Doing Business In The East Caribbean: The Nevis Financial Sector
Nevis forms part of the twin-island Federation known as St. Kitts andNevis. It is located in the Eastern Caribbean, approximately 230 miles from Puerto Rico, 1200 miles from Miami, 2000 miles from New York and 4,000 miles from London. Nevis’ legal system is based on English common law with final appeal to Her Majesty’s Privy Council in London. Nevis has a history of political and economic stability. Having gained independence from Britain in 1983, Nevis enjoys all of the advantages of a foreign and democratic state within the Commonwealth of nations. Nevis was one of the first jurisdictions in the Eastern Caribbean to realize the economic benefits of diversification via international financial services. Accordingly, in 1984, the Nevis Island Government launched the Offshore Financial services sector with the enactment of the Nevis Business Corporation Ordinance. For the first ten years, the government concentrated on International Business Company (IBC) formation. However, in 1994, in recognition of the opportunities that could be derived from the industry, the Nevis Island Government initiated various measures aimed at developing its financial services infrastructure and offering a wider range of onshore and offshore business opportunities. To this end, from 1994-1996, the Nevis Island Government expanded the offerings by enacting a series of legislative instruments for International Exempt Trusts, Limited Liability Companies and Offshore Banks. Further, the Government expended considerable resources aimed at developing expertise in the international financial services area and enhancing the ability of the service providers on the island to offer effective financial planning structures to the international financial community. Accordingly, astute international investors now have a unique blend of cutting edge legislation with over 55 highly qualified registered agents and other service providers in Nevis with expertise in law, banking, taxation and finance to meet their needs.
Language & Education
The official language of the island is English. Interpreters are available for other major international languages. The island has a 98% literacy level and its CXC and GCE results are among the highest in the Caribbean. The labour force is adaptable, trainable and possess a high degree of aptitude. However, foreign executives and technical personnel may be recruited from abroad, if necessary.
Banking & Other Support Services
Nevis offers a wide range of support services, such as state of the art telecommunications facilities; international and regional couriers; professional and competent attorneys and accountants; a range of local, regional and international banking institutions; and established trust and asset management services.
Taxes & Exemptions
There are no personal income taxes in Nevis. However, local companies are subject to a corporate tax on profits. Nevis international financial services sector offers numerous taxation benefits to offshore companies, limited partnerships and trusts. These include exemption from income, social security, capital gains, withholding, gift, estate and succession taxes. Furthermore, as practiced in many developed countries, certain qualified companies wishing to conduct business in Nevis may be granted concessions and tax holidays.
International Financial Services Legislation
The four major pillars of the Nevis International Financial Services Industry in Nevis are the formation of International Business Companies under the Nevis Business Corporation Ordinance, 1984; Nevis International Exempt Trusts under the Nevis International Exempt Trust Ordinance, 1994; Limited Liability Companies under the Nevis Limited Liability Company Ordinance, 1995; and Offshore Banks under the Nevis Offshore Banking Ordinance, 1996.
Nevis Business Corporation Ordinance (NBCO), 1984
The Nevis Business Corporation Ordinance is modeled in large part on the United States Delaware Corporation statutes combined with English law. A company formed under this Ordinance is the equivalent of what is commonly termed as an International Business Company (IBC). A company may be incorporated under the NBCO to conduct any lawful business and there is no need to enumerate the particular objects for which the company is incorporated. However, no person is authorised to carry on, or hold himself out as carrying on domestic banking, international banking or insurance business in or from within Nevis unless he is appropriately licensed under the Domestic Banking Act, the Nevis Offshore Banking Ordinance or the Insurance Act.
An Offshore Company registered in Nevis is required to maintain a registered agent at all times and a registered office in Nevis. The legislation permits the office of the registered agent to act as the office of the company. A registered agent must be licensed by the Minister of Finance. A registered agent may ascertain whether a suggested name is available and reserve the name electronically instantly with the company being registered in less than one day. In addition, Offshore companies registered under the NBCO need not file annual returns, and may keep corporate records and annual general meetings or meetings of the Board of Directors anywhere in the world. Furthermore, the NBCO facilitates the easy transfer of domicile of any foreign corporation to or from Nevis.
Nevis International Exempt Trust Ordinance, 1994
The Trust Ordinance provides for the creation of charitable, spendthrift and protective trusts. It also includes special provisions tailored to make Nevis a preferred jurisdiction for the establishment of asset protection trusts (APTs). To qualify as an International Exempt Trust, the following criteria must be met:
Other features of the trust are that the trust assets and income deriving from the corpus of an international trust are exempt from all exchange controls and estate, corporate, gift, income, inheritance, withholding, succession and stamp taxes in Nevis. The Nevis International Exempt Trust Ordinance is widely admired by persons wishing to structure offshore trusts, whether for asset protection purposes or for estate planning purposes. However, as always, Nevis has undertaken dynamic action and improved on its Trust law by enacting amendments to its Ordinance. These amendments, enacted on 15 September, 2000, further enhance the attractiveness of the Nevis trust law. The changes cover three areas, namely:
Registration of Nevis Trusts & Foreign Trusts
The first change addresses the misinterpretation of some users that registration of a trust may be delayed for many years after formation until a cause of action arises or that trusts formed under English common law may obtain the benefits of the Ordinance notwithstanding the failure to register. The amendment makes it clear that trusts formed under the Ordinance may claim the benefits of the Ordinance only if they are properly registered under the Ordinance within 45 days of creation. Such a provision would preclude trusts formed under the statutes of another jurisdiction from ever migrating or fleeing to Nevis. By definition, these trusts are not Nevis trusts and could not be expected to be registered in Nevis as a Nevis trust until it migrates in long after creation. To address this issue, the Amendment provides that a foreign trust for which future migration might be a possibility should register with the Nevis registrar as a foreign trust, thereby becoming a “qualified foreign trust” (QFT). In so doing, it preserves the trust’s ability to make such a move in the future if and when the need arises. Failure to register as either a Nevis trust or a QFT, as the case may be, within the specified time periods, or the failure to maintain the registration annually within the specified time periods, results in exclusion from the protection afforded by the Ordinance. A trust formed to be a Nevis trust is a trust that is registered with the Nevis registrar and for which the law of Nevis is the proper law of all or any aspects of the trust under section 4 of the Ordinance. This trust must be registered with the registrar within 45 days of the date on which the trust is created, settled or established. The application must be in the form specified by the registrar and shall be accompanied by the prescribed fee, a notice of the name and registered office of the trust, and a certificate from a trustee company licensed in Nevis or a barrister or solicitor licensed to practice in Nevis. This certificate must certify 1) that the trust will be an international trust as defined in the Ordinance and 2) the date the trust was created, settled or established, as applicable. As long as these requirements are met and the annual renewal fees are paid no later than 90 days after the current registration, the trust will be governed by the provisions of the Ordinance.
A foreign trust is a trust that provides for the law of a jurisdiction other than Nevis to be the governing law of all aspects of that trust. In order to be a QFT and be provided with the opportunity on some future date to migrate to Nevis and thereby obtain the full benefits of the Ordinance, the foreign trust must be registered with the Nevis registrar within 45 days of the date the trust is created, settled or established in the foreign jurisdiction. As with the Nevis trust, the QFT application must be in the form specified by the Registrar and shall be accompanied by the appropriate fee, a notice of the name of the registered office of the trust and a certificate from the trustee company licensed in Nevis or a barrister or solicitor licensed to practice in Nevis. However, in this case, the certificate must certify 1) that the trust will be a qualified foreign trust as defined in the Ordinance; 2) the date the trust was created, settled or established, in the foreign jurisdiction; and 3) the law under which the trust was settled. In some cases, where good reasons are established by a trustee company, barrister or solicitor for delays beyond the 45 day registration period, the registrar has the discretion to extend such periods as needed. In effect, the amendments to the Nevis International Exempt Trust require timely registration of 1) a Nevis trust in order to qualify as a Nevis International Exempt Trust; 2) a foreign trust to qualify as a QFT in order to preserve its ability to become a Nevis trust at some future date; and 3) a QFT that is in the process of migrating to Nevis.
Changes to the Fraudulent Conveyance Provisions
The new amendments to the fraudulent conveyance provisions as set out in Section 24 of the Ordinance accomplishes the following:
Prohibition on using Nevis Trusts to further criminal activities To prevent the use of Nevis trusts by those involved in criminal activities, this Amendment provides that the trust shall be invalid and unenforceable if any part of the trust assets are the proceeds of a crime for which the settlor is convicted.
Nevis Limited Liability Company Ordinance, 1995 (LLC) The Nevis LLC Ordinance permits planners to structure their Nevis LLC in any manner that suits their needs. Hence, if partnership tax treatment is desired, the Nevis LLC could be structured to lack continuity of life, free transferability, centralized management, and even limited liability. The Nevis LLC can be used as a structure to provide asset protection features similar to those of a trust without the limitation on control. It can also be used for any business venture or professional practice outside of Nevis. Structured appropriately, a Nevis LLC, free standing or together with a Nevis Trust, may ensure reduced gift and estate taxes and stronger asset protection than is currently available to domestic business structures. The owners of the Nevis LLCs are referred to as members, and may be thought of in the same way as one think of partners in a partnership or shareholders in a corporation. Their precise nature depends on the nature of the LLCs management. As structured, the structure provides maximum flexibility. The most important feature being the operating agreement, which defines the operation and rights among members. The statute provides a series of default rules that apply to the LLC unless the operating agreement fails to dictate otherwise. Whereas the statute of the US and other jurisdictions require at least two members, the Nevis LLC may have a single member. A foreign LLC could become a Nevis LLC by redomiciling to Nevis. Other foreign business entities, including partnerships and corporations, may also convert to a Nevis LLC under a relatively simple process.
Nevis Offshore Banking Ordinance, 1996
The legislation provides that licenses are only granted to eligible companies of local banks incorporated under the Domestic Banking Act of 1991 or a qualified foreign bank. A qualified foreign bank is defined as a bank with adequate capitalization and assets licensed to do domestic banking in its jurisdiction of incorporation or a financial institution that is directly or indirectly a wholly-owned subsidiary of a foreign bank.
Challenges faced by the Nevis Financial Services Sector In recent months, the entire offshore financial services industry, particularly those within the small Caribbean island states have been facing significant challenges. These challenges emanate from the unilateral actions of the larger and wealthier nations, which are documented in various blacklists, classifications and reports from the Financial Action Task Force (FATF), the Organization for Economic Cooperation and Development (OECD) and the Financial Stability Forum (FSF). The negative lists and classifications were drawn up by the larger nations of the world without giving the victimized countries an opportunity to dialogue with them. Further, these negative lists resulted in advisories and threats of economic sanctions if the named countries do not comply with specific demands by a certain date.
Response to the Challenges
The FATF alleges that the named jurisdictions were not doing enough in the fight against money laundering. Notwithstanding this allegation, it is widely known that Nevis has always been committed to maintaining the highest degree of integrity and ensuring that only qualified and reputable persons are allowed to conduct business in its jurisdiction. Nevis does not want to attract money laundering neither any kind of illegal activity in its jurisdiction. It only desires legitimate business activity. To this end, extensive due diligence is conducted and the backgrounds of all applicants who wish to conduct business in Nevis are scrutinized very carefully. Additionally, to ensure that Nevis remains a reputable jurisdiction from which to conduct legitimate international financial activity, Nevis undertook a series of initiatives. Of notable mention are the following initiatives:
Conclusion
Over the years, Nevis has built its reputation slowly. Today, the Nevis Financial Services sector is recognized as a flourishing, modern entity firmly anchored on the island’s stability, financial integrity, well-planned modern legislation and the implementation of protective regulations. Further, Nevis is aware that it needs to respond to the international arena and cooperate in the attempt to build a sounder financial architecture in order to develop international best practices. As a demonstration of its commitment, Nevis has undertaken significant measures aimed at ensuring that it remains a viable, vibrant and reputable jurisdiction from which to conduct legitimate international financial activity. Notwithstanding these measures, as always, Nevis remains poised to respond dynamically and proactively and is well positioned to offer services to the astute international investor seeking to maximize their opportunities in the ever-changing global marketplace. As a result, the Government of Nevis is confident that as it continues to work in collaboration with relevant persons in the international community and the service providers on the island, that its offshore financial services sector will continue to grow, while keeping in mind its watchwords of quality, efficiency, innovation and integrity.
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