Offshore

What Counts In Choosing An Offshore Jurisdiction

George Merrylees, 7 February 2022

articleimage

A private client lawyer sets out the questions he has about what he looks for in an offshore jurisdiction; the trends that are unfolding and the centres which are making most headway.

What sort of considerations apply when choosing an offshore location? Some might respond that tax, regulations and ease of doing business are likely to be uppermost in mind, but it can be more complex than that. How politically stable are such places? Is the government honest? And – in light of the COVID crisis – how rational and efficient is the system at handling viruses and the associated restrictions? Are travel connections quick and pleasant? Are there good schools and healthcare facilities and is the location a fun and interesting place in which to live? 

There’s a lot to take on board. To explore how to frame these questions is George Merrylees, partner at Wedlake Bell, the London-based law firm. The considerations are, by definition, global and we hope that the article will stimulate debate across our different editions. 

The usual editorial disclaimers apply and we invite people to jump into the debate. Email tom.burroughes@wealthbriefing.com

Many international private wealth practitioners have tried, and often successfully, to undertake a comparison of offshore jurisdictions. I will leave such a task to those who have global offices with boots on the ground.

As my firm is a single office based in central London with international affiliations, I will look at the world of offshore jurisdictions through the lens of a London private client lawyer, which is, after all, all I can really do. The questions I will address in this article are threefold:

(1) What factors motivate me to choose an offshore jurisdiction; 
(2) what trends am I seeing; 
(3) which offshore jurisdictions are charging further ahead; and what factors motivate me to choose an offshore jurisdiction?

Like many of my London colleagues, I am guilty of having a short list of favourite offshore jurisdictions. This is compounded by the fact that I know what I know, and I don't know what I don't know. But beyond that, I am surely influenced by experience, personal relationships and, possibly, the unconscious bias of a London practitioner who usually favours the Channel Islands. There is, of course, no logical reason for this if my clients come from outside the UK and, in some cases, have no link to the UK at all.

In my experience, the perfect solution is often not possible but I have met too many clients who end up putting their family wealth out of reach due to the structures they have used. This might be on account of the tax, the regulations, the overheads or the lack of foresight as to jurisdictional requirements that have been ignored.

So what would I say is my approach when it comes to choosing offshore jurisdictions? I can honestly say that, through trial and error, I have learned to recommend offshore jurisdictions that offer culturally intelligent solutions. 

In my opinion, and to avoid the problems I have mentioned, a culturally intelligent approach requires that the structures:
•    should be as easy to understand and use as possible by both the family members and any interested tax inspector; 
•    should be portable in that they can follow the family through the changes in their tax status. If such changes jeopardise the structures, then the structures should be easy to dismantle/restructure; 
•    should work efficiently and effectively across borders from a tax and compliance perspective; 
•    should be cost effective; and 
•    should be tax efficient but not at any cost.

An equally important consideration is the team of advisors with whom the family have to work in relation to their structure. In my opinion this is absolutely linked to choice of jurisdiction. 

I consider the fiduciary provider to be an integral part of the professional team that services the client. After all, the fiduciary might very well turn out to have the longer relationship with the client as the client moves from one jurisdiction to the next. So it is vital to me that I introduce a high calibre fiduciary team to the client and their family and that such team has the required expertise to accompany them in the long term. I take the same approach when I involve foreign lawyers on a client matter. It is for this reason that I will gladly go to a less established jurisdiction if I know that I am not compromising the professionalism and technical ability of the fiduciary service provider. 

The types of question I will ask myself when choosing an offshore jurisdiction can be summarised as follows:

1.    Which jurisdictions offer the correct structures to hold the assets owned by the client?
2.    How do the jurisdictions relevant to the client and his/her family interact or simply, react to the offshore jurisdictions and to the entities that we will consider setting up to hold the assets? 
3.    What is the relevant expertise I am looking for in the fiduciary provider? This will usually relate to the tax situation, the complexity of the client's affairs, international compliance as well as to the assets; 
4.    Is there a language requirement? and
5.    Will the client get on with the fiduciary provider? 
 

Register for WealthBriefingAsia today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes