A Quarterly Newsletter from the UAE and Oman member firms of the PKF International Ltd.

VOL 18, Issue 1 January 2016

OFFSHORE UPDATE

Comparison of Trusts in the British Virgin Islands, the Cayman Islands and Jersey

Where to establish an offshore trust is a decision that can only be made based on the specific requirements of the client. Some jurisdictions have benefits that others don’t, but there is no one she fits all solution. This note is not an advice, but rather a guide highlighting some of the features which Cayman, BVI and Jersey have in common (they are all British Overseas Territories) yet where they are different. It also describes certain of the legal requirements in respect of trusts in each jurisdiction and examines some of the factors t o consider when deciding which jurisdiction to use.

 

BRITISH VIRGIN ISLANDS CAYMAN ISLANDS JERSEY
Principal legislation Trustee Act (as amended in 1993, 2003 and 2013). Virgin Islands Special Trusts Act, 2003 (“VISTA”). Recognition of Trusts Act (Overseas Territories) Order 1987. Trustees’ Relief Act. Trusts Law (2011 Revision) Fraudulent Dispositions Law (1996 Revision) Perpetuities Law (1999 Revision) Bank and Trust Companies Law (2009 Revision) (as amended) Trusts (Jersey) Law 1984 (as amended in 1989, 1991, 1996, 2006 and 2012).
Application of principles of English common law Yes, subject to modification by BVI statute. Yes, subject to modification by Cayman Islands statute. Not directly, but many of these principles are reflected by Jersey statute and in Jersey customary law and where the statutory provisions are silent the courts take guidance from English and other Commonwealth cases.
Types of trusts Discretionary trust.
Life interest trust.
Charitable purpose trust.
Non-charitable purpose trust.
Bare trust (nomineeship).
Unit trust.
Pension trust.
Employee benefit trust.
Most of the above forms of trust can be set up as a VISTA trust or as settlor-reserved power trust.
Discretionary trust.
Life interest trust.
Charitable purpose trust.
STAR trust .
Bare trust nomineeship).
Unit trust.
Pension trust.
Employee benefit trust. Exempted trust.
Most of the above forms of trust can be set up as a protection trust.
Settlor reserved power trust or an asset
Discretionary trust.
Life interest trust. Charitable purpose trust.
Non-charitable purpose trust.
Bare trust (nomineeship).
Unit trust.
Pension trust.
Employee benefit trust.
Most of the above forms of trust can be set up as a settlor-reserved power trust or an asset protection trust
Taxation Income tax is zero-rated in the BVI and there are no capital or inheritance taxes in the BVI. Specific exemptions from taxation are also contained in the Trustee Act. No taxes in the nature of income tax, corporation tax, capital gains tax nor inheritance tax are payable in the Cayman Islands.
If a Cayman Islands trust is registered as an exempted trust, the trustee is entitled to apply for an undertaking from the Governor of the Cayman Islands that it will be exempt from local tax (if any should be introduced) for up to 50 years.
There are no capital or inheritance taxes in Jersey. Income tax is chargeable on persons who are resident or ordinarily resident in Jersey. In the normal trust situation, i.e., with settlor, life tenants and beneficiaries all being non-Jersey resident, full exemption from Jersey tax is given to foreign income and Jersey bank interest, by concession. This exemption is automatic.
Protectors permitted Yes. This is specified by BVI statute. Yes. Yes.
Filing requirements and confidentiality Except in the rare case of certain unit trusts which are ‘public funds’ and thus need to be registered in accordance with the requirements of the Mutual Funds Act 1996 (as amended), there are no public filing requirements for trusts and trust instruments are confidential documents.
The registered agent of a company which is an exempt private trust company must retain copies of the trust deed and other essential records at their offices in the BVI. There is no requirement for the regulatory authorities to be provided with these or for them to be filed publicly.
Except in the case of certain unit trusts which are regulated mutual funds under the Mutual Funds Law (2012 Revision) (as amended) and in the case of exempted trusts (in respect of which documents lodged are not available for public inspection), there are no public filing requirements for trusts and trust instruments are confidential documents.
Confidential Relationships (Preservation) Law (2009 Revision) (“CRPL”) makes it a criminal offence to divulge or attempt, offer or threaten to divulge certain confidential information. ‘Confidential information’ is defined broadly and includes information concerning any property which the recipient thereof is not, otherwise than in the normal course of business, authorised by the principal to divulge.
Except in the case of certain unit trusts which are regulated Control of Borrowing (Jersey) Law 1947 or the Collective Investment Funds (Jersey) Law 1988 (as amended) and thus need to be registered in accordance with the requirements of those laws there are no public filing requirements for trusts and trust instruments are confidential documents.
An exempt private trust company must be administered by a person who is licensed to carry out trust company business under Financial Services (Jersey) Law 1998 (as amended) but there is no requirement for the regulatory authorities to be provided with the trust instrument or other essential records of the trust to be filed publicly.
Trustees Minimum of one trustee (corporate or individual).
Subject to special requirements for VISTA and non-charitable purpose trusts, trustees can be licensed BVI professional trustees, BVI exempt private trust companies, foreign corporate trustees or individuals (wherever resident).
Minimum of one trustee (corporate or individual). Subject to special requirements for STAR trusts and certain types of unit trusts which are licensed mutual funds, trustees can be licensed Cayman Islands professional trustees, Cayman Islands private trust companies, foreign corporate trustees or individuals (wherever resident). Minimum of one trustee (corporate or individual). Subject to special requirements for certain types of unit trusts which are regulated Control of Borrowing (Jersey) Law 1947 or the Collective Investment Funds (Jersey) Law 1998 (as amended), trustees can be licensed Jersey professional Trustees, Jersey private trust companies, foreign corp. trustees or individuals (wherever resident).
Private trust companies permitted Yes. Under The Financial Services (Exemptions) Regulations 2007. Regulations Enabling Private Trust Companies to be Established in the BVI. Yes. Under Bank and Trust Companies Law (2009 Revision) and Private Trust Company (Amendment) Regulations (2011 and 2013). Yes. Under the Financial Services (Trust Company Business (Exemptions)) (Jersey) Order 2000.
Anti-forced heirship provisions The Trustee Act contains comprehensive and carefully crafted provisions protecting most BVI trusts (and dispositions to their trustees) from ‘forced heirship’ claims.
These also prevent foreign judgments based on such claims from being recognised or enforced in the BVI.
The Trusts Law (2009 Revision) contains comprehensive and carefully crafted provisions protecting most Cayman Islands trusts (and dispositions to their trustees) from ‘forced heirship’ claims.
These also prevent foreign judgments based on such claims from being recognised or enforced in the Cayman Islands.
The Trusts (Jersey) Law contains comprehensive and carefully crafted provisions protecting most Jersey trusts (and dispositions to their trustees) from ‘forced heirship’ claims. These also prevent foreign judgments based on such claims from being recognised or enforced in Jersey. Provisions may not apply to trusts set up by Jersey domiciliaries.
Settlor reserved power trusts permitted Yes. Yes. Yes.
Provisions to protect third parties such as lenders who deal with trustees Yes. No. Yes.
Provisions to cater for situations were trust assets comprise shareholdings in controlled companies VISTA sets up a special alternative trust regime to cater for the succession to shares in controlled companies, so that these can be run by their directors free from trustee intervention and the trustee will be exonerated from liability for the consequences of not intervening in investment decisions No. No.
Trusts perpetuity period 360 years. 150 years. Jersey trusts may exist in perpetuity.

(This article is Compiled by Chaitanya Kirtikar, Senior Manager, Offshore & Free Zone Department)