Turks & Caicos LLC

We are able to assist in the establishment of a Turks & Caicos LLC to enable clients to move their IRA offshore without altering any of the benefits of the standard IRA. We establish a TCI LLC which the IRA custodian would become amember of on behalf of the IRA.You may need to switch custodians as not all custodians will allow foreign investments even though they are eligible investments. Once the funds are in the LLC, they can be managed as you see fit with no restrictions. We do of course, have a custodian who will allow this type of arrangement.

One famous author wrote in the late 1970’s that the Turks & Caicos Islands were a tax haven waiting to be discovered. Recent reports show there are about 10,000 exempted companies in this British crown colony a few hundred miles southeast of Nassau Bahamas. It appears the Turks & Caicos Islands have finally arrived.

Drafting legislation unmistakenly similar to that earlier enacted in the Cayman Islands, the Turks & Caicos Islands look to capture their share of the offshore tax haven business by offering lower incorporation fees than in Cayman. Both exempted and ordinary companies can be formed in the TCI for about ½ what you would spend for the same company in the Cayman Islands.

Currently there are some 10,000 exempted companies in the TCI. In addition, 1,100 captive insurance companies have been registered since the enactment of the Insurance Ordinance 1989.

The Companies Ordinance 1981 was introduced to cater to the needs of the international financial community which comprise a diverse range of end-users, including attorneys, tax-advisers and private investment banking institutions. Some of the advantages under the new Ordinance include:

-          Political stability, with a history of peace and a low crime rate.

-          Geographically well positioned in the same time zone as New York City.

-          The official currency is the U.S. dollar; there are no exchange controls.

-          Registration fees are lower than in most competing jurisdictions, and professional fees competitive.

-          The Registry itself is extremely efficient. As  a matter of course, a company is incorporated on the incorporation documents usually being completed and available within twenty-four hours.

-          A flexible and workable companies law giving rise to highly streamlined procedures of statutory administration.

-          Official recognition of the importance of the Islands’ economy for the development of a financial service industry and outgoing support at high levels of Government.

Ordinary and Exempted Companies

There are two main types of companies, the ordinary and the exempted company. There is also a third category of foreign company of which there are few in number.

The procedure for registering both ordinary and exempted companies are basically the same. Three copies of the Memorandum and Articles of Association are lodged together with the prescribed fee. Forms of Memorandum an Articles of Association are prescribed in schedules to the Companies Ordinance for both ordinary and exempted companies, and may be adopted in whole or in part. The subscriber(s) to the Memorandum of Association of an exempted company must file a declaration that the operations of the company will be carried on mainly outside the Islands. Agents lodging an application for registration must hold appropriate license issued pursuant to the business Licensing Ordinance.

There is a legal requirement for a minimum of only one shareholder who may be an individual or a corporation. The liability of members may be limited to guarantee or to the amount unpaid on their shares. Shares may be of no par value, and the Articles of Association may include the power to issue shares in bearer form.

All companies must have a registered office within the Islands and exempted companies must also nominate a representative resident in the Islands for the purpose of service of process.

Special Privileges for Exempted Companies

• Confidentially. No requirement to file details of shareholders or directors.
• Authorized capital may be in any currency with no requirement that the word “Limited” or “Ltd.” be part of the name.
• Objects may be unrestricted.
• No requirement for annual general meeting of shareholders. Directors hold office until replaced.
• Availability of Governor’s Undertaking conferring exoneration from future direct taxation and any increases in annual filing fees.

Confidentiality

As well as Part VIII of the Companies Ordinance, which applies specifically to business affairs of exempted companies, the Confidential Relationships Ordinance of 1979 imposes duty of confidentiality upon banks, professional advisers, and other persons holding positions of trust. Both these laws impose criminal sanctions for unauthorized disclosures. The Islands have no double taxation agreements with any antion, thus no exchange of tax information is provided by the Turk government. 

Transfer to and from the Jurisdiction is Unrestricted, Fast and Easy

Part IX of the Companies Ordinance makes provision for the transfer into the islands of companies incorporated in other jurisdictions. The law of the country of incorporation must not prohibit such transfers, and there are safeguards to protect the interests of creditors and shareholders. The company, on being transferred, becomes registered as if it was incorporated as an exempted company and registration fee is determined accordingly.

A company wishing to be in the position to transfer in the future at short notice may obtain a “standby” permit which can be activated without delay at a later date. 

There are corresponding provisions in the Ordinance for transfers out of the jurisdiction by exempted companies registered in the Islands.

Trusts

An important example of an area of law as yet unaltered by statue is that of trust. This allows for a great deal of flexibility in the creation of trust, but insofar as the applicable law is in some cases as it was in England prior to the Trustees Act of 1925, there are certain areas which could benefit from statutory interference. These is already in force a Trusts (Special Provision) Ordinance, which gives persons using approved trustees the ability to invoke certain provisions of the U.K. Trustee Act and to abrogate certain rules of equity such as the rule against perpetuities and the rule requiring certainty of objects. However, this law does not seem to be widely utilized, and a New Jersey-style law of trusts will be legislated as part of the overall package of legislation expected to be passed by Legislative Council in early 1989

LLC's in TCI

LLC's were first introduced into TCI law by the Companies Amendment Ordinance of 1994. are effectively hybrids between partnerships and companies. They afford limited liability to members and are specifically designed to be treated as partnerships tax-transparent with income/dividend distributions being attributed to the members without the imposition of corporation tax. Turks & Caicos LLC's differ from ordinary companies in that they have limited life (typically 50 years with a right to extend for a further 50 years) thereby avoiding the corporate characteristic of perpetual existence.  Existing TCI exempted companies (IBC's) can be registered as LLC's by applying to the Registrar of Companies annexing a Special Resolution limiting the life of the company to 50 years and changing the company's name to include the suffix "LLC".  This is a simple and inexpensive process if you have an existing TCI company or an IBC which you wish to continue into the islands in order to change its nature to that of an LLC.    Feel free to contact us if you are interested in availing of this option and we will be happy to provide you with further information on the costs and other considerations involved.

How are they used?

Several multinational companies have utilized TCI LLC's as vehicles to raise capital from US investors by the issuance of preference shares.  The proceeds of the sale of the preference shares are then lent to the issuer's (on-shore) parent company.  Because the parent company has effectively borrowed monies from its TCI subsidiary, it can treat the entire of the monies so raised as an ordinary tax-deductible loan thereby significantly reducing its overall tax exposure.  Furthermore, as noted above, because LLC's can be classified as partnerships the TCI subsidiary avoided withholding taxes on the interest payments.  By contrast, for normal US tax purposes if preference shares had been issued directly by the multinational, it could only deduct the interest costs of the preference share offering but not the dividends paid on the stock.In a nutshell, parent companies using TCI LLC's avoided "dividends" on preferred shares by treating payments as interest for tax purposes.  Reducing exposure to taxation in this way meant the relevant multinational could build its capital reserves more rapidly than would otherwise have be possible.We would be delighted to discuss the other potential benefits with individuals and/or their tax advisors and will provide further more detailed information on the possibilities afforded by TCI LLC's.   Should this area be of interest to you, send us a brief e-mail by following the link below requesting further information or outlining your current situation and objectives and we will get back to you as soon as we can

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