Wealth creation through INTERNATIONAL TRUST

1. Wealth creation through INTERNATIONAL TRUST VINOD JAIN, FCA, FCS, FCWA, LLB, DISA GLOBAL MOBILE : - 9811040004

2. objective • The objective for all individuals • regardless of what country they reside in • is to create an international planning structure outside of their home country • Wealth is created/ owned/Invested • No Income tax/wealth tax on the beneficiaries /Settlor • Control on Money

3. objective • Flexibility • Meet needs of money confidentially/without regulatory compliance • Inheritance Plan

4. Trust …..A Solution • Trust is created to own an international structure • Wealth is created/ owned in the trust structure. • Invested by the trust • No Income in the hands of the beneficiaries • Trustees Directed by Settlor • Trust could be Revocable • Trustees and Trust are outside India • Formal Agreement with trustees

5. Case study

6. CASE STUDY 1STANDARD TRUST A standard trust is an estate planning cum investment solution that allows an individual to structure wealth effectively, for the benefit of both current and future generations.

7. HOW A STANDARD TRUST IS STRUCTURED SETTLOR Original Owner of the Assets and creator of the Trust TRUST DEED The Trust Agreement that sets out the terms of the Trust BENEFICIARIES Persons Designated by the Settlor in the Trust Deed to benefit from the Assets held in the Trust TRUSTEE Bank owned Trust Company SETTLOR INVESTMENTCOMPANY A Cayman Island Company set up specifically to hold the Assets SECONDARY BENEFICIARY ULTIMATE BENEFICIARIES TRUST ACCOUNTS The Trust assets are held in one or more accounts specified by the Settlor which are opened in the name of the investment company

8. DESCRIPTION OF STANDARD TRUST STRUCTURE • The term of the Trust are set out in a trust Agreement between settlor and the trustee. • Trustee is the person(s) who holds the legal title to the trust fund and who is obligated to administer the trust for the benefit of the beneficiaries. The trustee can be a company if it has the corporate capacity to act as a trustee. The trustee stands in a fiduciary position vis-à-vis the beneficiaries. • Trust assets are held in the accounts specified by the settlor which are opened in the name of the Investment Company.

9. DESCRIPTION OF STANDARD TRUST STRUCTURE • During the settlor’s life time, the settlor may manage the assets and received distributions from the trust. • The settlor may name a secondary beneficiary, who may be entitled to receive the income of the trust or the capital upon the death of the settlor. • Settlor may also name one or more ultimate beneficiaries, to whom the trust assets are distributed upon the death of the settlor and the secondary beneficiary, if any.

10. DESCRIPTION OF INVESTMENT COMPANY • Investment Company is Owned by Trust in a Tax Friendly Jurisdiction “B” • Accounts are Maintained in jurisdiction “C” • Board Members Professionals/ company outside host country • Asset Management company/Investment Banker could be mandated to manage wealth

11. INVESTMENT • Asset Management company/Investment Banker/ INMACS could be mandated to manage wealth • Investment in • Mutual Funds • Hedge Funds • Debt Funds • Private equity Funds • Corporates • Directed Investment in FII schemes/ Participatory Notes • Bank Deposits with Guaranteed return • Direct investment for acquiring businesses • Lending Money • Real estate/ REITs

12. Target • Investment in US$ Denomination/ Multiple currency • Inflationary losses Avoided • Transfer Pricing…… Own Independent structures to undertake related party transactions • Multiple Trust structures/ Guchha Company Technology to use • Purchase existing investments through Mauritius route • Real estate investment without capital gain tax • Confidential legal transactions in downstream corporates

13. CUSTOMISATION: CONCEPT OF PROTECTOR SETTLOR Original Owner of the Assets and creator of the Trust TRUSTEE Trust Company TRUST DEED The Trust Agreement that sets out the terms of the Trust BENEFICIARIES Persons Designated by the Settlor in the Trust Deed to benefit from the Assets held in the Trust PROTECTOR Appointed to protect the interest of the Beneficiary FIRST BENEFICIARY INVESTMENTCOMPANY A British Virgin Island Company set up specifically to hold the Assets SECONDARY BENEFICIARY ULTIMATE BENEFICIARIES TRUST ACCOUNTS The Trust assets are held in one or more accounts specified by the Settlor which are opened in the name of the investment company

14. CUSTOMISATION: CONCEPT OF PROTECTOR • Protector is usually a person who is a friend or advisor of the settlor. The inclusion of a protector is not mandatory for the creation of a trust but can balance the wide discretionary and fiduciary powers often given to the trustee under the trust. • Typically, the protector (which may be an individual or committee of individuals or a company) is appointed to ensure the wishes of the settler are carried out by the trustees.

15. FAVOURABLE INTERNATIONAL JURISDICTIONS

16. Isle of Man British Virgin Islands Cyprus Bermuda Bahama Caymen Island St Lucia Belize Mauritius

17. Comparison of Holding Companies in Different Tax Havens

18. TRUST FORMATION IN INTERNATIONAL JURISDICTIONS

19. TRUST DEED - CLAUSES Clause 1 Clause 2 Clause 3 Clause 4 Clause 5 Clause 6 Clause 7 Clause 8 Clause 9 Clause 10 Dispositive Provisions Dealings with the Trust Fund and Powers of Trustee Trust Property Accounts Compensation and Indemnity of Trustee Change of Trustee Protector Governing Law Written Instruments and Communications Interpretation

20. British Virgin Islands • There are no • Income tax, • capital gains tax, • Wealth tax, • Withholding tax, • gift tax or inheritance tax in the BVI on non-residents. • A BVI trust will not be liable to tax in the BVI except for • stamp duty, • annual application and • licence fees for a company engaged in trustee or banking activities

21. British Virgin Islands • Trustees have a duty of confidentiality as regards information pertaining to the trust, its existence, terms and parties. • Further, there are special rules relating to the disclosure of evidence in criminal proceedings connected with indictable offences including suspected drug trafficking and money laundering.

22. Mauritius – Trust Formation • Mauritius Trusts are governed by The Trusts Act 2001. • It can be formed by a resident or non resident of the Island. • There is no requirement to register the trust with any registrar and no need for any disclosure of beneficial owner to any authority . • It can have a Protector and a purpose trust must have an Enforcer. • It can have a managing trustee in Mauritius and a custodian trustee in another jurisdiction. • The forced heirship rules of other states will not be enforced by Courts in Mauritius.

23. Mauritius – Trust Formation • There is no register of trusts in Mauritius nor is there any need for any disclosure of beneficial owner to any authority. • A trustee is required under the Act to keep confidential all information concerning the trust. • Under exceptional circumstances, a trustee may be required to give confidential information to authorised persons under anti-money laundering, prevention of terrorism or prevention of corruption legislation or under the Financial Services Act 2007.

24. Mauritius – Tax Planning • Trusts with non resident settlors and beneficiaries are exempt from tax if election is made or, • if no election is made, at an effective rate of 3% of their net income after deductions for expenses • Tax paying trusts enjoy the benefits of Mauritius’s many favourable tax treaties. • Trusts for residents are taxable at 15% on their net income after deductions for expenses.

25. United States – Disclaimer Trust • "Disclaimer Trust", is a flexible estate planning tool to benefit married couples whose combined estates are approaching or exceed the lifetime exemption amount for federal estate tax. • There is currently no federal estate tax in 2010, and in 2011, the exemption amount will be $1 million, tax rate being 55%. • In 2009, threshold was $3.5 million and tax rate was 45%. • The Disclaimer Will is a standard Will with a trust provision that a surviving spouse can elect to utilize if he/she believes that his/her estate could be subject to federal estate tax upon his/her death.

26. United States – Disclaimer Trust • The Disclaimer Will provides for an outright marital deduction bequest of the entire residuary estate to the surviving spouse, and • It will further provide that if the surviving spouse wishes to disclaim the bequest (in whole or in part), the disclaimed property will be passed into a trust for the benefit of the surviving spouse. • The trust will shelter the exemption equivalent $1 million (in 2011) from estate tax.

27. JERSEY A Jersey trust will not be liable to Jersey taxation provided it can be demonstrated that :- • None of the beneficiaries is resident in the island. • The trust has no income arising from sources within Jersey other than bank interest. • These provisions mean that a Jersey trust can accumulate income from differing sources tax free. • There is no requirement to formally register its existence.

28. Case study

29. Case study- 2 Wealth Creation without disclosing the identity of the ultimate beneficiaries

30. Case study 100% shareholding 100% subsidiary

31. CASE STUDY • An International Business Company (IBC) is set up in British Virgin Islands • The entire shareholding will be held by the trust specially created for that purpose. • The Directors of said BVI will be a company in Hong Kong/ CAYMAN/ISLE OF MAN. • A Trust is set up in BVI • Trustees will be Hong Kong Company. • A Company is set up in UAE/ Tax friendly jurisdiction • For R&D purposes • The entire share holding of the Dubai Company will be held by the IBC Company. • Dubai Co. shall open the representative Office in HONGKONG • Appointment of local person as Manager.

32. THANK YOU