International Business Review - September 2013 - Israel Edition

horizons

forum

insights

focus

business 20:20

Providing a macro overview
of International Finance
Centres

Showcasing differing views
from leading industry experts
and encouraging debate
around the topic

Focusing on the key drivers,
stories and trends in
International Finance Centres

Discussing the relevant
companies and organisations
related to International
Finance Centres

Providing an inside track
from industry leaders

international
BUSINESS review

distributed by

global analysis, local perspective

israel edition

September 2013

special report on international financE centres

Islands of

FINANCE
Against a background of globalisation and economic resurgence,
this edition of the International Business Review takes a look at
International Finance Centres, and their strategic importance to
the Israeli economy and business community.

3328 Jerusalem Post Supplement a1 1


4 th Dec emb e r 2013.
C en tr a l Lo nd on.
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4/9/13 17:53:22

An independent report produced and published by AcreWhite distributed by the Jerusalem Post. AcreWhite takes sole responsibility for all contents.

2 international business review september 2013

international business review september 2013 3

horizons

horizons

The modern face of

oFfshore
finance

T

This is, of course, nothing new –
international finance centres (IFCs),
perhaps more commonly known as
‘offshore’ centres (see box on page 5 for a
definition), have been providing a broad
variety of financial services to businesses
and wealthy individuals outside their
borders for some considerable time. With
the onset of the financial crisis and the
stinging downturn that followed, client
demands have changed dramatically.

Those with assets to manage, be they
personal or corporate, are seeking
security, transparency and a strong
track record more than ever before.
And this is good news for IFCs that are
able to deliver on those demands. Jersey,
as a prime example, has a 50-year track
record of servicing such clients and has
broadened its offering and its global
scope during that time.
So let’s break down how IFCs may prosper
as the world gets smaller. First of all, there
is the handling of personal wealth. IFCs
offer a range of products and services,
from trusts and foundations to hedge
funds and family offices that can help an
individual build and protect their assets.
Such offerings have been around for
quite some time, but have traditionally
been the preserve of wealthy Westerners.
These days, however, it’s the emerging
economies in Africa, Asia, the Near,
Middle and Far East, and Latin America
that are producing greater fortunes

for wealthy families and ambitious
entrepreneurs, and for many of these
people there’s no greater priority than
to protect their wealth by putting it
somewhere out of harm’s way. It would
be no surprise to see an entrepreneur
from Nairobi who’s built a fortune in
telecoms seeking to set up a trust package
in a distant jurisdiction, providing it has a
long-standing reputation for transparent
and robust processes.

From personal to business
More often than not such packages come
with a tax management angle too. IFCs,
as a rule, provide a low-tax or tax-neutral
environment, free of taxes such as
capital transfer tax, capital gains tax and
corporation tax. So not only will such
wealth be protected, it will be handled in
a financially prudent manner.
On the downside, it can take a lot of
faith for someone from a remote culture
to buy into, for example, the common
law concept of trusts, which essentially

Not only do such companies – be they
large or small – benefit from access to the
vast amounts of capital floating about on
London’s markets (and beyond), but there
is the added flexibility and freedom from
many UK regulatory restrictions that
come with going through an IFC.
Plus, again, it’s tax-neutral too.

©
COPYRIGHT 2013, ACREWHITE LTD. ALL RIGHTS
RESERVED. COMPANY REGISTERED IN ENGLAND
& WALES.

DANIEL SEAL, CHIEF EXECUTIVE,
ANTHONY BEILIN, CHIEF OPERATING OFFICER,
ANNA ORCEVA, OFFICE MANAGER, JASON
PEARLMAN, EDITOR, NICK KIRBY, CONTRIBUTOR,
DENNIS SPENCER, CONTRIBUTOR, SARAH
MANUEL, CONTRIBUTOR, SEAN DAVIES,
CONTRIBUTOR, MARIA HUGGINS, CONTRIBUTOR,
SAM SMITH, CONTRIBUTOR.
DESIGN & LAYOUT, GRAPHICAL AGENCY,
LONDON.

And it’s not just the newspaper readers
who are struggling for cash and are
drawn to tax stories. As international
governments become increasingly
desperate too, IFCs are finding themselves
under greater pressure to become more
transparent in regard to their clients
and their activities. The hope, with the
introduction of laws like the Foreign
Account Tax Compliance Act (FATCA) in
the UK and US, is that governments can
weed out illicit cross-border capital flows
and recoup outstanding tax money ‘hiding’
in overseas accounts.

IFCs certainly boast a wide and varied
source of business that means they can
prosper even as the global economic
picture shifts and finds new shape. But
while IFCs may be in high demand in
the current trading climate, they’re not
immune to the financial pressures that
are weighing down the rest of the world.
First, take the mainstream media. Money
is an emotive subject when many round
the world are struggling to find it, so it’s
easy for a sensationalist press to lump
IFCs together under a generic ‘tax haven’
umbrella, to create a global bogey man. If
money is kept offshore, it’s universally
painted in the mainstream press as a bad
thing, with no distinction made between

In a post 2009 economy client and
corporate governance are more key
than ever to doing business anywhere
in the world. Wealthy individuals and
corporations will still be looking to benefit
from IFCs but, given the importance of
reputation in the current climate, they’ll
need to make sure they’re working with
an IFC that’s on top of its game.

involves handing over your family’s
fortune to the control of an organisation
on an island on the other side of the world.
Trust is indeed the operative word. Again,
it helps if the jurisdiction in question has a
track record that can appease anyone wary
of corruption.
The role of the IFC also extends beyond
private wealth to the corporate sphere. As
well as providing safer vehicles for inward
investment to developing economies, IFCs
are being used by expansionist businesses
to gain a foothold in global markets. This
could be a Swiss commodities giant like
Glencore, which floated with a Jersey
holding company on the London Stock
Exchange (LSE) in 2011. At $10bn, it
was the largest ever capital raising by an
international company in London.
But it’s equally becoming the preserve
of companies from emerging markets
seeking exposure in the West. It could
be a relatively small Israeli technology
company such as Starcom (see page 11),

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these days there’s a
whole planet-worth of
routes your money may
take. It seems capital
really doesn’t care for
visas and boundaries.

shalom
tel aviv
We fly to the UK up to 11 times a week. Direct
flights depart daily from Tel Aviv to London and
Manchester.

Easyjet 1/4 advert
It’s just another example of how we’re making
travel easier and more affordable for everyone.

Global Financial
centres index (GFCI):
1. London
2. NYC
3. Hong Kong
4. Singapore
5. Zurich

€110

1. jersey
2. guernsey
3. gibraltar
4. cayman islands
5. Isle of man

Money is an emotive
subject when many
round the world are
struggling to find
it, so it’s easy for a
sensationalist press
to lump IFCs together
under a generic ‘tax
haven’ umbrella, to
create a global bogey
man.

*

one way pp
based on
2 people flying

Jersey, according to the
Global Financial Centres
Index, is at the head of
the pack when it comes
to offshore finance.

*Passengers travelling on the same booking. Prices correct at 09/09/2013. Additional charges for credit card payment and baggage.
For travel from now until 15/06/2013. We fly from Tel Aviv (TLV). We fly to Gatwick (LGW) and Manchester (MAN). See easyJet.com


international
business review
an executive summary

jason pearlman, editor

offshore centres index:

from

THE INTERNATIONAL BUSINESS REVIEW IS
PRODUCED & PUBLISHED BY ACREWHITE
WHICH TAKES SOLE RESPONSIBILITY FOR ITS
CONTENTS.

tightly regulated IFCs, and places with
somewhat ‘looser’ regulation.

However, many IFCs have found that,
while signing up to such new legislation
demonstrates that they can stand up to the
highest levels of scrutiny, it only further
proves something that they have actually
been able to prove for years, thanks to
measures they put in place themselves –
that their financial services sectors already
comply with the highest of international
standards.

setting the standards

As the world becomes more globalised, international finance centres have
a significant role to play in handling personal wealth and helping
businesses expand. So just what is the state of play right now?

hey say that money makes the
world go round. But it’s also true
that an increasingly globalised
world is making money go
round too. Whether you’re a privately
wealthy entrepreneur in Kenya looking to
safeguard your savings from an unstable
domestic regime, or an Israeli technology
group seeking to raise capital by listing
overseas, these days there’s a whole planetworth of routes your money may take. It
seems capital really doesn’t care for visas
and boundaries.

which listed (via Jersey) on the Alternative
Investment Market (AIM), London’s
fast-growth market, raising £14.5 million
in the process. Or a metals explorations
and development company, such as Orsu
Metals, which operates in Kazakhstan
and in July this year listed on AIM and
the Toronto Stock Exchange through the
British Virgin Islands.


It is a bizarre fact that the media
in Israel often treats business
news as ‘soft news’, and I
suppose in a volatile region, it
can be considered as such.
However, the result is that while the
media looks the other way, tremendous
economic progress and industry
expansion is taking place every day.
With more and more startups and new
technologies creating new wealth and
opportunity, Israeli companies and
individuals are increasingly playing
a greater role on the international
business scene, and the Israeli market
has become a key area of potential for
international financial service providers.
While Israel in the most part weathered
the global financial meltdown, Israeli
companies big and small must be ready
for the economic resurgence, in order to
benefit fully from the new international
growth and investment.
In this edition of the International
Business Review, distributed with the
Jerusalem Post - the leading English
language daily in Israel - we take a look
at the opportunities afforded by offshore jurisdictions and the attraction
of Europe - against a background of
ongoing economic uncertainty.
“Jersey, in particular have
led the way in partnering
with Israeli companies, and
offering top of the range
financial services, as well
as a ‘live test bed’ for new
technologies.”
We also look forward to the Innovate
Israel conference taking place in
London in December 2013. The event
is a showcase for Israeli innovation and
a true market building opportunity for
Israeli start-ups, especially in the fields
of mobile communications, e-commerce
and cyber-security.



horizons

horizons

Meeting the

challenge
of new legislation

Changes to the way in which crossborder wealth is reported means
new procedures for financial centres
around the globe, with offshore centres
coming under particular scrutiny. But
for many, international compliance is
something they have been achieving
for years.

W

ith the onset of the financial
crisis and the subsequent
downturn, the usual
front-page tales of political
wrangling and reality TV suddenly had to
battle for column inches with a subject
that isn’t generally seen as ‘sexy’ enough
to sell papers – tax. Yet how those in the
spotlight manage their finances, whether
it’s a multinational corporation like
Google and Starbucks, or a high-profile
individual like comedian Jimmy Carr,
has become a highly emotive, oftensensationalised issue.

The key piece of legislation to be
introduced in recent times is the
Foreign Account Tax Compliance Act
(FATCA) – brought in by the US in the
wake of the UBS tax evasion scandal of
2008/9, which proved beyond doubt that
its citizens were using overseas vehicles
specifically to avoid paying tax. Wounded
by the revelations, the US government
slapped UBS with a $780 million fine and
developed FATCA, an act designed to keep
US persons from hiding income and assets
overseas. In a nutshell, FATCA requires
financial institutions around the world to
improve their due diligence procedures, in
order to identify US citizens among their
clientele, and to report this back to the US.

And it’s far from merely a media obsession.
Since 2008, cash-strapped governments
around the world have been introducing
laws to combat tax evasion and recoup
The three UK Crown Dependencies
‘tax dollars’ from wealthy individuals with
– Guernsey, Jersey and the Isle of Man –
funds beyond their borders. For many
signed up to FATCA earlier this year, only
IFCs, this means struggling with new
for the UK government to implement its
and exacting standards of disclosure and
own version in an attempt to boost its own
transparency. For many, however, this new
ailing coffers. The Crown Dependencies
climate has also been a chance to show they quickly signed up to this act too, so they
have been acting with integrity all along.
will be working with new laws for UK


resident-but-non-domiciled individuals
and utilising, where appropriate, a
disclosure facility to enable UK taxpayers
to regularise any financial affairs in
their jurisdiction.

Doing the work

Silver lining
So if the jurisdiction is already up to speed
on everything, then in theory it has nothing
to worry about, right? Not quite. The cost of
such extra compliance can be crippling, and
this will naturally translate to higher prices
– all for the privilege of reporting on things
that aren’t happening there anyway.

FATCA is a sweeping change, but
the implications have often been
misinterpreted. “Mainly it’s just a huge
“The Channel Islands have very strong anti
pain in the backside,” says Tony Mancini,
money-laundering laws, and there simply
Head of Tax at KPMG in Guernsey. “It
isn’t that big bulk of money sitting there
takes lots of work to introduce the systems
untaxed that the governments are hoping,”
and procedures to even identify the US
says Richard Brooks, Head of Tax for the
citizens who are our clients, then to report
British Isles at RBC Wealth Management.
the right information on them and their
“The question you have to ask is to what
income to the tax office. And it covers
extent are we responsible for policing
trusts and companies we administer. We
people in other states? How much burden
have to put the procedures and systems in
can they keep piling onto the Channel
place to do that every year, and then you
Islands?”
need new procedures around taking on new
clients, as you need different information.
It seems that’s a question for which ‘they’
And now we have to do that for UK
haven’t found an answer yet – the level
customers too.”
of compliance legislation keeps getting
higher. But there are some positives from
And it’s not just IFCs that have suffered –
all this for IFCs that are up-to-speed with
larger economies are having to comply with all the latest legislation. It means that any
US FATCA as well, with Denmark, Mexico,
individual wanting to use an IFC knows
Ireland, Spain and Germany among those
from the outset what is expected of them,
that have already concluded agreements
and also that with a compliant jurisdiction
with the United States.
they’ll be operating somewhere that has
a greater history of applying the highest
All of this extra procedure is in the interest
standards.
of disclosure. It won’t necessarily change
much regarding the money being kept
in any well-regulated, well-monitored
Jersey has very strong
jurisdiction. In most of the headlineanti money-laundering
grabbing cases, like Carr’s use of a Jersey
laws, and there simply
vehicle to ‘avoid’ tax, the tax management
isn’t that big bulk of
itself is actually legal, and it will remain so
under the new laws. Only now the financial
money sitting there
institutions involved have to say what
untaxed that the
they’re up to.
This may seem a lot of extra work: most
IFCs have already signed tax information
exchange agreements with other countries,
demonstrating that they are operating
in a transparent and legitimate fashion –
Guernsey, for instance, has 44 in place
at the time of writing, Jersey has 31 (with
13 in progress), the Cayman Islands have
31 signed and British Virgin Islands has 19.
It is arguable that these Tax Information
Exchange Agreements (TIEA) make the
regulatory structure of such jurisdictions
more rigorous than not only other offshore
centres but, ironically, even those nations
that are clamping down with the new
legislation.
“The mainstream press gives no
differentiation between these ‘tax havens’,
which is a massive frustration,” says Geoff
Cook, CEO of Jersey Finance. “You get
good and bad performers in any field, and
international finance is no exception.
These days the focus is on sound corporate
governance, and we’re already signed up to
everything regarding transparency, from
OECD to FATCA. The US and UK are only
now looking to start keeping a record of
asset ownership information, but we’ve
been doing that for years. And our trust
industry is rare in that it’s all regulated
and subject to random checks.”

What is an IFC?
There is no consensus on what
constitutes an ‘international
finance centre’ (IFC). The term is
interchangeable with ‘offshore centre’
and IFCs are referred to in some
quarters by the pejorative ‘tax haven’,
owing to the fact that they provide
low-tax or tax-neutral environments
for individuals and corporations.
In a 2007 IMF paper, economist Ahmed
Zoromé proposed a new definition: ‘A
country or jurisdiction that provides
financial services to non-residents on a
scale that is incommensurate with the
size and the financing of its domestic
economy’. This, however, would
include not only smaller centres that
are typically identified as being IFCs,
such as the Channel Islands, Bermuda,
British Virgin Islands and the Cayman
Islands, but also the United Kingdom
and Singapore.

Conference sees step-up in
tax information exchange

governments are
hoping,” says Richard
Brooks, Head of Tax for
the British Isles at RBC
Wealth Management.

Take Jersey, for example. As one of the few
jurisdictions that regulates trust providers,
it is streets ahead of other centres which
don’t have the structures that both clients
and global governments now deem as
necessary.
“Jersey has to operate in a professional
environment and be open and honest and
assist in the collection of taxes where they
are actually due, and it does that anyway,”
says Brooks. “Jersey is a very compliant
jurisdiction. We see it first-hand from
working here, and the financially-informed
politicians in the UK realise this is the case.”
The challenges facing IFCs may in fact prove
positive for places such as the Channel
Islands, who are leaders in offshore finance.
If every jurisdiction plays ball and signs
up to FATCA, then each will be subject to
the same extra hurdles as those that have
already committed themselves. It will be a
more level playing field, with factors such as
transparency, reputation and track record
carrying more weight.

I

nternational cooperation on tax
regulation was the name of the game
at this years’ Society of Trust and Estate
Practitioners (STEP) conference in Israel.

Assistance in Tax Matters as a legal basis
for this increase in regulation and the
development of a single international
standard on taxation and asset reporting.

Speaking at the conference in Tel Aviv’s
Dan hotel, Israel’s Tax Authority head
Moshe Asher told the attendees that, “The
authority is pushing forward legislation
on the automatic exchange of information
with countries that don’t have a tax
covenant with Israel, and promoting
information transfer procedures as part
of the US FACTA Foreign Account Tax
Compliance Account.”

Meanwhile, the conference heard how
Israel, due to the relative stability of the
economy, and due to the increase in tax
agreements with foreign jurisdictions,
was becoming a greatly desirable location
for foreign residents and new immigrants
– principally among the Diaspora Jewish
community looking to relocate to Israel.

Delegates at the conference heard that the
new approach by the authorities in Israel
very closely echoes moves by the OECD,
tasked by the G8 nations to ensure better
transparency and free flow of information
to prevent offshore assets evading taxation.
Moreover, the OECD had pointed to
the increase in countries joining the
Convention on Mutual Administrative


Moreover, the same factors were raised
as being key to the international tax
planning for high tech companies, many
of whom were based or founded in Israel,
as well as for real estate companies and
family investment offices.
The conference also addressed issues
surrounding private banking and the
management of trusts and trustees.



Forum

Forum

Expert opinion

The ultimate conundrum:
increasing returns
without extra risk

Listing in london: how to solve the settlement issue

Avram Kelman, Partner, Fladgate LLP
t. +44 (0) 20 3036 7352
e. akelman@fladgate.com
w. www.fladgate.com

Many foreign companies (including companies incorporated in Israel) find the London
Stock Exchange an appropriate place to come
to for the purposes of raising capital and
increasing the visibility of their companies.
Elsewhere in this supplement, the issues
surrounding a listing in London have been
discussed. There is an easily overlooked but
critical point that has to be considered when
listing in London - the electronic settlement
system by which shares on the London Stock
Exchange are traded. To gain a London
listing, shares must be eligible for electronic
settlement unless the London Stock Exchange
agrees otherwise. The problem for foreign
issuers is that shares or other securities issued
by companies from jurisdictions other than
the UK or Ireland cannot be directly held in

or traded through the electronic settlement
system used by the London Stock Exchange,
known as CREST.
To solve this problem and provide shareholders the benefit of electronic trading, a foreign
issuer must create securities eligible to be admitted to CREST that mirror the underlying
securities of the company. Such companies
appoint a depository (typically, the company’s
registrars) which becomes the registered
holder of the shares. The depository then
holds the shares on trust for the shareholders.
The depository can then issue a depository
interest, which is a UK security, to the shareholders and these represent the underlying
security on a one for one basis. These depository interests are an English law instrument

and trades in them can be settled through
CREST just like a regular share. Through
the depository arrangements, the holders of
depository interests retain full economic and
voting rights over the underlying shares.
If you are a foreign company that wants to
have its shares traded on the London Stock
Exchange, your UK based lawyer will be able
to assist you with the paperwork necessary to
set up the depository interests so that this can
be achieved.

The State of Israel’s economy has shown itself to be remarkably robust
and well managed over the last few years, boasting a growth rate higher
than most Western or ‘developed’ economies.

Fladgate LLP is leading London law
firm with an acknowledged expertise in
acting for Israeli companies seeking to
expand into the overseas market.

all is not lost: recovering investments if things go wrong
Since that fateful Autumn day in 2009,
when the financial world ground to a
screeching halt and billions of investment
dollars disappeared into nothing,
investment opportunities have been
approached with tremendous caution and
circumspect.

Carl W Linde, linde krost law
t. +972-9-9629100
e. enquiry@lindekrost.com
w. www.lindekrost.com

Today prudent investors are wary, and a
trend has developed where it is better to
“do nothing’’ rather than risk investment
altogether. The result of this has been that
in an ailing private equity and investment
market, many great ideas never see the
light of day.
For the lucky few who do still attract
investment, the prerogative is now with
the investors to make sure that proper due
diligence is undertaken to mitigate their
risk and exposure. When negotiating a
deal the investor’s aim is to ensure that any
money put into a business will provide a
solid return on investment. Investors need
to be sure of the facts and confident that
they are making a wise decision, especially
in the current market environment. Due
diligence is that assessment process. More
than that, due diligence is also a reality
test — a test of whether everything is as
it seems. It allows investors to take a look
“under the hood of the car’’ to expose any
problems, verify information and assets,
and ensure that the factors driving the
deal are real.
All too often, however, investors neglect
this process, and expose themselves to
unnecessary problems. Whether it is
reading a prospectus or subscription
documents, which are often assumed
as “non-negotiable”, or identifying bank
account details and the movement of
investment money, there should be no
stone left unturned. Investors should not

be scared to ask questions and make sure
the money is in safe hands.
Most commonly, investors fail to assess
where their money is going to be kept,
and how it is going to be transferred. This
is particularly vital for safeguarding an
investment, as tracking the path of an
investment at the time it is made allows
for the removal of recovery obstacles, and
the establishment of safeguards such as
“stop loss” and money monitoring.
Overall the due diligence process when
done properly can, at times, be frustrating
and time-consuming. Yet it is a necessary
prerequisite to a well-planned acquisition,
and it can be quite informative in its
analysis of the target company as well
as its measures of the costs and risks
associated with the transaction. Buyers
should resist the temptation to conduct a
hasty “once over,” either to save costs or
to appease the seller. Like any audit, a due
diligence process is designed to answer
the important questions, and ensure with
reasonable assurance that the seller’s
claims about the business are fair and
legitimate. Effective due diligence is both
an art and a science.
So too is the process of asset recovery –
getting back your investment when things
haven’t gone as planned. The skill in the
recovery process is the ability to identify
the “target” through which assets may be
recovered and being able to move swiftly
on that target without negatively affecting
the investors recovery prospects.
When undertaking asset recovery on behalf
of an investor the lawyer assisting the
client needs to piece together information
obtained from the following sources:


Human Intelligence – information
pertaining to individuals involved,
including background checks, personal
asset statements, relationship between
one another and with third parties,
corporate directorships, professional
qualifications and regulatory
memberships.
Financial Intelligence – information
regarding bank accounts, expenditure,
use of investment proceeds, placement
of funds, reserve deposits, offshore and
onshore accounts, capital asset purchases,
debts and mortgages and the inflow of
other sources of money.
Publicly Available Intelligence –
information sourced from company
registries, land and deed registries and
internet sources.
Data Sources – including the prospectus
for the investment, subscription
agreement, promotional materials and
correspondence between the investor and
those proposing the investment.
With the assistance of the courts and
law enforcement agencies, action can be
taken to freeze assets and prevent the
further dissipation of investor funds, while
caution must be exercised to ensure that
the investor’s rights and entitlements are
not infringed. The recovery process is
often lengthy but getting back even 50%
of what could have been lost is better than
writing off the investment altogether.

Linde Krost is regarded as a leading,
multinational firm in the area of private
capital, tax, real estate and trusts.

Israeli investors are seemingly no
different from their European or
American counterparts when it comes to
stocks and shares. Many ‘retail’ investors
remain sceptical about the volatile nature
of the global equities market, inconsistent
returns and consequently, the safety of
their capital.
Notwithstanding the potential for real
above inflation growth and higher returns
over the long term and despite the return
to normalcy in the markets over the
last 18 months, many investors have not
shifted gear. They are still choosing to
hold much of their savings in cash deposits
or Government guaranteed assets, such
as bonds, solely for peace of mind and
security. Retired investors in particular
are tolerating low yields, causing a marked
negative impact on their standard of living.
For example, one year deposit rates being
offered by Israel’s top 4 banks, Leumi,
Hapoalim, IDB and Mizrachi currently
stand between 0.25% – 1.11% for deposits

over 500,000NIS. Investors can be secure
in the knowledge that their capital is safe
(subject to the banks remaining solvent),
but with inflation currently at 2.20% in
Israel, the real value of their money is
eroded while held on deposit.

don’t stock pick or advise our clients
to hold individual assets, but believe
in diversifying risk across asset classes,
whilst always ensuring that our clients’
portfolios are tailored to satisfy their
individual requirements.

Here’s the problem - while the current
rates of interest from deposits and yields
from Government bonds remain so low
(a 1 year Government Bond is currently
yielding 1.274%), how can you maximise
the potential return from investments
without having to compromise on safety?

Our clients will typically hold a portfolio
with underlying assets spread across a
range of corporate bonds and government
debt, well diversified equities and
international property – all in funds
that can be traded daily. We have a well
developed and tested methodology for
choosing the right funds to use and take
advantage of technology to provide us
with core data to make our choices from
the thousands of funds available. Most
importantly, our pro-active approach
and the very low cost of fund switches on
the platform we use enables us to pursue
higher returns from the low risk funds in
which we specialise. We prefer to underpromise and over-achieve, consequently
our investment return target for a low risk
portfolio is 5-7% per annum after fees.

This is where HBFS can really help.
Over the last decade we have built our
expertise and excelled in the provision
and management of low-risk investment
portfolios. Using predominantly bond,
equity and mixed asset funds, our strong
performance history is a testament to
this. We work closely with individuals,
companies, charities, pension funds and
trusts in both Israel and the UK. We

Just made Aliyah or
thinking about it?
If you are thinking about finally making
that move to the Holy Land or have
recently made Aliyah and are still holding
assets outside of Israel, there are some
significant tax benefits available.
The Israeli Government currently gives
you a 10 year grace period to bring assets
into the country with no local Israeli
income tax liability. This gives you a great
opportunity to grow a low risk portfolio in
one of our Offshore Wrappers for the next
10 years and then take it into Israel, free
of any tax.
If you are fed up with earning very little
on your deposits and would like to learn
more about how HBFS may be able help
you get higher returns from a low-risk
portfolio, please get in touch with one of
our Consultants for a no-obligation chat.

For further information, please
contact Moshi or Saul on
+44 208 953 3444 or
alternatively send an email to
moshi@hbfs.co.uk or
saul@hbfs.co.uk


www.hbfs.co.uk



insights

insights

A world of

ofFshore finance

Businesses and individuals around the globe are looking beyond their
shores to ensure that their finances are run as effectively as possible.
Here are the financial jurisdictions that are leading the way…

Jersey

luxembourg

bermuda

curaçao

shanghai

Offshore centre: 1
GFCI: 28
Areas of expertise:
Banking, trusts, foundations, capital
markets, philanthropy
Key global markets:
UK, Europe, Gulf States, Russia, China,
India, Israel
Notes of interest:
Jersey’s authorities have signed 39
international tax agreements to date

Offshore centre: N/A
GFCI: 18
Areas of expertise:
Investment funds, private banking, reinsurance
Key global markets:
Europe, Asia,
Notes of interest:
Luxembourg is the world’s
second-largest investment fund centre
after the US

Offshore centre: 7
GFCI: 49
Areas of expertise:
Captive insurance, shipping registry
Key global markets:
US, UK
Notes of interest:
Bermuda is the world’s third-largest
reinsurance market

Offshore centre N/A
GFCI: N/A
Areas of expertise:
Family office, IP licensing,
funds, captive insurance
Key global markets:
Latin America, US, Europe
Notes of interest:
Curaçao benefits from its status as part
of the Kingdom of the Netherlands,
which boosts its legal position and links
to the EU

GFCI: 24
Areas of expertise:
financial derivatives, bonds,
Yuan trading
Key global markets:
US, Asia, Europe
Notes of interest:
The Chinese government has launched a
concerted drive to
make Shanghai a top global
finance centre by 2020

guernsey

monaco

malta

Offshore centre: 2
GFCI: 31
Areas of expertise:
Banking, asset management, hedge
funds, private equity, e-gaming
Key global markets:
Far East, India, Russia,
Latin America
Notes of interest:
There are £90bn of deposits held in
Guernsey

Offshore centre: 8
GFCI: 60
Areas of expertise:
Banks, trusts, private client
Key global markets:
Europe. Asia, Latin America, Middle East
Notes of interest:
In 2009, Monaco was removed from
the OECD’s ‘black list’ of uncooperative
finance centres after it signed 24 tax
agreements

Offshore centre: 9
GFCI: 68
Areas of expertise:
Banking, funds, insurance, pensions,
e-gaming
Key global markets:
Europe, China
Notes of interest:
Malta’s financial services industry is
rapidly growing since joining the EU

cayman islands

mauritius

panama

Offshore centre: 4
GFCI: 41
Areas of expertise:
Captive insurance, hedge funds,
company registrations, shipping, aircraft
registration
Key global markets:
US, Asia, South America
Notes of interest:
Cayman’s funds industry represents over
US$1 trillion in net assets

Offshore centre: 10
GFCI: 70
Areas of expertise:
Banking, insurance, capital markets, fund
administration and management
Key global markets:
India, Africa, China
Notes of interest:
Mauritian structures are responsible for 42%
of foreign direct investment into India

GFCI: 67
Areas of expertise:
Banking, trusts, insurance, re-insurance
Key global markets:
US, Central America, Latin America
Notes of interest:
Panama was removed from the OECD’s
‘grey list’ in 2011 after signing its 12th
tax information exchange agreement in
two years

isle of man

gibraltar

geneva

Offshore centre: 5
GFCI: 43
Areas of expertise:
Banking, captive insurance, fiduciaries,
fund management, e-gaming, precision
engineering
Key global markets:
UK, Europe. China, Asia
Notes of interest:
Isle of Man has a AAA credit rating
from Moody’s and AA+ from
Standard and Poor’s

Offshore centre: 3
GFCI: 35
Areas of expertise: Private banking,
fund management, private equity,
corporate investment
Key global markets:
Europe, South America, Africa
Notes of interest:
e-gaming industry centre of excellence

GFCI: 7
Areas of expertise: Banking, private
wealth, fund management
Key global markets:
US, Europe, Asia
Notes of interest:
Geneva is the world’s largest centre for
managing institutional fortunes

dublin

cyprus

zurich

GFCI: 56
Areas of expertise:
Banking, hedge funds, asset financing,
fund management, corporate treasury
management, specialised insurance
Key global markets:
Europe, US
Notes of interest:
Dublin is the world’s number one centre
for hedge fund management, handling
40% of the global alternative fund market

Offshore centre: 12
GFCI: 75
Areas of expertise:
Private banking, corporate structuring
Key global markets:
Russia, Eastern Europe
Notes of interest:
There are serious questions surrounding
Cyprus’ future as an IFC, as a result of
financial turmoil in the region

GFCI: 5
Areas of expertise:
Banking, asset management, fund
provision, alternative investments
Key global markets:
US, Europe, Asia
Notes of interest:
Swiss banking is expected to suffer heavily
from the US Governments clamp down on
secrecy

british virgin
islands (BVI)

hong kong

Offshore centre: 6
GFCI: 47
Areas of expertise:
Corporate structuring, captive insurance,
funds
Key global markets:
Hong Kong, Singapore, China, Eastern
Europe, Russia
Notes of interest:
Around 50% of the government’s
revenue comes direct from licence fees
for offshore companies

GFCI: 3
Areas of expertise:
Equity funding, private banking,
fund management, technology
Key global markets:
China, US, Asia
Notes of interest:
Hong Kong was named the world’s top
financial centre for the past two years
by the World Economic Forum, thanks to
the strength of its business environment,
infrastructure and favourable tax regime

bahamas

(wellington)

singapore

Offshore centre: 11
GFCI: 73
Areas of expertise: Banking, trusts,
fund administration, capital markets,
e-commerce, insurance, and corporate
and shipping registries
Key global markets:
US, South/Central America
Notes of interest:
The Bahamas has been providing
banking & trust services to the
international financial community since
the 1930s

new zealand
GFCI: 42
Areas of expertise:
Banking, asset protection, trusts
Key global markets:
Asia-Pacific, Cook Islands, South
America
Notes of interest:
New Zealand is known by many as the
‘Switzerland of the South Pacific’ for its
favourable asset protection climate

GFCI: 4
Areas of expertise:
wealth management, private banking,
hedge funds
Key global markets:
China, South Asia, India
Notes of interest:
PwC predicts Singapore will overtake
Switzerland as the world’s top hub for
managing international funds (by AUM)
by 2015

Source: Offshore centre ranking and GFCI ranking are taken from the Global Financial Centres Index 13 (published in March 2013)

international
BUSINESS review
global analysis, local perspective


coming soon in:
hong kong, singapore, south korea, North America, uk
For more information please email: info@acrewhite.com


FOCUS

FOCUS

jersey:
P

roperty experts may extol the
virtues of ‘location, location,
location’ when it comes to the
value of houses, but it seems the
same rule applies to islands too. Jersey sits
85 miles south of mainland Britain and 14
miles from the coast of France, a position
that’s bestowed a great deal of significance
on the island over the centuries – from a
failed French invasion of 1790 to the 1940
Nazi occupation. But while the nature
of its strategic appeal may have changed,
the jurisdiction remains a gateway for
European ambitions of a different kind. For
many companies around the world, Jersey
has become an important financial route to
the London and European markets.

How important? Well, Jersey accounts
for the greatest number of FTSE 100
companies registered outside of the UK,
with 37 companies listed on the UK main
market (LSE) as of March 2013. These
companies have a market cap in excess of
£103bn. Jersey is also a popular route to
the Alternative Investment Market (AIM),
the UK’s fast growth market – listing 34
companies, with a total market cap of more
than £1.7bn.


“Through Jersey you can go straight in and
float at no extra cost, with no extra due
diligence needed,” explains Geoff Cook,
CEO of Jersey Finance. The fact that
Jersey boasts an unusual level of access
is indicative of the amount of faith that
the London Stock Exchange places in the
island, which, it recognises, is operating
to the same governance standards. This
has been helped by recent changes to the
UK’s Takeover Code, which now covers
international companies listing on AIM but
incorporated in Jersey, and improves the
process of takeovers for those companies
managed and controlled elsewhere.

Greater flexibility
While Jersey may be attractive in terms
of its similarity to the UK, it also boasts
several key differences that really help
it stand out. Jersey offers a tax-neutral
environment, with no capital transfer
tax, capital gains tax, value added
tax, withholding taxes, wealth taxes or
corporation tax. This provides tax certainty
and allows for fiscally efficient investment
across borders. Hence a Jersey Public
Holding Company may be comparable
to a UK PLC, but without many of the
restrictions to which a company would be
exposed if setting up in the City itself.

When flights to London take only 30
minutes, and the island boasts more than
40 years’ experience of working closely
“For an international business, using a
with the City, this all makes perfect sense.
vehicle like a Jersey company gives you
But there are other factors at play. While
flexibility along with all the advantages
relations are close, and Jersey has an
that a UK company would give you,” says
allegiance to the British Crown, it crucially Raulin Amy, Head of the Corporate and
retains its independence and is not a part
Commercial team at law firm Ogier. “You’re
of the United Kingdom. It has its own
able to do certain things under the Jersey
Parliament and its own judicial system.
Companies Law that you can’t under the
This creates an unusual environment
UK Companies Act. The latter is more
where the laws governing business are
prescriptive in terms of what you can and
complimentary to, yet also significantly
can’t do, and how you have to do it.”
distinct from, those in the UK. And it’s
this that enables the island to deliver the
This is a sentiment that is echoed by
ideal business conditions for international James Mews, Director of Finance Industry
finance.
Development at the States of Jersey.
“There’s no shortage of good blue-chip
One key advantage that Jersey has over
examples that have used Jersey,” he says.
other international finance centres (IFCs)
“The main reason is our state-of-the-art
as regards UK listings is that shares of
company law, probably the leader in
Jersey companies can be traded directly
its field. It’s robust and familiar to UK
through CREST, the UK’s paperless trading
lawyers because it’s broadly similar to UK
system. If you’re going to trade shares from
legislation, but it’s also very flexible. As
other jurisdictions, like the British Virgin
we’re not constrained by the EU company
Islands or the Cayman Islands, you have
law directives, we’ve developed our law
to issue and trade depository receipts –
ahead of the UK’s, and that’s something we
an extra step that costs time and money.
pride ourselves on.”
Meanwhile Jersey has three CRESTenabled registrars on the island.


gateway to europe
For companies around the world looking to list on London and Europe’s
stock markets, Jersey can provide the perfect opportunity – and is
developing a strong reputation in the process
The question for an international business
looking at London is, therefore, less why
should they go via Jersey, but why they
shouldn’t. “A Chinese mining company
that has no physical presence in the UK
anyway won’t want or need to subject
itself to UK tax laws,” says Mike Jeffrey, a
Partner at law firm Carey Olsen. “They
would if they went to the UK direct, but
they don’t have to if they go via Jersey.”

starcom
& jersey
The Israeli-based tech company
Starcom floated in February on
AIM, the LSE’s market for growth
businesses, through a Jersey
incorporated holding company. It
raised £14.5 million, a respectable
sum for an AIM float.

Added value
It should come as no surprise then
that plenty of businesses have planted
their flag in Jersey already. Take Swiss
commodities giant Glencore, which at
$10bn was the largest ever capital raising
by an international company in London
when it floated on the LSE with a Jersey
parent company in 2011. Polymetal
International plc, a Russian company
which is incorporated in Jersey, is part of
the FTSE 100. Meanwhile AIM listings
have proven popular with Chinese
companies, such as clothing manufacturer
Camkids, looking to tap into that market.

Jersey is a route to London that’s built
on stability, reputation, flexibility and
experience. “We have a long track record,
from working with FTSE-100 companies
down to junior AIM-listed companies,”
says Raulin Amy. “We’re not reinventing
the wheel – it’s just a quality product. Plus
all the softer factors, all the expertise and
advisors to properly help with listings –
other jurisdictions simply don’t have that.”

For innovative companies around
the globe, Jersey not only offers
the ability to list on London and
European markets – through the
island’s Tier 1 telecoms carrier, JT
Group, it also acts as a ‘test bed’
for innovative companies looking to
research, develop and launch their
own products.

Appleby acted as Jersey counsel
for the Starcom listing – and as
James Gaudin, a Partner in the law
firm’s Corporate and Commercial
department explains: “There are
strong links between Jersey and Israel
that have developed over the years. If
a company is looking to list anywhere,
especially a smaller company,
then AIM is one of the more robust
exchanges. Investors are comfortable
to go with a UK-registered market like
AIM, and Jersey is a well-trodden path
in terms of international companies
listing that way.”

Yet these companies aren’t attracted
simply by how Jersey compares to the
UK, but what it offers as a jurisdiction
in its own right. Jersey is politically
stable, well-regulated and has a proven
track record. It also has a vast range of
personnel and expertise: of its population
(currently around 99,000), there are
12,470 professionally trained staff working
within finance and support industries, in
companies with a global presence and an
understanding of the needs of companies
wanting to expand.
Investors know that they’re dealing with a
reputable jurisdiction that is on the OECD
‘white list’ and has already achieved a level
of transparency that’s still being sought
by the UK and US. That’s a crucial factor
in what is a changing global business
environment.

JT LAB: Leading
the way

Gaudin adds that there are several
Israeli companies on his books that
may consider an AIM listing in the
fashion of Starcom, which makes
sense given Israel’s strength in small,
intellectually rich tech companies. It
will simply depend on appetite
and the state of the markets, locally
and globally. “They will wait for the
right time, but it’s likely that more
will float,” he says.

37

Companies

Jersey accounts for the
greatest number of FTSE 100
companies registered outside of
the UK, with 37 companies listed
on the UK main market (LSE), as
of March 2013.

£103bn

Jersey registered companies
on Capitalisation LSE


JT Lab provides tech growth
companies around the world with a
unique opportunity to carry out R&D
on a real carrier’s infrastructure,
in real time, with real customers.
It provides a contained, safe test
environment where key learnings
can be captured on a small scale
prior to larger scale rollout.
JT is the only Tier 1 carrier in the
world that offers its network and
customer base to companies to
trial their technology, products and
services before launching worldwide,
making it the perfect launch pad
into the UK and European markets.


It’s about loving what we do,
creating strong client relationships
and applying some drive.
Fairway is a regulated, independent, owner
managed boutique group of companies
dealing with private client business, fund
services and pension trustee services.

e
ivat
pr

ts

n
clie

ices

fun

serv
d

a rewarding
partner
for business
For companies around the world looking to list on London and Europe’s stock
markets, Jersey can provide the perfect opportunity – and is developing a
strong reputation in the process

es

sion
pen

FOCUS

te
rus
t

IBR: In what other areas is Jersey
seeing growth as far as its relationship
with Israel is concerned?
AM: Technology and IT is an area of
particular interest. Jersey is a thriving hub
of e-commerce activity offering one of the
most advanced, tech savvy environments
in Europe. As well as having a stable and
safe telecoms infrastructure in place and a
commitment to world-class IP protection,
Jersey is also leading the world with the
pan-island deployment of fibre broadband.
This initiative is transforming the Island,
offering companies an ideal environment
for innovative high-bandwidth, globallyfocused services.

Senator alan Maclean, minister for economic development, states of jersey

International Business Review (IBR):
Jersey has been visiting Israel for some
time now. How is that relationship
progressing?
Senator Alan Maclean (AM):
As a result of numerous visits by Jersey’s
government, its regulator, financial
services firms and representatives from
the wider business community, Jersey
has a history of working with Israel that
stretches back a number of years now.
This commitment has really helped Jersey
raise its profile within Israel’s business
community.

Group

fairway_FP_ad-intl_business_review-DRIVE.indd 1

8th Floor, Union House, Union Street, St Helier, Jersey, JE2 3RF
tel: +44 (1534) 511700 reception@fairwayjersey.com
Regulated by the Jersey Financial Services Commission

11/09/2013 14:30

Israel clearly shares with Jersey the
desire for success in high quality, cutting
edge business. Based on a closely aligned
vision, I am delighted that Jersey intends
to strengthen its relationship with Israel
further this year. Following my own visit
earlier this year, a delegation from Jersey
that includes representatives of Jersey’s
government and business community
will be visiting again in October, and in
December Jersey will also be represented
at Innovate Israel.

IBR: Jersey is perhaps predominantly
known as an International Finance
Centre. What sort of financial services
developments are you seeing between
Jersey and Israel?
AM: There’s no doubt that financial
services is the engine of Jersey’s economy
and that Jersey is recognised globally as
a leading, well regulated International
Finance Centre. Having 13,000 highly
skilled workers across Jersey’s banking,
funds and wealth management sectors
gives us a solid platform to explore new
aspects of our financial services offering.
In particular, Jersey has highly attractive
company legislation and the right
expertise to support Israeli businesses
seeking to access capital markets, through
listing on exchanges in key markets such
as London. In addition, we are seeing
real opportunities for Israeli funds to be
domiciled and managed through Jersey,
thanks to Jersey’s flexible funds regime
and highly experienced funds workforce.

businesses to prosper. An incredibly
accessible place, it benefits from fast and
frequent access to London, as well as 30
European hubs like Geneva, Paris and
Dublin, offering connectivity without
compromise. We frequently hear that
Jersey’s unparalleled quality of life, and
its safe, stress-free environment for living
and working are key reasons behind
business location decisions.
There is also government-level
commitment to major investment
in Jersey’s infrastructure. Major
developments include 600,000 square foot
of prime office space in St Helier, creating
Europe’s newest business quarter.

With this infrastructure in place, and a
shared commitment to a digital economy,
there are real benefits to be gained from
a strong collaboration between Jersey
and Israel. Indeed, we are already seeing
interest from Israeli tech companies
considering establishing a presence in
Jersey to help support their expansion,
and we are delighted to be part of their
success.

Over the past four years, we have seen
year-on year increases in enquiries from
businesses wishing to establish a presence
in Jersey, evidence that we are sending
out the right message to the international
business community.

IBR: What attracts international
businesses to Jersey?
AM: The focus for Jersey is very much
on creating the right environment for
innovative businesses to flourish. As well
as offering some of the lowest direct tax
rates in Europe, businesses are attracted
to Jersey by the approach of its businessfocussed, independent government
and its highly experienced network of
professional services firms and globallyrenowned experts.

AM: The overwhelming message from
Jersey is that it is very much open for
business, and the feeling I get from
recent visits is that Israel shares a very
similar outwardly-looking vision. I
remain convinced that there are real
opportunities for Israel and Jersey to work
together, particularly within the financial
services and technology sectors.

Overall, Jersey is focused on being a place
that rewards enterprise, not punishes
it. Businesses find that an attractive
proposition.

Locate Jersey is the department
within Jersey’s government
responsible for promoting Jersey as
a leading business centre overseas,
targeting inward investment, handling
enquiries from businesses and
individuals considering establishing
a presence in or moving to Jersey,
and supporting the diversification of
Jersey’s economy.

IBR: What differentiates Jersey as a
jurisdiction specialising in innovative
global business?
AM: Everything is geared up in Jersey
to enabling internationally-focused


IBR: How do you see the relationship
with Israel evolving in the coming
years?

about locate jersey



Business 20:20

Business 20:20

digital jersey

island
innovators

Digital Jersey is attending DLD in Tel Aviv, along with some
technologists and creatives from Jersey, all of whom are looking
to inspire and be inspired by the Israeli tech community.
What is ‘Digital Jersey?’
Digital Jersey is the independent
organisation responsible for promoting
Jersey as a leading centre for digital
excellence.
Working alongside government and
industry, Digital Jersey coordinates
activities to improve the environment for
digital business in Jersey; these activities
include skills development, technical
innovation, research and marketing.
Digital Jersey was established in early
2013 with the objective to accelerate
development in the Island’s digital sector,
with three key aims, namely:
1. To increase economic returns to
the Island through international
partnerships and business,
3. Reap social benefits from being a
connected population,
3. Develop the reputational advancement
of Jersey as a digital Island.

QA

Why was Digital
Jersey set up?
Digital Jersey was established following
Jersey’s recent emergence from the
global financial crisis. As a result of this
challenging period, security policies have
left the once strong position of offshore
financial centres under threat, and Jersey
joins a list of jurisdictions each looking to
grow their digital economies.
The digital sector is unique in that it offers
the potential for high growth from a modest
capital investment, making it a prime target
sector for regions possessing ambition
to diversify. Digital Jersey is working to
position the Island as the jurisdiction of
choice for companies looking to develop
in areas of e-commerce, intellectual
property, and digital industry in a general
sense. Digital Jersey is seeking to leverage
Jersey’s existing advantages including; its
competitive tax base, excellent legal system,
good infrastructure, strong public finances,
high quality workforce and world-class
finance sector to advantage.

mark stutchfield, head of innovation and
strategy, jt lab

How can international
partners get involved
with Digital Jersey?

will enable investment in digital
companies.

At Digital Jersey we are working
closely with Jersey companies who
are looking to develop overseas
partnerships to establish technologybased development projects.

This means that for any company
providing technology-based products
and/or services considering Jersey as
a location to develop their business,
Digital Jersey will have the necessary
resource to help them assess the
benefits of this decision and utilise our
on-Island connections to make this
process easier.

In addition, we are developing
a unique proposition for the
development of innovative services,
which can be trialled across an entire
population. This has already attracted
the attention of companies involved in
cybersecurity and, especially e-Health,
which is set to become a focus for
Jersey. The emergence of big data as
an invaluable tool for assessing macro
trends and personal opportunities is
also an area where Jersey’s robust
legislative environment has started to
attract companies wishing to exploit a
first-mover advantage across a number
of applications.
We have made significant progress in
this area recently and will officially be
partnering with the finance industry
to set up a Tech Growth Fund that

It’s the fact that you wouldn’t expect all of
those things from a company like JT that
make them possible, because the truth is
that there aren’t many Tier 1 telcos like
JT at all. Being small makes us quicker to
adapt, more agile and therefore able to
innovate – all key factors in the modern
telecommunications industry, especially
when you have the vision to see the
opportunities all around you.
JT’s size is one asset; its location is another.
Based in the Channel Island of Jersey,

with TED RIDGWAY WATT, CHIEF EXECUTIVE OFFICER, DIGITAL JERSEY

Ted comes to the
helm of Digital Jersey
Ltd with 20 years
experience in connecting
international business
to the UK science
base and proven
success with a range
of multinationals,
new technology
companies, academia
and government.

You wouldn’t necessarily expect a
telecommunications company from an
island measuring just nine-miles-by-five to
be installing an award-winning fibre-optic
network that will connect 45,000 premises
by 2016, to become the fastest ubiquitous
fibre network in the western world. You
probably wouldn’t expect it to be hosting
world leading technology companies from
around the world at its revolutionary ‘JT Lab’
test bed facility either, or at the forefront in
the Machine-to-Machine market and you
may not even expect the CEO of a publiclyowned organisation from an island of fewer
than 100,000 people to be speaking at
prestigious Silicon Valley conferences.

What are your
long-term aims?
We are confident that by 2016 Jersey
will be a world leader in terms of its
connectivity. It is intended that by
2016 we will have fully functioning,
100% penetration gigabit fibre in
place, Island-wide.
The Gigabit Jersey project will enable
vast amounts of data to be generated
and used in Jersey. The States of
Jersey can exploit this by creating an
intelligent infrastructure for Jersey
(e.g. traffic systems, ID systems,
energy usage, analysis of police
communications, community health,


etc.) and in so doing so, trigger a
range of Jersey-based businesses and
opportunities that will secure Jersey’s
place on the digital map as it were.
Sustained success in digital
jurisdictions globally is correlated
to early and strong support for
e-Government platforms delivered
on the basis of intention to drive
growth in the private sector and will
ultimately provide societal benefits
through the total availability of
innovative services.
It is to this end that the States of
Jersey is embarking on a number
of transformative projects in Jersey
to encourage and support the
development of new businesses. An
example of this would be the move
towards community healthcare, this
requires increased use of telecare
and telehealth.
Essentially, the long-term aim
of Digital Jersey is to act as an
accelerator for the digital economy
and the development of a digital
connected society.

off the south coast of England, we are
20 milliseconds away from the UK and
mainland Europe – but we’re not bound
by UK or EU legislation. The Island is
English-speaking and is best-known for
its world-leading international offshore
finance industry, which has spawned
a strong professional services sector –
there’s also a new government agency,
Digital Jersey, backing tech innovation
and seeking to develop this growing new
strand to Jersey’s economy.
However, it’s the fibre-to-the-home
network that makes JT and JT Lab stand
out. JT Lab provides companies with the
opportunity to test, research, develop and
launch products on a real network, on
real customers and in real time. We’ve
been in talks with some of the leading
software and hardware firms in the world
about trying out their new products and
services in our unique testing facility,
which is currently already being used by
a world-leading hardware company and
a top Israeli internet-security firm. This
is all down to our agility – for some major
global players, arranging and carrying out
testing can take months or years, our size
means that we can make that happen in a

timescale that better fits the fast-moving
modern telecommunications sector.
Whatever the future trends and new
product/sector innovations may be, for
all areas of telecommunications whether
it be fibre, mobile and the Machine-toMachine markets, JT is perfectly placed for
them. Our vision is to become the partner
of choice for global telecommunications
innovation which we will deliver through
unique propositions such as JT Lab.
Importantly, we’re experienced at engaging
with organisations at the cutting edge of
this dynamic and rapidly-changing industry.

contact jt
To find out how we can help your
organisation visit www.jt-lab.com
or www.jtglobal.com

trust turmoil
With much fanfare and following hype
and expectation the Taxation of Trust Law
was enacted in 2006, as part of a package
of tax reforms designed to increase the
flow of foreign capital into Israel and
help establish Israel as an international
financial center.
In the years following the introduction of
the Taxation of Trust Law it is estimated
that approximately $3 billion per year
entered the Israeli economy from family
members abroad.
A major vehicle responsible for foreign
income flowing into Israel is the Foreign
Settlor Trust (FST), a trust which exempts
Israeli and other beneficiaries named in
the trust deed from paying Israeli tax. This
exemption caused the FST to become a
“star performer” enticing foreign settlors
to establish such structures and thereby
enabling them to channel trust assets to
their beneficiaries who lived in Israel.
In late 2012 early 2013 the FST came
under tremendous scrutiny by the tax
authorities primarily as a result of several
publicized cases involving the abuse of

the FST. Several high profile personalities
were accused of using the FST as a means
of not paying tax, resulting in the tax
authorities being unable to collect billions
of Shekels in tax.
These abuses resulted in a reactionary
response by the authorities who were so
outraged by this situation that they were
driven to introduce sweeping reforms
concerning the taxation of trusts. These
reforms were included in the Budget
Law which came into effect on the 1st
August 2013.
From the 1st January 2014 a FST which
has one direct or indirect Israeli resident
beneficiary will be considered an Israeli
Resident Beneficiary Trust. An Israeli
Resident Beneficiary Trust is obliged to
pay tax on its worldwide income in Israel.
However, there is no indication as to
how the authorities intend to determine
whether in fact there is an Israeli resident
beneficiary named in a FST, which is crucial
to the implementation of the new law.
The difficulty facing the tax authorities

here is that discretionary irrevocable trusts
often used for long term estate planning
allow for beneficiaries to be substituted,
excluded and included at the discretion of
the trustees at any time. The beneficiaries
of such a trust are not fixed and such a trust
may be around for generations.

The Taxation of Trust
Law introduced in 2006
has made a 180 degree
turn in only 7 years.

There are many other technical issues
which have to be dealt with for example
the capital gains made on trust assets. The
present situation is that any capital gains
made by the sale of a trust asset before
2014 will not be subject to tax however
the sale of such an asset after 1 January
2014 will render the entire gain subject to
Israeli tax. The tax consequences made on
a significant gain would be considerable if
the trust asset is sold at the incorrect time.


The Taxation of Trust Law introduced in
2006 has made a 180 degree turn in only
7 years. The adoption of the new laws has
effectively disabled the original purpose
of the FST, by turning off the tap which
allowed billions of Dollars to flow into the
economy from family members abroad.
The saving grace is that there is a window
of three months before the new law
concerning the FST kicks in. The window
should be utilized by all those involved
with Foreign Settlor Trusts to plan and
restructure their affairs, and solutions are
available to ensure that they are not the
ones paying for the abuses of others.

contact linde krost
For more information contact Alan
Krost on: enquiry@lindekrost.com
or visit www.lindekrost.com

International Business Review - September 2013 - Israel Edition

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