St. Kitts-Nevis Asset Protection

08 Apr

Saint Kitts and Nevis Map - Asset ProtectionThe “sovereign democratic federal state” of St. Christopher-Nevis (as its 1983 constitution ceremoniously describes it), has a governmental form and name almost bigger than its population (45,000), and total land area (267 sq. km.).

But this tiny West Indies island nation, known to the natives as “St. Kitts-Nevis,” has become very big in certain exclusive international financial circles. That’s because Nevis has no taxes, extremely user-friendly incorporation and trust laws, and an official attitude of hearty welcome to foreign offshore corporations and asset protection trusts.

In his second voyage to the New World in 1493, the year after Columbus discovered what was to become known as “America,” (actually landing first at what is now the Dominican Republic), his explorations included two of the Leeward Islands. One of these he named (perhaps for a bit of ego gratification), St. Christopher, much later shortened to the current “St. Kitts.”

It is reliably reported that when Columbus saw the smaller of the two islands, two miles south of St. Kitts, he was instantly impressed by the majestic volcanic mountain in its center, an almost perfect cone rising 3,232 feet, smothered in thick clouds. His diary indicates the intrepid Columbus was reminded of the snow-capped peaks of the Pyrenees, and so he named the island Nieves, the Spanish word for “snows.”

Though Columbus claimed the islands for Spain, the first colonization was by the British in 1623 and 1628 respectively. In fact these islands became the mother British colony in the Caribbean, the launching pad for other settlements in Antiqua, Barbuda, Tortola, and Monserrat. The French arrived a few years later, inexplicably bringing a bunch of monkeys with them, and they (the French, not the monkeys) also used the islands as a starting point for their West Indian colonial designs in Martinique, Guadeloupe, St. Martin, St. Barts, La Desirade, and Les Saintes.

Located 225 miles east of Puerto Rico and about 1,200 miles south of Miami, until the islands September 19, 1983 declaration of independence, both were British colonies.

The islands are now a member of the Commonwealth of Nations and recognize as nominal head of state, Queen Elizabeth II, who appoints a local Governor General. The elected unicameral Parliament sits in the capital of Basseterre on St. Kitts (population 35,000), but Nevis (10,000) has its own Island Assembly as well, and retains the constitutional right of secession from St. Kitts. Now and again newspapers in Nevis (pronounced NEE-vis) issue heated editorial demands for separation, but if it happens, it will be without shots being fired, other than a few verbal salvos.

The tiny 2-island nation is a member of the United Nations, the Organization of American States (OAS) and is an associated Commonwealth participating state of the European Union (EU). It is also a member of the Caribbean Community (CARICOM) economic and trading group, along with fourteen other area nations including the Bahamas, Bermuda and Belize.

Although it was formerly a member of the British sterling bloc, the country’s currency is now the Eastern Caribbean dollar used by several CARICOM nations, pegged to the United States dollar at a rate hovering around EC$ 2.60 to 2.70, to US$ 1.00. U.S. currency is freely accepted, but your change will be in EC dollars.

Most St. Kitts-Nevis islanders are descendants of African slaves imported by the British and French, the original American West Indian natives being long since extinct. The population is 94 percent black, 40 percent urban. English is the official and spoken language, but with a lilting West Indian accent, “mon.”

The legal and judicial system, originally based on English common law, has now incorporated many of the basic elements of United States commercial law, especially that of New York and Delaware, for good reasons that will be clear in a moment.

The islands have a pleasant, healthy climate, warm with cool breezes throughout the year, low humidity and no real demarcated rainy season. Average annual rainfall is about 55 inches, most of it in the fall, which is also the hurricane season. The official tourist “season” is from December 15 to April 14, only because that’s when weather is nastiest in the northern hemisphere and Caribbean islands most fashionable. Temperatures year-round average 78 to 85 degrees Fahrenheit, and from November through January the islands experience increased “Christmas winds,” as they are called locally.

A low-key economic promotional program authorized by the 1984 “Citizenship Act” offers nationality and a passport in return for a $200,000 investment, usually the purchase price of a seaside condominium and certain “fees.” Citizenship for the investor and spouse are included in the deal. (A less expensive route to citizenship is marriage, since St. Kitts & Nevis is one of the few countries that gives instant citizenship upon marriage to a spouse of either sex.)

Nevis is attractive for financial reasons, as we shall see, but it is also known for its natural beauty — long, curving beaches of white and black sand, lush foliage and flowers, mineral spa baths and restored sugar plantations now used as charming country inns, many nestled high in the mountains surrounded by lavish tropical gardens. For the energetic resident there is mountain climbing, swimming, tennis, horseback riding, snorkeling. But the going is easy here with hammocks for naps, lobster bakes on palm-shaded beaches, candlelight dinners in stately dining rooms and relaxation on romantic verandas.

Nevis is located two miles south of St. Kitts, a leisurely 45-minute ferry ride away, except Thursday, which is ship maintenance day, and the Sabbath. There is also inter-island air service.

The “Premier Off-Shore Corporate Jurisdiction”

That’s the way local boosters describe the smaller of the two islands, Nevis, where its capital, Charlestown, has become a miniature international corporate business center.

About 1,200 of the island’s 9,300 inhabitants live in the town, founded in 1660, a place full of ancient buildings with fanciful galleries, elaborate gingerbread woodwork, shutters, colorful hanging plants — and a small but effective cadre of international corporate and asset protection experts, both lawyers and bankers.

Based on the Island Assembly’s adoption of the “Business Corporation of 1984,” Nevis has an established, decade-long record of catering to foreign off shore corporations, with the welcome mat always out. Patterned after the extremely liberal (towards business) corporation laws of the American State of Delaware, English commercial law is also blended into the statute, so UK solicitors should have little fear about navigating its provisions.

The corporation statute allows complete confidentiality for company officials and shareholders, and there is no requirement for public disclosure of ownership, management, or financial status of a business.

Although they must pay an annual fee of US$450, “international business corporations,” or “IBCs” as the law calls them, are otherwise exempt from taxes — no withholding, stamps, fees or taxes on income or foreign assets. Individually negotiated government-guaranteed tax holidays are available in writing for IBCs, provided they carry on no business locally. Official corporate start-up costs can be under US$1,000 including a minimum capitalization tax of US$200, and company formation fees of US$600. These low government levies compare very favorably with those imposed by other corporate-friendly havens, like the high-profile, high-cost Cayman Islands.

On Nevis there are no exchange controls, no tax treaties with other nations (including the U.S.), and the government will not exchange tax or other information with any other foreign revenue service or government. Principal corporate offices and records may be maintained by Nevis companies anywhere in the world the owners wish.

The Nevis corporation law is almost unique in that it contains a very modern legal provision allowing the international portability or transfer of an existing foreign company from its country of origin to the island. Known as the “redomiciling provision,” this allows the smooth and instantaneous transfer of an existing American, British, Panamanian or any other nation’s corporation, retention of its original name and date of incorporation — all without interruption of business activity or corporate existence. The only requirement is the amendment of existing articles of incorporation to conform with local laws.

New company creation and registration is fast in Nevis — accomplished by the simple payment of the capitalization tax and fees mentioned earlier to the Register of Corporations. Within ten days thereafter formal incorporation documents must be filed, but there are corporate service firms waiting to assist the foreign incorporator with ready-made paperwork.

Small wonder that in ten years since the law’s original adoption, thousands of foreign corporate owners have established their companies in Charlestown, Nevis.

In 1995 Nevis enacted the Limited Liability Company Ordinance, which provides for the existence of what is sometimes known as a Limited Duration Company, or LLC, with the added benefit that the company may be structured in such a way as to be treated as a partnership under United States tax laws.

Asset Protection Trusts — A New Offshore Service

Building on their record for statutory corporate cordiality, on April 28, 1994 the Island Assembly adopted the “Nevis International Trust Ordinance,” a comprehensive, clear and flexible asset protection trust (APT) law comparable to, and in many ways, better than that of the Cook Islands in the South Pacific, already well-known as an APT world center.

The new Nevis law incorporates the best features of the Cook Islands law, but in many ways is more flexible. The basic aim of the law is to permit foreign citizens to obtain protection against threats to their property and assets by transferring title to an APT established in Charlestown, Nevis.

Nevis simply is taking advantage of the fact that in many parts of the world, especially the U.S., medical, legal and professional malpractice law suits, as well as legislative and judicial imposition of no-fault personal liability on corporate officers and directors have become a nasty fact of business life. A Nevis trust places personal assets beyond the reach of potential foreign governments, litigious plaintiffs, creditors and contingent fee lawyers.

Under the new law, the Nevis judiciary will not recognize any non-domestic court orders regarding its domestic APTs. This forces a foreign judgment creditor to start all over again, retrying in Nevisian courts, with Nevisian lawyers, the original claim giving rise to the foreign judgment. A plaintiff who sues an APT must first post a US$25,000 bond with the government to cover court and others costs, before a suit will be accepted for filing. And the statute of limitations for filing legal challenges to a Nevisian APT runs out one year from the date of the trust creation. In cases where fraudulent intent on the part of the trust or its officers or beneficiaries is alleged, the law places the burden of proof on the foreign claimant.

Nevis has an established international bar and local trust experts who understand and can assist in furthering APT objectives. The APT act has proven very popular and a considerable number of trusts have been registered in Nevis.

Under the statute, basic trust documents are not required to be filed with the Nevis government, and are not a matter of public record. The only public information needed to establish an APT is a standard form or letter naming the trustee, the date of trust creation, the date of the filing, and the name of the local trust company representing the APT. The only governmental fee charged is US$200 upon filing, and an equal annual fee to maintain the filing.

Once established, the Nevis asset protection trust can consist of as little as a trust account in a local bank offering international services. Nevis has many of them, including Barclays International, Royal Bank of Canada, the Bank of Nova Scotia, the Bank of Commerce, the Nevis Co-operative Bank, the St.Kitts-Nevis-Anguilla Bank and the Nevis Bank in Charlestown. Banking hours vary but generally are 8-2 Monday through Thursday, Friday 8-5 and Saturday 8:30-11:00 a.m.

These established banks have full international departments. Most international banks offer U.S. dollar-denominated accounts that often pay better interest rates than U.S. institutions. With modern fax machines, telex, telephones, instant communications and international banking facilities, it is just as convenient to hold assets and accounts in Nevis as it is in any major financial center — and a lot safer in many personal and financial respects.

Under the provisions of the Nevis International Trust Ordinance, the same person can serve in the triple role of creator (settlor), beneficiary and protector of the APT, allowing far greater control over assets and income than U.S. domestic law permits. Generally, Anglo-American common law forbids a settlor to create a trust for his or her own benefit.

The basic structure of a foreign asset protection trust differs little from an Anglo-American trust.

The settlor creates the trust by executing a formal declaration describing the purposes, to which he transfers assets to be administered according to the declaration by the named trustees. Usually there are three trustees named, two in the settlor’s country and one in Nevis, the latter known as a “protector.” Named trust beneficiaries can vary according to the settlor’s estate planning objectives, and under Nevis law the settlor may be the primary beneficiary.

Nevis requires the appointment of a trust “protector” who, as the title indicates, oversees its operation to insure trust objectives are met and the law is followed. A protector does not manage the trust, but possibly can veto some actions — and Nevis allows a beneficiary to serve in the dual role as protector.

Tax and Legal Advantages for American Readers

Under U.S. tax law, foreign asset protection trusts are “tax-neutral.” They are considered as domestic trusts, meaning income from the trust is treated by the Internal Revenue Service as the settlor’s personal income and taxed accordingly. Because the settlor retains some control over the transfer of his assets to any foreign trust, including those established in Nevis, U.S. gift taxes can usually be avoided. Although Nevis has no estate taxes, U.S. estate taxes are imposed on the value of trust assets for the settlor’s estate, but all existing exemptions for combined martial assets can be used. Foreign asset protection trusts are not subject to the 35 percent U.S. excise tax otherwise imposed on transfers of property to a “foreign person.”

One device a settlor may employ to retain optimal control of assets is to form a limited partnership, making the Nevisian trust a limited partner. This allows a general managing partner/settlor to retain active control over all assets he transfers to the Nevis trust/limited partner, while trust assets are protected from creditors or other legal assaults.

It goes without saying that assets located in the United States, title to which are held by a foreign APT, are certainly not immune from American court powers. U.S. judges have shown an increasing tendency to justify such jurisdiction, but in appropriate cases cash and certain types of portable personal property easily can be transferred physically to a foreign situs such as Nevis.

Nevis — An Obvious Choice

Aside from the undoubted protection offered by the new Nevis International Trust Ordinance, this is a small nation with great economic and political stability, a highly reputable judicial system, favourable local tax laws, no language barrier and excellent international communication and financial facilities.

These combined virtues of St. Kitts-Nevis explain why it is already taking its rightful place as a leader among other offshore financial centers with legal systems hospitable to foreign-owned asset protection trusts, among them the other Caribbean nations of the Cayman Islands, the Bahamas, Belize, the Turks and Caicos islands, the Cook Islands in the south Pacific near New Zealand, as well as Cyprus and Gibraltar in the Mediterranean.

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