SUMMARY OF TURKS & CAICOS

[Riser Adkisson LLP]

Turks & Caicos

Overview

The Turks & Caicos Islands, sometimes referred to as "the TCI" are a British dependency which are located at the southern end of the Bahamas island chain, about 575 miles southeast of Miami, Florida, and about 90 miles north of the Dominican Republic. The TCI is comprised of eight main islands and numerous small cays, which together total about 166 square miles of land. The total population for the islands is under 20,000, with the largest and capital city being Providenciales.

The spoken language of the TCI is English, although French Creole is popular is some areas. The TCI claim to have the lowest crime rate in the Caribbean.

Communications to Providenciales are excellent, and the TCI benefit from the same location advantages as Nassau, including daily jet service to and from several major cities in the U.S. and Canada. Flying time from Miami is approximately 75 minutes. There are also regular flights to the other Caribbean islands, including Cuba. Driving is on the left.

The TCI’s political system is based on English law. A democratically-elected Legislative Council governs with the U.K.-appointed Governor in the Executive Council, which essentially runs the government. While the U.K. is responsible for defense and the financial services industry, all other governmental tasks are handled by local ministries.

The courts of the TCI follow the English Common Law model, with a Bahamian/Jamaican flavor.

The TCI were a Jamaican dependency until 1962, in which year they were annexed to the Bahamas. In 1973, the TCI became a British dependency, with Queen Elizabeth II as the Head of State, locally represented by the Lieutenant Governor. The TCI government is bicameral, with a mostly elected Legislative Council, and an Executive Council which is mostly appointed by the Governor. A 1986 "interim amendment" to the TCI Constitution granted broad powers to the Governor to manage the islands.

The TCI use the U.S. Dollar for currency, and there are no exchange controls. The TCI is a tax-free jurisdiction, with the government being financed by revenues from import tariffs, and also licensing of offshore entities. The TCI government actively promotes the TCI as an "offshore" jurisdiction, and encourages investments there.

There is a Mutual Legal Assistance Treaty ("MLAT") between the TCI and the U.S., which mostly relates to the laundering of drug money. This Treaty allows the TCI Courts to cause persons in the TCI to release information which could assist a U.S. criminal investigation, so long as the criminal investigation is unrelated to tax items. There is now cooperation between the TCI and the U.S. relating to the sharing of information relating to tax crimes.

Turks & Caicos Banking

The TCI is attempting to build a solid financial infrastructure. Both Barclays and Bank of Nova Scotia, and some small banks, maintain offices in Providenciales and Grand Turk, and a continued influx of the larger and more prestigious international banks can be expected. It is still typical, however, to form a trust or corporation in the TCI but to maintain the trust or corporate accounts elsewhere. As the TCI’s financial sector comes into its own, more trusts and IBCs will retain accounts and be managed directly from the islands.

Turks & Caicos Insurance

Among offshore jurisdictions, the TCI are probably best known for their offshore insurance industry, which are primarily regulated by the Insurance Ordinance of 1989 and the Insurance Regulations of 1990. These laws require all persons connected with a TCI insurance company to be licensed, which gives a degree of legitimacy usually unknown in the offshore industry. Applicants to carry on the business of insurance must provide the TCI Financial Services Commission with a business plan which outlines the proposed activities of the insurance company, along with detailed information on shareholders, officers and directors, beneficial ownership, and administration of the company. Since 1990, more than 2,000 insurance licenses have been issued, mostly to producer owned/credit life reinsurance companies, which have been granted certain attractive exemptions from the insurance regulations.

Turks & Caicos Secrecy and Confidentiality

The TCI’s Confidential Relationship Ordinance of 1979 makes the unauthorized releasing of information by professional persons, banks, etc., a crime which is punishable by a fine, $10,000 for an individual and $50,000 for a corporation, imprisonment for up to three years, or both.

Turks & Caicos Corporations

"Exempt" companies, which are also known as International Business Corporations (IBCs), are formed in the TCI under the 1989 Amendment to the Companies Ordinance. Resident officers and directors are not required, but the company must maintain a registered office in the islands. The use of nominees is permitted, and is in fact typical for these entities. Similarly, there are no reporting requirements to the TCI government for these "exempt" companies.

Ordinary companies are non-exempt, and must be used by persons who wish to own real property in the islands, or carry on business with TCI residents. For these entities, a declaration must be filed with the government each year stating that the beneficial owners of the company have not changed.

The TCI also offer a variety of hybrid companies, such as Limited Life Companies, Companies Limited by Guarantee, etc., and will domesticate foreign corporations in the islands.

Turks & Caicos Trusts

While the TCI do not have the cutting-edge trust laws found in the Cook Islands and Nevis, the TCI do have a solid "second-tier" body of trust laws. Trust formation in the TCI is governed by the Trust Ordinance of 1990, and the licensing of trustees is governed by the Trustees Ordinance of 1992.

The TCI’s trust laws are distinguished by the following: (1) abolition of the Rule Against Perpetuities; (2) no requirement that the trust be registered; and (3) the laws of the TCI will always take precedence in the interpretation of trust issues, except as specifically set forth by the trust. There is a four-year time frame within which transfers to a TCI trust must be challenged.

Trust Companies which have achieved the designation of an Unrestricted Trustee have passed the TCI government’s scrutiny and have met the minimum capitalization requirement of US$250,000, as well as requirements relating to liability insurance and annual audits.

TAX WARNING FOR U.S. CITIZENS

U.S. citizens are taxed on their taxable income from wherever it is derived, anywhere in the world. U.S. citizens are also taxed on investments indirectly made through foreign trusts and foreign corporations, including offshore trusts and IBCs. Thus, the fact that an offshore jurisdiction may have low or no taxes does not mean that if a U.S. citizen does business there that he or she will enjoy only low or no taxes on the personal income made. There are simply NO personal income tax advantages, at all, for U.S. citizens to use offshore structures, and anyone who tells you differently is probably telling you a falsehood. Any discussion we make of an offshore jurisdiction's tax laws should be construed only according to the foregoing warning.

BEWARE OF OFFSHORE SERVICE PROVIDERS: There are some offshore service providers who will make wild claims about saving you personal income taxes, so as to convince you to set up an offshore structure. Most of these people don't know the first thing about U.S. tax law, and their representations to you will not help you, at all, if you are caught with an unreported trust, corporation, or bank account. All they really want is your money, and even if you commit tax evasion they are not subject to U.S. law, and so couldn't care less.