gallery Alpha to Zeta – The Offshore Trust, a quick overview

Screen Shot 2015-09-05 at 20.04.58– The 1985 The Hague Convention had the effect of spreading the knowledge of trusts in civil law countries and consequently increasing the activity of the trust companies located in OFCs (most commonly “tax havens”).

– The trust went offshore in the 1990’s and developed important features from a comparative standpoint. Malta/ Bermuda/ BVI/ Turks and Caicos/ Cyprus/ Hong Kong/ Guernsey/ Jersey/ Isle of Man, even Montserrat, among others, signed the Convention. International trusts have features the classic English trust lacks. Scholars showed the commercial appeal and its specific favorable tax treatment are the main reasons of the international trust genesis.

– There were nevertheless, developments the participants to the Convention could not foresee. Among these, stands the modern offshore non-charitable purpose trust. It is used in the most disparate fields.

– Offshore Trusts are often purpose trusts (a concept born offshore) so to limit the liability to the entrusted assets/ have a greater duration/ let powers to be returned to the settlor/ empower the trustee with special rights thanks to special clauses.

They also ensure complete bulletproof confidentiality, could be used for philanthropic / personal purposes, to protect from creditors’ potential seizability (for example Nevis and Cook Islands enable great bankruptcy advantages), permit the holding of companies’ ownership, guarantee tax neutral transfers and off-balance treatment.

Plus, Offshore Jurisdictions always offer tax benefits for any income generated by trusts constituted in favor of non-residents (so with foreign Benefeciaries, Settlors and entrusted Assets), mitigating the tax liabilities of complex financial operations such as securitization; multi-banking financing and international project finance.

The Offshore trust can go as far as being orphan: a standalone trust, which undertakes a specific legal role as part of an overall structure which may involve holding securities, managing cash flows, among many others. Once a transaction completed and the duties met, the structure simply falls away. It is orphan because purposely created so that it has no past (no previous debt liabilities nor any possible tax liability) and most of the time no future.

The ‘Offshore legislation’ is very often adjourned. The goal is to keep up with the most complex and updated structures, original fiscal and financial planners elaborate.

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