IMF: Tax Administration Reform in the Francophone Countries of Sub-Saharan Africa

Since the early 1990s, major tax administration reforms have been implemented in the Francophone countries of sub-Saharan Africa, with significant support from the IMF and development partners. While the reforms have contributed to an increase in revenues, attention is still needed to address a number of weaknesses in these countries’ tax administrations. A review of the conditions for successful modernization of the tax administration shows that significant changes are needed to ensure better utilization of technical assistance, improve the governance of reforms, and provide the tax administrations with greater flexibility in managing their resources.

Working Paper No. 13/173

Mauritius and Gabon sign Agreements on Taxation and Investment

Mauritius and Gabon signed yesterday in Port Louis a Double Taxation Avoidance Agreement (DTAA) and an Investment Promotion and Protection Agreement (IPPA) to enhance economic ties and provide greater tax certainty for businessmen between the two countries.

The signatories were the Vice-Prime Minister, Minister of Finance and Economic Development, Mr Xavier-Luc Duval, and the Minister of Foreign Affairs, International Cooperation and the Francophonie, in charge of NEPAD and Regional Integration of Gabon, Mr Emmanuel Issoze Ngondet. The Minister of Foreign Affairs, Regional Integration and International Trade, Dr Arvin Boolell and the Minister of Agriculture, Fisheries and Rural Development, of Gabon, Mr Julien Nkoghe Bekale, were also present.

The DTAA will give a further spur to the positive evolution of economic ties between the two countries while making clear the taxing rights of Mauritius and Gabon on all forms of income arising from cross-border economic activities between the two countries. Under the agreement, double taxation which is an impediment to cross-border activities will be eliminated. It also provides for reduced taxation at source or exemption on various sources of income.

As regards the IPPA, it will give a boost to cross-border investment by protecting investors from direct or indirect double taxation and enhance the commercial and economic relations between the two countries and broaden investment opportunities for the business community. It will also be easier for investors from both countries to invest their capital and repatriate their investments and profits to their respective countries.

The agreements also provide for an exchange of information between the two countries based on the most recent version of the Organisation for Economic Co-operation and Development (OECD) Model article on exchange of information.

Speaking on the occasion, the Vice-Prime Minister, Minister of Finance and Economic Development, Mr Duval, said the agreements will help generate trade activities, transfer of technology, promote management skills of entrepreneurs between both countries. Besides, he added, it will help investors from Mauritius and Gabon to explore possibilities for mutually profitable ventures.

For his part, the Minister of Foreign Affairs of Gabon, Mr Emmanuel Issoze Ngondet, qualified the agreement as a significant achievement that demonstrates the commitment of both countries towards promoting cooperation and consolidating efforts in areas of mutual interests while strengthening the bilateral relations between Gabon and Mauritius. He underlined that the Gabonese authorities will look into possibilities of joint ventures while giving a boost to the economies of both countries as well as the issue as regards visa entry for Mauritians in Gabon.

Mauritius has to date signed 43 Double Taxation Avoidance Agreements and 38 Investment Promotion and Protection Agreements with several countries. The country is also committed to developing a Tax Information Exchange Agreement with countries where there is no Double Taxation Agreement

iFOVEA: Photo-optical surveying & mobile data acquisition

An idea that saves time and machines, and then money in the end as well, is always welcome. That’s why a new idea spawned by a HAWK founder team is currently attracting a lot of attention in the wood industry: the new smartphone app is able to very quickly calculate the value of any woodpile. FOVEA is the name of a young company that is being accompanied and supervised by the HAWK Founders’ Initiative and is also financially supported with an existence-funding stipend from the German Federal Ministry of Economics.

Up until now, anyone who wanted to know the price of a woodpile in the forest usually had to count all the trunks and logs individually, then measure and calculate the volume. And that takes time – at least twenty minutes. This new app needs only approximately two minutes to count the trunks, the cubic meters and the stacked cubic meters for an average pile of wood.

The wood is measured photo-optically in several steps; a panorama photo then appears on the display, and finally the number of trunks appears according to thickness along with the data on solid cubic meters and stacked cubic meters, on the basis of which the price can then be calculated. In addition to the advantage of saving time, the app can also – if used for larger areas – serve to simplify and standardize wood logistics. The price charged for the app is based on the volumes measured or trunks/logs counted, which results in cubic meters or in price per piece.

The savings potential for the wood industry is enormous – and that applies all over the world confirms Prof. Dr.-Ing. Bernd Stock from the HAWK Faculty for Natural Sciences and Technology: “The app is a real technological innovation; it uses elements from digital image processing and calculates this information on a smartphone.” Stock is the supervisor for the corresponding PhD thesis by Christopher Herbon, who developed the special mathematical algorithm that runs in the background of the app. Herbon is the software developer at FOVEA.

It was Manfred Ide who first had the idea for the app and the founding of the company. Ide is a graduate in computer science and a forester. He comes from a rural-forestry company in the south of Lower Saxony in Germany and is very well acquainted with this topic. With the help of the HAWK Founders’ Initiative, he was also able to find “his people” in the corresponding faculties at the University. While Ide himself studied at the Göttingen-based Faculty for Forest Industry Resource Management, Herbon, who is from the Faculty of Natural Sciences and Technology, was referred to him by Prof. Stock.

For design, marketing and public relations, Ide found Nadine Weiberg at the Hildesheim Faculty of Design to join the team as the third “Musketeer”. She is a perfect fit: while writing her Bachelor thesis, Weiberg developed the “Bug Science” app under the direction of Prof. Stefan Wölwer, an app that foresters and school children can use on smartphones to identify bugs and get to know more about them. Her thesis just recently received an internationally renowned design prize, the reddot award.

FOVEA is also working together with research assistants on the market introduction of the “Holz App” (Wood App). Tasks that still have to be carried out and supervised include testing in state, municipal and private forested areas in Germany. Manfred Ide has already introduced the project at national and international wood fairs and it has been attracting a lot of interest from South Africa, Brazil, Spain and Russia. 

With iFOVEA Counter it is possible to count the wood logs in a wood log pile within a few seconds. You can automatically count 1,000 wood logs in approximately 4 minutes. 

iFOVEA Counter App is currently available in Australia, Austria, the Czech Republic, Germany, New Zealand, Poland and Switzerland.

Mauritius: Speech of FSC Chief Executive - Launching of ETF on SEM in association with ABSA Capital SA

‘‘Announcement of the Launching of Exchange Traded Funds on

Stock Exchange of Mauritius (SEM) in association with ABSA Capital SA”

Speech by Ms Clairette Ah-Hen

Chief Executive

at Stock Exchange of Mauritius Ltd (SEM), One Cathedral Square Building

Thursday, 18th July 2013

Mr. Sunil Benimadhu, Chief Executive, Stock Exchange of Mauritius Ltd

Mr. Vipin Mahabirsing, Managing Director, CDS

Dr Vladimir Nedeljkovic – Principal – Head, Investments ABSA Capital/Barclays Group.

Members of the Press

Distinguished Guests

Ladies & Gentlemen

Good evening,

I am delighted to be among your midst this evening to present this SEM/ABSA partnership and announce the launch of the Exchange Traded Funds on the Stock Exchange of Mauritius.

First of all I would like to thank the Stock Exchange of Mauritius for giving me the opportunity to address you.

Over more than a year ago, at the workshop ‘Internationalising the SEM, Creating substance and Capitalising on Africa’s potential” at the Swami Vivekananda Conference Centre in Pailles, SEM introduced the listing rules for Depositary Receipts and Mineral Companies on the Official Market as well as the requirements for the listing of junior Mineral and Exploration Companies on the Development and Enterprise Market (DEM). SEM then announced some of the projects and other new products in its pipeline. Today is another milestone in the history of SEM and I am pleased to see one such project coming to fruition.

I must add that such innovation shows that both SEM and the FSC deserve the awards presented to them last September 2012 - for the second time - by the Africa Investor, in collaboration with New York Stock Exchange Euronext, as the “Most Innovative African Stock Exchange of the Year and the “Most Innovative Capital Market Regulator of the Year” respectively. A prize of excellence, the Jurisdiction and the Securities Industry can be proud of!

Such recognition and awards reflect firstly, the commitment of the FSC to be an efficient and service-oriented regulator and to offer a regulatory framework which inspires trust and confidence and secondly, SEM's initiatives to embrace new areas of development and compliance with regulatory and operational set-up of international standard.

This evening is another opportunity for us, as members of the Financial Community, to reflect on the consolidation of Mauritius as an International Financial Centre of substance and a transparent and safe place to conduct financial services activities.

Nowadays, investment decisions are increasingly made on a global rather than a national basis. The drive for internationalisation of exchanges results from cross-information flows that underpin market activity and from infrastructure that allows market participants to act upon this information. Maintaining the domestic infrastructure is an immense challenge for any policy authority but connectedness across borders is an even more daunting challenge.

The launch of the Exchange Traded Funds (ETF) is a testimony of close collaboration to develop the capital market and meet the needs of investors. At the FSC, we have widened the scope of application of our laws - with new rules - to accommodate for more market players and to spur the growth of the financial services sector.

• The securities of NewGold – in the form of gold bullion debentures – which are already issued and primarily listed at the Johannesburg Stock Exchange (JSE) - will be listed on the SEM by way of introduction and the securities transferred from STRATE, a South African Central Securities Depository to that of CDS for secondary trading on SEM as from 26 July 2013.
• This was made possible following the publication of the Securities (Interpretation of Securities) Regulations 2013 to include "Exchange Traded Funds" as "securities" under section 2 of the Securities Act 2005. This has enlarged the scope of the types of securities offered in Mauritius.
• In terms of Brokerage Fees, the FSC has published the Securities (Brokerage Fees for Exchange Traded Funds on Foreign Underlyings) Rules 2013 in the Government Gazette (GN 179 of 2013) which are meant exclusively for foreign underlyings as the name indicates. I must point out here that the fees prescribed represent a significant reduction as compared to the brokerage fee applicable to transactions on shares as per the Stock Exchange (Brokerage) Regulations 1989. This, I believe will no doubt be viewed as an incentive to boost our competitiveness and to act as a gateway for Mauritius to attract more investors to trade in ETF instruments.

We all know that ETF is a well-known international product which has been around for more than 20 years now (since 1993), but it is relatively new in our Mauritian landscape. The introduction of such and any other financial products on SEM usually requires of the FSC to building the right human capacity and using our links and good collaboration with other regulators around the world so that we have the right and proper environment for investors to compete in Mauritius as well as on another international platform. At all times, we ensure a proper regulatory framework and monitoring in line with the principles and guidelines of international organisations such as the International Organisation of Securities Commissions (IOSCO).

In a report published in June this year, IOSCO stated “Investor interest in ETFs has increased worldwide as evidenced by the sharp increase in funds invested in these types of products. Assets managed under ETF structures totalled almost around US 1.9 trillion at the end of January 2013, representing roughly 7% of the global mutual fund market. This dynamic growth in ETFs has gradually attracted the attention of regulators concerned about the potential impact of ETFs on investors and on the broader market place, as the industry has continued to evolve through diversification and the launch of new innovative products”.

ETF is purported to have a number of benefits to investors - in terms of asset-allocation, spreading-the-risk, lower-fee-structure, liquidity, convenience-and-flexibility, transparency, security and easy to buy and sell - thus enabling investors to diversify their portfolio.

Ensuring that there is the appropriate infrastructure for product and market, that proper regulatory measures are in force and most importantly that consumers are adequately protected remain of primary importance to FSC as the securities regulator.

A small note of caution here, no investment is without risk - any investor must obtain and carefully consider its own independent advice in this regard before investing.

The partner of choice for SEM, in the form of Absa Capital to launch this ETF in Mauritius is in my view an excellent choice. Absa Capital is a reputable market maker and will step in as the counterparty to ensure that liquidity is always maintained - if there is no willing buyer or seller at the other end of the trade. As a well-known provider of strategic advisory, financing and risk management needs, Absa Capital has an extensive global network for its clients and this helps them remain competitive within sub-Saharan Africa. We, at the FSC, believe that this will bring more market players to our jurisdiction and consequently, encourage flow of funds and investments into the African continent.

You will agree with me that the provision of ETFs as an additional investment product will reinforce our jurisdiction as an investment avenue. As we continue our struggle to foster global cooperation worldwide, the example of ABSA Capital as a market maker is a good one to promote Cross-border listing.

SEM's move towards internationalising its exchange and introducing ETF is in line with the FSC‟s vision to be an internationally recognised financial supervisor committed to the sustained development of Mauritius as a sound and competitive financial services centre However, the work doesn‟t end here. SEM is ready to become a multi asset infrastructure and for the FSC, there is already such an infrastructure in place. You will no doubt hear about our initiatives for the securities sector in the future.

Coming back to the ceremony of this evening, I am confident that the launch of ETF – securities of NewGold - on the SEM is an important addition to our vibrant capital market industry and will no doubt contribute to making our jurisdiction an IFC to be reckoned with. So I would like to congratulate both the SEM and ABSA and wish them a fruitful journey together.

On this note ladies and gentlemen have a pleasant evening.

Financial Services Commission

18th July 2013

The Lawyer : Offshore, Mauritius: Sun, sea and tax

The current commercial interest in Africa is having a knock-on effect in Mauritius as it becomes one of the world’s growing offshore jurisdictions

Mauritius, though geographically one of the larger offshore jurisdictions, has remained off the radar for many in the offshore world.

India: Ministry of Finance constitutes a forum chaired by Dr. Parthasarathi Shome, Adviser to the Finance Minister for exchange of views between industry groups and government on tax related issues or tax related disputes

From time to time, representations are received from Chambers of Commerce or Industry Associations on tax-related issues and tax-related disputes that concern the industry as a whole or concern large sections of the industry. They have represented that there must be a forum at which they can be heard so that their point of view is placed before the Government for its consideration.

The request is found very reasonable. Exchange of views between industry groups and Government on tax related issues or tax related disputes would give an opportunity to Government to hear the arguments of the industry groups. It will also give the Government an opportunity to explain its stand on tax related matters. Thus this exercise would be mutually beneficial.

Accordingly, the Ministry of Finance has decided to constitute a forum that will meet every Wednesday at 3 p.m. It will be chaired by Dr. Parthasarathi Shome, Adviser to the Finance Minister. He will be supported by officers of the Tax Policy and Legislation (TPL) wing of the Central Board of Direct Taxes (CBDT) and the Tax Research Unit (TRU) of the Central Board of Excise and Customs (CBEC). Chambers of Commerce, industry associations and industry groups are advised to first submit a memorandum to Dr. Parthasarathi Shome and then seek an appointment. An appointment will be fixed for them on a suitable Wednesday. They will be given a hearing by Dr. Parthasarathi Shome and the officers assisting him.

The first meeting of the forum will be held on August 7, 2013 and it will be held thereafter on every Wednesday.

Touchstone's Wealth Management : TrustDynamics and FundDynamics

Touchstone's Wealth Management Division is a wholly owned subsidiary of the Touchstone Group, one of the largest suppliers of business software and consultancy services to mid-sized UK organisations.

Touchstone Wealth Management is based in Jersey and has an Australian office in Sydney. Altogether, we are a team of 40 business, technical and training personnel, specialising in one vertical market: wealth management.

Our TrustDynamics® and FundDynamics® software solutions were first created in Jersey in 1997 and since then have been continuously developed into a proven “standard package” using Microsoft Dynamics NAV as the core underlying software platform.

Decades of use in the wealth management industry have proven that TrustDynamics® and FundDynamics® are ideal for the fiduciary and fund administration sectors.

Touchstone is a Microsoft Gold Partner, with competencies in Enterprise Resource Planning and Customer Relationship Management. Our relationship with Microsoft means that our clients benefit from the highest level of innovation and a deep understanding of the Microsoft roadmap, as well as the support of Microsoft’s considerable Research & Development commitment to future-proof technology.

TrustDynamics® and FundDynamics® are completely scalable solutions making them an excellent choice whatever the size of your trust or fund administration business. We work with companies that have as few as 10 users all the way up to businesses with 200 or more worldwide users with multi-jurisdictional communications requirements.

It doesn’t matter where you are based, our project teams have a proven track record of implementing TrustDynamics® and FundDynamics® in locations across the world.

TrustDynamics®

What makes TrustDynamics® the world’s leading trust and company administration system?

TrustDynamics® transforms the way you do business

True competitive advantage lies in your fiduciary company’s ability to identify, process and react to critical information upon which you can make informed and confident decisions that drive successful outcomes, increase productivity, reduce cost and improve profitability.

With TrustDynamics® you know that your business analysis and decisions are based upon the strongest possible foundations. Years of meticulous development using core Microsoft Dynamics NAV technology have resulted in the realisation of the world’s most advanced trust and company administration system.

TrustDynamics® is tried, tested and trusted

Tried, tested and trusted by our clients, TrustDynamics® is a comprehensive suite of integrated applications designed specifically for trust & company administrators. Core system modules, with additional functionality available on a modular basis, allow you to implement the functionality you need and then expand the system as your business needs dictate.

TrustDynamics® has evolved over years of successful implementations and data migrations into the market leading system that it is today. Users benefit from proven methodologies, solutions rich in functionality and a comprehensive suite of integrated modules designed exclusively for the wealth management sector

FundDynamics®

What makes FundDynamics® the world’s leading fund administration system?

FundDynamics® transform the way you do business

True competitive advantage lies in your company’s ability to identify, process and react to critical information upon which you can make informed and confident decisions that drive successful outcomes, increase productivity, reduce cost and improve profitability.

With FundDynamics® you know that your business analysis and decisions are based upon the strongest possible foundations. Years of meticulous development using core Microsoft Dynamics technology have resulted in the realisation of the world’s most advanced fund administration system.

FundDynamics® is tried, tested and trusted

Tried, tested and trusted by our clients, FundDynamics® is a comprehensive suite of integrated applications designed specifically for partnership and retail fund administrators. Core system modules, with additional functionality available on a modular basis, allow you to implement the functionality you need and then expand the system as your business needs dictate.

FundDynamics® has evolved over years of successful implementations and data migrations into the market leading system that it is today. Users will benefit from proven methodologies, solutions rich in functionality and a comprehensive suite of integrated modules designed exclusively for the fund administration sector.

Microsoft Dynamics NAV

As our platform, Microsoft Dynamics NAV is the core technology upon which TrustDynamics® and FundDynamics® are built. This is important because Microsoft’s annual research and development budget for its business solutions portfolio is USD 1 billion which means you benefit from unrivalled investment in future-proof technology.

Microsoft Dynamics NAV is fully integrated with the Microsoft Office suite of products, including Word, Excel and Outlook. Familiarity with the software means your colleagues can build on the knowledge they already have, ensuring less training and development time and a quicker return on your investment.

Servicing clients in: Australia • Bahamas • Bermuda • Cayman • Gibraltar • Guernsey • Hong Kong • Isle of Man • Jersey • Liechtenstein • London • Luxembourg • Mauritius • Monaco • Netherlands • Papua New Guinea • Singapore • Switzerland

Mauritius: Tax Exempt Special Purpose Fund

Mauritius ranks amongst the most flexible and advantageous offshore fund domiciles due in no small part to the wide gamut of funds such as the tax exempt Special Purpose Fund that may be established under the legal and regulatory system of Mauritius.

The Special Purpose Fund regime was introduced in Mauritius with the promulgation of the Financial Services (Special Purpose Fund) Rules 2013 made by the Financial Services Commission ("FSC") under section 93 of the Financial Services Act 2007 and sections 9, 10, 12 and 39 of the Private Pension Schemes Act 2012  

The FSC may, on application, approve a scheme as a special purpose fund if -

• the purpose of the scheme is to conduct investment solely in countries which do not have a tax arrangement with Mauritius;
• the purpose of the scheme is to invest mainly in securities whose returns will be exempted from taxation; or
• all the investors of the schemes are pension schemes or other persons entitled to tax exemption.

“scheme” means a collective investment scheme or a closed-end fund authorised by the FSC under Section 97 of the Securities Act;

“tax arrangement” means an arrangement between countries for relief from double taxation in pursuance of section 76 of the Income Tax Act;

The FSC shall not approve a scheme holding a Global Business Licence as a special purpose fund.

An approval under the Financial Services (Special Purpose Fund) Rules 2013 may be subject to such conditions as the FSC may deem necessary.

Mauritius: FSC Circular Letter CL150713 Financial Services (Special Purpose Fund) Rules 2013

CL150713 – 15 July 2013

CIRCULAR LETTER (CL150713)

To: Directors,

Management Companies and Other Licensees

Dear Sir/Madam,

THE FINANCIAL SERVICES (SPECIAL PURPOSE FUND) RULES 2013

The Financial Services Commission (the “FSC”) is issuing this Circular Letter to set out the requirements to be met for a scheme (either a collective investment scheme or a closed-end fund) to be approved as a special purpose fund.

1.0 The Financial Services (Special Purpose Fund) Rules 2013

1.1 The Financial Services (Special Purpose Fund) Rules 2013 (the “Rules”) came into operation since 1 June 2013.

1.2 The Rules provide that the FSC may, on application, approve a scheme as a special purpose fund. Such application will only be considered where:

(i) the purpose of the scheme is to conduct investment solely in countries which do not have a tax arrangement with Mauritius;

(ii) the purpose of the scheme is to invest mainly in securities whose returns will be exempted from taxation; or

(iii) all the investors of the scheme are pension schemes or other persons entitled to tax exemption.

1.3 The approval may be subject to such conditions as the FSC considers necessary.

1.4 The FSC shall not approve a scheme holding a Global Business Licence as a Special Purpose Fund.

2.0 Application for a scheme to be approved as Special Purpose Fund

2.1 An application for authorisation of a scheme (CIS or CEF) must be made pursuant to Section 97 of the Securities Act 2005 on prescribed application forms. The Applicant must indicate on its cover note its intention for the scheme to be approved as a special purpose fund as well as specify under which condition it will operate as such.

2.2 All applications for authorisation of the scheme must be made in accordance with the CIS Regulations.

2.3 Where a proposed special purpose fund does not have a CIS Manager licensed by FSC, it shall at all times have a CIS administrator in Mauritius.

2.4 The proposed special purpose fund can also apply for categorisation as per Part XI of the Securities (Collective Investment Schemes and Closed-end Funds) Regulations.

2.5 At the time of application, an undertaking from the promoter must be submitted to the FSC to the effect that the proposed special purpose fund will abide by the condition under which it will be approved as special purpose fund.

3.0 Transitional period for schemes already authorised by the FSC

3.1 Those schemes which are already authorised by the FSC but wish to be approved as a special purpose fund can submit their application to the FSC.

3.2 The application must be accompanied by certificates from the scheme’s directors and auditors to confirm that the scheme complies with any of the conditions set out in Rule 3(1) of the Rules.

3.3 Each application will be assessed by the FSC prior to granting the approval.

4.0 On-going obligations of schemes approved as special purpose funds

4.1 The FSC hereby reminds its licensees that all schemes approved as special purpose funds are required to comply with the relevant provisions of the Securities Act 2005 and the CIS Regulations.

4.2 Furthermore, the submission of Audited Financial Statements of all schemes approved as special purpose funds must be accompanied by certificates from the scheme’s directors and auditors to confirm that the scheme is in compliance with any of the conditions set out in Rule 3(1) of the Rules. 

Yours Faithfully, 

Ms. Clairette Ah Hen 

Chief Executive

US: Treasury Engaging with More than 80 Countries to Combat Offshore Tax Evasion and Improve Global Tax Compliance

The U.S. Department of the Treasury and the Internal Revenue Service today announced that due to overwhelming interest from countries around the world, a six-month extension to the start of the Foreign Account Tax Compliance Act (FATCA) withholding and account due diligence requirements will be provided to allow more time to complete agreements with foreign jurisdictions. The six-month extension, to July 1, 2014, will also provide foreign financial institutions (FFIs) with the time necessary to comply with FATCA while helping to ensure efficient implementation of the law.

“Given the groundswell of international interest in FATCA, we are providing an additional six months to complete agreements with countries and jurisdictions across the globe, before withholding begins,” said Treasury Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. “The high volume of international participation in this effort represents a quintessential race to the top. Every additional country we bring on board means we are one step closer to winning the fight against offshore tax evasion.”

Enacted by Congress in 2010, FATCA targets non-compliance by U.S. taxpayers using foreign accounts and establishes a global approach to combatting offshore tax evasion. FATCA requires U.S. financial institutions to withhold a portion of payments made to FFIs who do not agree to identify and report information on U.S. account holders.

To make compliance with the reporting requirements of FATCA feasible, particularly for FFIs in jurisdictions where existing laws prohibit this type of reporting, Treasury has developed intergovernmental agreements (IGAs) that rely on governmental cooperation to facilitate the exchange of FATCA information. This approach not only addresses legal impediments that exist in some foreign countries, but also reduces burdens on financial institutions and streamlines the reporting process. The approach has been praised by the Organisation for Economic Co-Operation and Development (OECD), the G-8, and many others within the global community who are now actively considering making FATCA IGAs the basis for an international standard for the automatic exchange of this type of tax information.

Stopping offshore tax evasion is a global issue and the IGAs are a crucial component to FATCA implementation. To date, Treasury has signed nine IGAs, and is engaged in related conversations with more than 80 other jurisdictions.

While the start of withholding and due diligence will be extended to July 1, 2014, the first report of information under FATCA continues to be due in 2015, and will include information about accounts maintained during 2014. The FATCA registration website will be open by August 19, which will allow financial institutions substantial time to begin testing the process and entering information. Other key FATCA deadlines, including expected timelines for the implementation of withholding on gross proceeds from sales of U.S. securities and passthru payment withholding, remain unchanged.

UK - Transparency and trust: enhancing the transparency of UK company ownership and increasing trust in UK business

Business success, and therefore economic growth, depends on investors, employees, consumers and the wider public having confidence in business. When companies do business with each other, those transactions must also be built on trust.

An effective and trusted system that identies and deals with poor business behaviour reassures people that we operate fairly, and encourages honest entrepreneurs to invest in activities promoting growth and employment.

This paper considers a range of proposals to enhance the transparency of UK company ownership and increase trust in UK business. This will help:

• prevent illegal activity
• better enable companies to be held to account
• provide businesses, investors, employees and consumers with confidence that companies are acting fairly

Mauritius: FSC Q & A on Special Purpose Fund (SPF)

Special Purpose Fund (SPF) – Questions & Answers

1. What is a SPF?

A SPF is a fund (either authorised as a Collective Investment Scheme {CIS} or a Closed-end Fund {CEF}) which is not resident in Mauritius as per Section 73A of the Income Tax Act 1995 (‘ITA’).

2. What are the other amendments that have been made in the ITA in relation to SPF?

(i) Part I of the Second Schedule of the ITA refers to Exempt bodies of persons where Item 16 reads as follows: A special purpose fund established under the Financial Services Act.

(ii) Part II of the Second Schedule of the ITA refers to Exempt income which includes the following:

Interest, rents, royalties, compensations and other amounts paid by a company holding a Category 2 Global Business Licence or a special purpose fund established under the Financial Services Act 2007 to a non-resident.

3. What is the rule governing SPF and when has it come into force in Mauritius?

The relevant rule is The Financial Services (Special Purpose Funds) Rules 2013 which has been in operation since 1st of June 2013.

4. What are the criteria for a CIS/ CEF to be approved as a SPF?

The FSC may approve a CIS or a CEF as a Special Purpose Fund if:

• The purpose of the CIS/CEF is to conduct investment solely in countries which do not have a tax arrangement with Mauritius;
• The purpose of the CIS/CEF is to invest mainly in securities whose returns will be exempted from taxation; or
• All the investors of the CIS/CEF are pension schemes or other persons entitled to tax exemption.

5. What is the rationale for introducing SPF in Mauritius?

Mauritius has so far attracted treaty based funds (those benefiting from the Double Taxation Avoidance Agreement {DTAA}). However, there are a number of countries which do not have a DTAA with Mauritius. Therefore in the absence of an appropriate framework, certain promoters have been using other jurisdictions as a platform for investment funds. The introduction of the SPF aims at attracting those promoters.

6. Can the SPF invest in Mauritius?

Yes, investments can be made within Mauritius as well as outside Mauritius while enjoying the benefit of being tax exempt.

7. If the SPF is not a tax resident in Mauritius, how and where does the SPF pays its tax?

The SPF will be taxed in accordance with the tax legislations of the countries where the investments are being made.

8. If I am an investor in a SPF, how will I be taxed?

An investor in a SPF will be taxed in accordance with the tax legislation of the country where the investor is a tax resident.

9. Will a CIS/CEF be approved as SPF if it holds a Global Business Licence?

As per Rule 3(2) of the SPF Rules, a CIS/CEF holding a Global Business Licence shall not be approved as a SPF.

10. Is there any new/ additional application form to be filled-in by a SPF?

There is no new/ additional application form to be filled-in by a SPF. The SPF will have to fill-in only the current application form to be authorised as a CIS/CEF.

11. Are additional fees applicable for processing/ approving a SPF?

There is no additional fee for processing and approving a SPF.

However, as a CIS/CEF, the Special Purpose Fund is subject to processing and annual fee as set out

in Part 1 of the First Schedule of the Financial Services (Consolidated Licensing and Fees) Rules 2008.

12. What are the on-going obligations of a SPF?

• A SPF is required to comply with the relevant provisions of the Securities Act 2005 and the Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008 in so far the provisions relate to collective investment schemes and closed-end funds.
• Furthermore, the submission of the Audited Financial Statements of a SPF must be accompanied by certificates from the SPF’s directors and auditors to confirm that the SPF is in compliance with any of the conditions set out in Rule 3(1) of the Rules.

13. Can the SPF present its financial statements in a currency other than the Mauritius currency?

Yes, this is permissible subject to approval being granted by the Registrar of Companies pursuant to the provisions of the Companies Act 2001.

14. What happens if the CIS/CEF no longer fulfils the condition under which it was approved as SPF?

The CIS/CEF must forthwith notify the Commission of any change in its business principles and the Mauritius Revenue Authority (MRA) will be informed accordingly. Thereon, the CIS/CEF will be required to file the relevant tax returns with the MRA.

Financial Services Commission

15 July 2013

BVI: Action Plan To Prevent Misuse Of Legal Persons And Legal Arrangements

The British Virgin Islands recognises and supports the need for transparency in relation to the establishment of corporate entities, including legal arrangements, and is committed to supporting initiatives that seek to establish international standards in that respect.

Consequently, the British Virgin Islands has no difficulty in considering and implementing measures that are established as international standards applicable across the board and to all financial centres irrespective of the group or organization they each belong to or are a part of. This approach underscores Prime Minister Cameron’s position that there “is no point in dealing with tax evasion in one country if the problem is simply displaced to another”. The British Virgin Islands has a good record of international cooperation and this has been confirmed by the IMF in its reviews of the Territory’s financial services regime in 2004 and 2010. The Caribbean Financial Action Task Force (which supervises its member countries for compliance with the FATF standards on money laundering and terrorist financing) has also confirmed the British Virgin Islands international cooperation regime and compliance as robust and effective. In these contexts, it is important to note the following:

(a) The British Virgin Islands is a member of leading international organisations – such as the International Organisation of Securities Commissions (IOSCO), International Association of Insurance Supervisors (IAIS) and Global Forum (GF) – that have as a core of their activity the gathering and sharing of information. Indeed the Virgin Islands was the first jurisdiction admitted to IOSCO membership on the basis of its full compliance with the provisions of that organisation’s Multilateral Memorandum of Understanding;

(b) Various British Virgin Islands legislation have established fit - for - purpose gateway provisions for the receipt and provision of assistance on a mutual legal assistance basis in the areas of law enforcement, regulation , tax and judicial and the respective competent authorities have a good record of collaborating with each other and with international counterparts to facilitate the provision of assistance; The Mutual Legal Assistance (United States of America) Act, 1990, Drug Trafficking Offences Act, 1992, Criminal Justice (International Cooperation) Act, 1993 and Proceeds of Criminal Conduct Act, 1997 provide for assistance in the area of crime and law enforcement; the Financial Services Commission Act, 2001 provides for assistance in regulatory matters; the Mutual Legal Assistance (Tax Matters) Act, 2003 represents the framework for rendering assistance in tax matters; and the Evidence (Proceedings in For eign Jurisdictions) Act (Cap. 24) and Foreign Judgments (Reciprocal Enforcement of Judgments) Act (Cap. 27) deal with assistance in judicial matters.

(c) To date, the British Virgin Islands has concluded 24 Tax Information Exchange Agreements (TIEAs) and is in the process of negotiation with other countries for more TIEAs; the British Virgin Islands reiterates its commitment to negotiate and conclude TIEAs with any country (OECD and non - OECD) that wishes to enter into such an arrangement ;

(d) In order to ensure better coordination and response to tax information exchange matters, the British Virgin Islands established the International Tax Authority (ITA) within the Ministry of Finance with the primary responsibility of facilitating assistance to foreign tax and law enforcement authorities in tax and tax - related matters;

(e) The British Virgin Islands was the first jurisdiction to develop and implement a paper on immobilizing bearer shares in order to remove the anonymity associated with bearer share companies and this regime is well - established and enforced under the BVI Business Companies Act, 2004;

(f) The British Virgin Islands subscribes and adheres to the Statement of Best Practice for Trust and Company Service Providers issued by the then Offshore Group of Banking Supervisors (now transformed into the Group of International Finance Centre Supervisors) and accordingly licences and supervises to high standards all trust and company service providers in the Territory. With this regime in place , no company or legal arrangement can be incorporated , registered or in any way formed unless they do so through a licensed trust and company service provider who is in turn required to obtain and maintain the requisite beneficial ownership information (which requires the identification and verification of the ultimate persons behind the company or legal arrangement). Indeed the British Virgin Islands regime has for many years required licensed service providers to hold information on who really owns and profits from companies and to make that information available to appropriate authorities whenever required;

(g) All licensed trust and company service providers are supervised for their anti - money laundering and terrorist financing obligations, including the availability of beneficial ownership information, and periodic inspections are carried out in respect of the licensees to establish compliance and, where shortcomings are identified, appropriate enforcement action is taken;

(h) The British Virgin Islan ds, in consonance with its long - standing policy of not encouraging or welcoming those who choose to b r eak laws applicable to them, has committed to and is actively engaged in negotiations with the US Treasury in finalizing an Inter - Governmental Agreement (IGA) to facilitate the exchange of tax information; the British Virgin Islands is similarly engaged with Her Majesty’s Treasury and has committed to the G5 Multilateral Pilot Project on the automatic exchange of tax information; This process has been facilitated by the fact that the US Foreign Accounts Tax Compliance Act under which the IGA is being negotiated is of universal application and will not disadvantage the British Virgin Islands as against other jurisdictions. Just as with the USA and UK, the Multilateral Pilot Project will be negotiated and implemented bilaterally.

(i) The British Virgin Islands strongly believes in encouraging and developing a solid partnership with the private sector through which many transactions are conducted in order to sensitise them of current and emerging international standards; the private sector has, over the past years and to date, demonstrated maturity and recognises the positive aspects of compliance with those standards so long as they are applied on a universal basis in order to prevent business arbitrage.

3. The British Virgin Islands pledges to continue along the path of assisting with and supporting the development and implementation of international standards on beneficial ownership information that are of universal application, as opposed to selective application which may result in arbitrage and loss of business. In this vein, the British Virgin Islands commits to reviewing its legislative regime to ensure full compliance with the revised 40 Recommendat ions of the FATF (where this is not already provided for) in relation to the keeping of beneficial ownership information. If at any time in the future this requirement is elevated to a need to maintain such information in a central registry accessible to law enforcement and tax authorities and applied universally, the British Virgin Islands will review its regime accordingly.

4. In recognition of its long - standing policy to support and be a part of promoting international standards to ensure cooperation in all spheres of business and other areas, the British Virgin Islands commits to the following action plan on beneficial ownership information:

(a) Review its legislation and systems, in consultation with its stakeholders, to ensure that where shortcomings ex ist on beneficial ownership information on account of the revised FATF Recommendations 24 and 25 on legal persons and legal arrangements respectively, steps are taken to remedy those shortcomings;

(b) Develop a national risk assessment framework (considered essential for measuring effectiveness and adequately preparing for the fourth round of mutual evaluation on AML/CFT compliance) in consultation with the Joint Anti-money Laundering and Terrorist Financing Committee (JALTFAC) and the Inter-Governmental Committee on Money Laundering and Terrorist Financing (IGC); this is expected to be undertaken and completed in 2014 to be followed by appropriate training to enable the conduct of a proper and effective national risk assessment on a periodic basis;

(c) Further strengthen the current supervisory and inspection regime to ensure that beneficial ownership information is being maintained and properly tested in a manner that assures timely availability to compete nt authorities; this will be on an ongoing basis;

(d) Lend support to international initiatives in relation to any development of new or additional standards on company transparency, including measures to strengthen international cooperation on beneficial ownership information; in this respect, the British Virgin Islands will encourage and support initiatives to promote the adoption of the (OGBS) Statement of Best Practice for Trust and Company Service Providers;

(e) Continue active engagement within the Global Forum in shaping and promoting international standards on tax transparency as well as continue to volunteer the services and expertise of the British Virgin Islands by serving in the Peer Review Group and such other organs from time to time; and

(f) Continue engagement with Her Majesty’s Government in relevant areas of international cooperation with a view to both supporting the UK’s initiatives and protecting the interests of the British Virgin Islands in a fair and consistent manner.

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HM Treasury: Advisory Notice on Money Laundering and Terrorist Financing controls in Overseas Jurisdictions

On 21st June 2013 the Financial Action Task Force (FATF) published two statements (included as annex A and B respectively) identifying jurisdictions with strategic deficiencies in their anti-money laundering and counter financing regimes. 

The Money Laundering Regulations 2007 require regulated entities to put in place policies and procedures in order to prevent activities related to money laundering and terrorist financing.

In response to the statements published by FATF on 21st June 2013, HM Treasury advises firms to:

Consider the following jurisdictions as high risk for the purposes of the Money Laundering Regulations 2007, and so advises firms to apply enhanced due diligence measures in accordance with the risks: 

DPRK*, Ecuador, Ethiopia, Indonesia, Iran*, Kenya, Myanmar, Pakistan, São Tomé and Principe, Syria*, Tanzania, Turkey, Vietnam and Yemen.

Take appropriate actions in relation to the following jurisdictions to minimise the associated risks, which may include enhanced due diligence measures in high risk situations:

Afghanistan*, Albania, Algeria, Angola, Antigua and Barbuda, Argentina, Bangladesh, Cambodia, Cuba, Kuwait, Kyrgyzstan, Lao PDR, Mongolia, Morocco, Namibia, Nepal, Nicaragua, Nigeria, Sudan*, Tajikistan and Zimbabwe*.

*These jurisdictions are subject to sanctions measures at the time of publication of this notice which require firms to take additional measures.

New report shows the value of Jersey to the UK

A report written by a leading economist has revealed that Jersey helps the United Kingdom generate around £2.3 billion in tax revenues each year and supports 180,000 British jobs.

The work, prepared by Mark Pragnell and a team from the respected independent firm, Capital Economics, was commissioned by Jersey Finance and seeks to provide the most comprehensive analysis to date of the relationship between Jersey’s economy and that of the UK.

While much of the data concerns the impact of Jersey’s international finance industry, the report is representative of the island’s overall benefit to the UK across all sectors.

Other key findings include:

• £1 in every £20 of money invested by foreign individuals and companies in assets located in Britain reaches the UK via Jersey.
• Each year, Jersey banks send around £120 billion of their deposits to parent operations in the UK, representing 1.5% of the funding of the whole UK banking system.
• Two-fifths of all assets administered or managed across Jersey’s financial and wealth management sectors come from markets outside the UK and EU.

The report also considers the issue of so-called ‘tax leakage’ from the United Kingdom mediated through Jersey, concluding that:

• Losses to the UK Treasury through legal tax avoidance are estimated to be no higher than £480 million a year and are probably much less.  
• No more than £150 million a year of British taxes could potentially be evaded using Jersey, but that recently approved information exchange agreements will substantially reduce or eliminate the potential for tax losses.
• Although some UK tax may leak through Jersey, the amounts are dwarfed by the estimated £2.3bn of taxes paid on British jobs and profits supported by Jersey. 

Geoff Cook, CEO of Jersey Finance, said:

“This new work powerfully demonstrates the substantial contribution made by Jersey to the United Kingdom. We have always understood that our activity here in Jersey delivers a net benefit to the UK, but it is now clear from the data in this report that Jersey makes a substantial contribution to the British economy, facilitating huge amounts of foreign investment, providing billions in vital liquidity to the UK banking system and supporting many tens of thousands of jobs.

In addition, the report demonstrates the truly international nature of Jersey’s finance industry, with global capital flowing to the UK from some of the largest, and fastest growing, markets in the world.”

Senator Philip Ozouf, Treasury and Resources Minister, States of Jersey, said:

“This report powerfully illustrates the interdependent and mutually beneficial relationship between Jersey and the UK. In recent months we have taken significant steps to advance our shared agenda around zero tolerance of tax evasion and a commitment to transparency. This independent report goes further in quantifying also the benefit to the UK of a well-regulated offshore centre in bringing global investment to UK business, infrastructure and the City of London.”

Mark Pragnell of Capital Economics and principal author of the report, added:

“This work goes further than any previous study and, importantly, provides a comprehensive review of the sources and uses of assets administered or managed in Jersey. The island is a catalyst for employment and economic activity in the United Kingdom, which itself generates revenues for the British exchequer.”

Click here for the full report

Moody's Justifies Mauritius's Baa1 rating by an Increased Economic Diversification and Resilience

Moody's Investors Service Report entitled: "Credit Analysis: Mauritius," released last week justifies the Mauritius's Baa1 rating which has been attributed on the basis of the continuous resilience of the economy and public finances to shocks, the government's pragmatic policy-making, and the stable and investment-friendly environment, which encourages foreign direct investment (FDI).

The report which is an annual update of markets reviews Mauritius' economic strength as moderate for despite its small size with nominal GDP of $11.5 billion, the upper middle income economy has shown resilience to the unfavourable external environment through the diversification of its economy both in terms of sectors and export markets.

According to the report, by attracting FDI, Mauritius now partly finances the structural current account deficit following the decline in sugar and textile exports in the mid-2000's. Furthermore, it points out that Mauritius has undertaken various steps to diversify its export market from the slow-growth European economies towards faster-growing African and Asian economies. Progress in this area will help mitigate the economy's external vulnerabilities, thereby maintaining its favourable external debt metrics, adds the report.

The report highlights that Mauritius economic resilience is supported by the country's strengthening institutional framework, which is expected to help the economy and public finances avoid the negative impact of any shocks emanating from Europe, the country's largest trading partner. Moody's observes that aggressive countercyclical measures facilitated growth in the economy despite the global recession in 2009.

According to the report Government financial strength is assessed as moderate, which balances a higher debt stock than its Baa-peers, with positive debt dynamics, after a temporary increase in debt was recorded during the global financial crisis. The report notes that with short-term debt having shrunk to 18% of the total debt stock from 30% in 2007, rollover risk has diminished substantially. As a matter of fact, Government can rely almost exclusively on the very liquid domestic debt markets and its external exposure is modest with regards to multilateral lending. Debt affordability has also improved from 21% in 2007 to 14% in 2012, particularly as a result of lower interest rates and better tax collection.

It will be recalled that Moody's Investors Service has upgraded Mauritius's foreign and local currency government bond ratings to Baa1 from Baa2 in June last year. Moody's determines a country's sovereign rating based on four key factors. They are: economic and institutional strengths, government financial strength and susceptibility to event risk as well as the interplay between them.

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