Offshore

EXCLUSIVE: Wealth Management GCC Conference Puts Offshore Under Microscope

Tom Burroughes, Group Editor, 21 March 2016

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The offshore world faces many challenges as demands for transparency increase but remains highly relevant, figures meeting at a conference in Dubai organised by WealthBriefing have heard.

Family business owners considering new jurisdictions in which to live need to work out if their top priority is to protect a business or shield their personal wealth and the wellbeing of all family members, a conference in Dubai has heard.

Before a person decides which jurisdiction is the best one, they must decide what counts for more – protection of a business against break-up and sale, which might mean some family members cannot travel to the new domicile, or protection of the family, which could require hard choices about the business, said Dr Nadine Lia, of the Ministry for the Economy, Investment and Small Business in the Government of Malta. 

Dr Lia was speaking at the WealthBriefing GCC Region Summit, held last November at Dubai’s Mina A’Salam Hotel. She addressed a theme called "Growing A Family’s Wealth On An International Playing Field". Other speakers on the panel were Nadine Goldfoot, partner of Fragomen Worldwide; Naomi Rive, chief trust officer, Coutts & Co Trustees (Jersey); and Jim Drysdale, director, investment sales, Savills. Sponsors of the conference were Emirates NBD, Fragomen Worldwide, Finacle, Coutts Trustees, Elegant Resorts, Finance Malta, smartKYC and ProFundCom. (To see a report from another panel session at this conference, see here.)

In recent years, a number of jurisdictions have sought to encourage inward investment through what are sometimes dubbed “golden visa” programmes. Malta, Portugal, Spain and the UK, among others, have such citizenship/residency-by-investment programmes; other jurisdictions, such as Canada and Hong Kong, have shut or temporarily halted them due to political pressures or capacity issues. Swiss voters chose about two years ago to cap immigration from the European Union.

“The competition is vast and models vary,” Fragomen’s Goldfoot said.

Dr Lia, addressing the basic choices for persons seeking new jurisdictions, said: “One of the biggest mistakes starts with the first conversation that you have – what is fundamental to avoid such mistakes it to determine what is your end goal? Is your goal to ensure the survival of your business or your family?” Once the goal is understood and chosen, then jurisdictional choices can be made. Planning is crucial and families should consider their options several years in advance.

Goldfood, asked about the risks of persons being mis-sold jurisdictional options, said advisors must work hard to manage the expectations of clients. “There has to be some give and take,” she said.

Rive, commenting on the structuring issues involved, said her organisation is seeing a “lot of high net worth individuals with a lot of international assets”. She also noted that tax often is not the prime reason for a person to move jurisdictions. Security, quality of life, access to healthcare and other amenities are often far more significant drivers, she said. However, "where there is the luxury of planning, they [people looking to move] aren’t going to put themselves into the position where they are at a disadvantage [on tax],” she said.

“Malta has been one of those jurisdictions that has in recent years expanded its options,” Dr Lia said, noting how the island has moved to attract international students, for example, and stresses its locational advantages for North Africa, the Middle East as well as southern Europe. “It is an economic and strategic melting pot with a very strong jurisdictional option for global investment,” she said.

Savills’ Drysdale, asked about the real estate angle on jurisdictions such as Dubai, said “there is no doubt that Dubai is a magnet for liquid funds in the region”. The current trend is more of a “migration of money more than that of people,” he added. 

Turning to the kinds of restrictions and incentives that IFCs seek to offer, and political pressures that can arise when investment flows are blamed for high prices, he noted that in countries such as Australia, there is a requirement that expats can only buy property if it can be shown that the purchases are not taking property from the local market. In the UK there are different pressures, some favouring such foreign investment, and others, such as tax changes, that have been more adverse. With Malta, Portugal and Spain there are net tax incentives to invest from abroad, he said.

“I would not advocate pushing into real estate to take advantage of a loophole in a scheme or get favourable legislation. You have to be blunt with the client and have to have absolute understanding of what is the goal,” he said. “I’m looking at security, security of capital…a bit of income would be nice. I would want to be sure of my exit."

Asked about low yields in some real estate markets, Drysdale said some international investors are treating the safer, low-yield markets primarily as ways to store money rather than seek large returns.

Coutts’ Rive said there remains a certain “kudos” to owning property in some jurisdictions that goes beyond hard financial calculation. “There is a lot of that with Russian and Middle East clients,” she said.

 

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