best to make this boring subject interesting, relevant, and easy to digest.
In 2009, the G20 declared that “the era of banking secrecy is over”.
The G20 and the OECD (Organisation for Economic Co-operation and Development) tasked another organisation with delivering this result. The succinctly named Global Forum on Transparency and Exchange of Information for Tax Purposes (“the Global Forum”) has completely transformed the operating landscape for offshore financial centres.
Key to all this was eliminating banking secrecy. Over the past decade or so, practically all jurisdictions that are a member of the Global Forum have eliminated bank secrecy, at least vis-a-vis tax authorities. Almost 70 jurisdictions have made these changes to their regulatory regimes and practices since 2009, including virtually all offshore financial centres that matter. In 2017 and 2018, these jurisdictions commenced the Automatic Exchange of Information (“AEOI”) on financial accounts held by non-residents. The result is that wherever in the world you hold a bank account, the tax authorities of your home country will be notified about it – electronically and automatically.
The era of bank secrecy has been well and truly over for years already.
Guernsey had never focussed on making money by offering secret bank accounts or anonymous shell companies. Instead, the island always had a focus on having highly trained staff for providing services in a few specific areas. For instance, up to half of corporate bond issues in Europe are put together by specialists in Guernsey – it’s an area where the island has a real edge and is a world-leading competence centre. Not relying on income from “tax haven”-style services made it easy for the island’s finance industry to support the global initiative right from the start.
Even before the advent of the Global Forum, Guernsey had cultivated a clear and transparent tax system. That’s why it was on the OECD’s so-called “White List” right from inception in 2009. This is the list of compliant, supportive jurisdictions that you want to be in so that you don’t face any restrictions on doing business elsewhere.
Guernsey always had very high standards of financial conduct and transparency. Having been on the right side of international tax reporting standards from inception is a pedigree that you will struggle to match elsewhere. In fact, financial services companies and their clients have flocked to Guernsey for decades because of the island’s robust regulatory framework and its centuries of stability and commitment to the rule of law.
In our increasingly unstable world, these qualities are of interest to investors, too. At Sarnia Asset Management, we internalised them from the get-go.
As a potential client, you’ll be curious to hear how it affects your tax situation if you invest some of your wealth through a Guernsey-based fund manager.
We at Sarnia Asset Management absolutely acknowledge the principle that everyone has a fundamental duty to society, which includes paying tax based on the laws of the jurisdiction you are based in.
We provide our clients with tax reporting tailored to the requirements of their country of residence. Providing tax reporting for your country is a standard part of our business and we can do this for >100 jurisdictions around the world. To make this process seamless, convenient, and reliable for you, we work with some of the world’s best and biggest service providers, such as Northern Trust.
If you invest with us, you’ll be able to openly, accurately, and most importantly EASILY answer any question that you could ever face about having invested some of your wealth abroad. In that sense, investing in a Guernsey-based fund is no different to investing in a fund based anywhere else. Do you have Luxembourg or Ireland based funds in your portfolio? Working with us will be no different.
We are a Guernsey registered company and adhere to the highest standards of compliance and corporate governance. To provide even further peace of mind to our investors, we are not only authorised and regulated by the Guernsey Financial Services Commission, but also registered with the UK’s Financial Conduct Authority (via our appointed representative in the UK, Oxygen Ventures Limited).
The majority of our staff resides in the Bailiwick of Guernsey, which gives us so-called “substance” and puts us beyond any doubt of being a fully compliant firm from a tax perspective.
Guernsey has a long long-established history of financial prudence – which is a quality that is increasingly in demand again in our turbulent world.
As the recent sanctions on Russia demonstrate, you want to hold your wealth through jurisdictions that are on good terms with the global community of nations. What good would it be if you had wealth stored in a place but weren’t able to use it elsewhere?
Playing according to international rules is part of that.
Prospective investors can rest assured that when investing in Guernsey-based funds, like those offered by Sarnia Asset Management, they are on the right side of regulation and have complete peace of mind in every regard.
With practical aspects such as tax reporting taken care of by our well-established systems, we can focus on managing your assets.
Guernsey looks after hundreds of billions of pounds, and as such is in the same group of jurisdictions as Switzerland or Singapore. In fact, we already published another article why Guernsey is such a great place to do business and why we set up Sarnia Asset Management there: British Switzerland by the Sea.
If you’d like to discuss any aspect of this article in more detail with us, please reach out to our team.
Disclaimer: This blog is intended for informational purposes only. This blog is not intended to invite, induce or encourage any persons to engage in any investment activities and is not a solicitation or an offer to buy or sell any stock, investment product or other financial instruments. If in doubt, please seek financial advice from an independent financial adviser. Sarnia Asset Management is licensed by the Guernsey Financial Services Commission (GFSC). Past performance is not an indication of future returns. Investments carry risk, including the risk that you will not recover the sum that you invested.
By James Faulkner
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