Turks and Caicos
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Find legal, tax and practice information for the Turks and Caicos Islands, and search for branches, firms and members in the jurisdiction. If you have any comments on the report please contact [email protected]
*Updated July 2020*
Editorial Board
Conrad Griffiths QC TEP, Griffiths & Partners, Providenciales, Turks and Caicos Islands
Important new developments
- The Companies Ordinance 2017, the Companies Regulations 2018 and the Beneficial Ownership Regulations 2017 are all now fully enacted. Alongside introducing a private register of beneficial ownership (only inspectable after a request from UK law enforcement and kept in a secure, air-gapped server by the local Regulator), the new laws represent the most fundamental change in company law in the Turks and Caicos Islands (TCI) for 25 years. The new laws use many parts from the equivalent British Virgin Islands (BVI) statutes, create a statutory framework for modern, flexible international business, and enable TCI companies to be listed on several key, global stock exchanges.
- The TCI has also enacted a comprehensive change to its corporate and personal insolvency laws, which are again based on the equivalent BVI statutes, and provide a significantly enhanced modern regime for administration and liquidation of TCI companies and for personal insolvency. The Insolvency Ordinance 2017 and Insolvency Rules 2019 and underlying regulations provide a comprehensive code for insolvency matters.
- The Trusts Ordinance 2016, the Trust Companies (Licensing and Supervision) Ordinance 2016, the Trust Companies Regulations 2016 and the Trust Companies Code 2016 came into force in September 2016. The Trusts Ordinance 2016 contains provisions for reservation of powers by settlors; limitation of interference by foreign courts; recognition of trusts and exclusion of forced heirship; duties of trustees in regard to accounts; the provision of security for outgoing trustees; the creation and administration of purpose trusts; the use of special trusts to hold designated company shares without involvement in the management of the business; and establishing a simple solvency test to prevent creditors setting aside validly established trusts with four-year limitation on such challenges.
- The Companies and Limited Partnerships (Economic Substance) Ordinance 2018 and subsidiary regulations came into force on 1 January 2019. The TCI enacted this legislation in similar form to other comparable international financial centres to reflect best standards and practices, with the approval of international stakeholders including the European Union Code of Conduct Group (Business Taxation).
Quick links
- Legal system
- Inheritance and succession
- Estate planning
- Taxation
- Residence and domicile
- Other relevant information
Legal system
The laws of the TCI are a mixture of (English) common law, some English statutes, which have been extended in whole or in part to the TCI, and local statutes (ordinances) as well as a number of international conventions to which the United Kingdom is party. The TCI has a Supreme Court (modelled on the English High Court) and a Court of Appeal from which final appeals lie to the UK Privy Council.
There is a fused legal profession made up of attorneys who have generally been admitted in other Commonwealth countries and who have overseas experience as well as domestic TCI experience.
Inheritance and succession
Succession
There is complete testamentary freedom to pass assets by will. There are no forced heirship rules.
Family law and defined inheritance rules
Yes. There is a statutory regime in the event of an intestacy which provides for the distribution of an intestate’s estate according to the class and number of surviving relatives (Intestacy Ordinance CAP 11.10).
If a deceased made no provision for a dependent (spouse, infant son or unmarried daughter or disabled child as defined) then the dependent may apply for continuing provision to be made from the deceased’s estate – Inheritance (Family Provision) Ordinance CAP 11.08. The legislation dates back to 1958 and is arguably discriminatory as it treats male and female children differently and also differently according to their marital status.
Probate process
Probate of a will must be applied for under the Probate and Administration Ordinance CAP 4.03. Application is made in the prescribed form on payment of a scale of set fees.
If there is no will, letters of administration must be applied for in the prescribed form under the Probate and Administration Ordinance CAP 4.03. Grants of probate from Commonwealth countries may be re-sealed under the Probates (Re-sealing) Ordinance CAP 4.04. Grants of probate from the United States may be re-sealed under 2 George IV, Chapter 32 of 1822.
Mental capacity
The testator must have mental capacity at the time the will is made. The common-law test of capacity is applied. The will must be attested to before two witnesses.
The old common-law rule on majority (attained at age 21) applies in the case of the capacity of minors.
The provisions of Part VIII of the Mental Health Act of 1959 of England and Wales (now largely repealed in England and Wales) were extended to the TCI by the Mental Health (Protection of Property Ordinance) CAP 8.09. This provides for a Court of Protection for the protection and management of the property of persons incapable of managing or administering their property and affairs.
The Mental Health Ordinance 2016 was partly brought into force in late 2017 and together with the Mental Health Regulations 2019 modernise the law for the protection of persons suffering from mental disorders.
Estate planning
Use of trusts in estate planning
Trusts are often used to assist with estate planning, either inter vivos or by will. As there are no inheritance taxes there is no domestic need for tax planning from a TCI perspective.
Use of foundations in estate planning
Generally, these are not used unless there are settlor tax concerns from other countries, in which case their use is dictated by onshore tax needs and advice.
Types of entities
There are no specific entities prescribed by legislation. In practice interests pass by will but trusts are used, as are corporate structures and limited liability partnerships, for holding real estate and commercial ventures. Share interests and partnership interests then pass by will.
Taxation
Income tax system
There is no tax on personal or corporate income. The TCI government raises revenues through import duties, taxes on the sale of hotel accommodation and tourism services (at 12 per cent), stamp duty on land sales (at up to 10 per cent on real property over USD500,000, although rates have been temporarily reduced to encourage activity in land sales due to the impact of COVID-19) and by a host of other minor taxes and licensing fees such as work permit fees, fuel taxes and other miscellaneous taxes. The TCI has operated a budget surplus for several years prior to the impact of COVID-19, and there are no plans to change the current basis for taxation. The TCI government closely follows developments in relation to international standards and best practices for economic substance tests and requirements applicable to entities registered and carrying out a specified business in the TCI. Legislation in similar form to other comparable international financial centres was enacted in the TCI to reflect these standards and practices, with the approval of international stakeholders including the European Union Code of Conduct Group (Business Taxation). The Companies and Limited Partnerships (Economic Substance) Ordinance 2018 and subsidiary regulations came into force on 1 January 2019.
Personal income tax rates
None.
Corporate income tax rates
None.
Capital gains tax
None.
Non-residents
NOT APPLICABLE
Withholding tax rate (non-treaty)
There is a retention tax on bank interest for EU residents (giving effect to the EU Directive on Taxation of Savings Income) in the form of interest payments imposed by the Retention Tax Ordinance CAP 19.14. The rate is now 35 per cent.
Withholding tax rate (treaty)
None.
Taxation at death
None save for modest filing fees on an application for the grant of probate or letters of administration.
Other taxes
Deatils above.
Tax treaties
There are no reciprocal tax treaties as the TCI is regarded as a tax-neutral jurisdiction for the purpose of double-taxation treaties. While there are no direct taxes on income or capital gains those who live and work in TCI do pay consumption taxes and other taxes and fees are imposed on employment, various economic activities and commercial transactions.
Tax information exchange agreements
The Tax Information Exchange Ordinance (20 of 2009) sets a framework by which the TCI government may commit to tax information exchange agreements. Currently TCI is party to at least 19 TIEA agreements with countries such as the UK, Ireland, Canada, France, Germany and Portugal. A list of TIEAs can be viewed at www.eoi-tax.org/jurisdictions/TC.
The TCI has implemented a Model 1-B inter-governmental agreement with the US as part of Foreign Account Tax Compliance Act which was domesticated by Order in January 2015. The TCI has implemented the Common Reporting Standard together with the UK, other Overseas Territories and Crown Dependencies.
Residence and domicile
Special rules on becoming resident
Acquiring residency rights is governed by the Immigration Ordinance. Anyone who does not have local status (described as an ‘Islander’ under the Immigration Ordinance) requires permission either to work or to reside in TCI. Work permits are granted if no suitably qualified Islander is available. Annual residency permits without the right to work can be obtained subject to showing good health and financial resources to support the applicant. Permanent residency permits can be acquired either through a combination of time served as a work permit holder in certain categories plus investment or by investment in property or commercial activities in the Islands.
Special rules on ceasing residence
None.
Domicile concept for gifts and inheritance
There is no statutory test for domicile and the common law test is followed.
Taxation of holdings by non-residents on death and of gifts
- Gifts: none.
- Death: none.
Reporting/auditing requirements
No. Companies must now preserve their internal records for a period of at least seven years but there is no obligation to file financial reports.
Other relevant information
Asset protection laws
Yes. Section 91 of the Trusts Ordinance 2016 provides that a disposition shall not be voidable if the settlor (an individual) is not insolvent and does not become insolvent when the disposition is made. The burden of proving insolvency lies on the person asserting that fact. Any action to prove that a settlor was insolvent at the time a disposition was made must be commenced no later than four years after the disposition.
Foreign currency restrictions
No.
Foreign ownership restrictions
None, except that foreign companies cannot own real property and so if real property is held in a company it must be held by a TCI company.
AML/due diligence and other requirements and regulatory procedures for advisors
- To establish a trust.
- For incorporation.
- To open a bank account.
All professional services providers (attorneys undertaking financial business work, trustees, company managers and banks) are required to be licensed and must adhere to comprehensive anti-money laundering regulations and a code. The legislation and codes are modelled on English legislation and reflect usual modern requirements.
Professional trustees must be licensed under the Trust Companies (Licensing and Supervision) Ordinance 2016. Company managers must be licensed under the Company Management (Licensing) Ordinance CAP 16.10.
Other points of interest
The TCI has seen significant legislative developments in the last two years as part of introducing well-balanced, international, modern trusts and companies' legislation.
Key resources for further information
WEBSITES
Financial Services Commission of the TCI: www.tcifsc.tc
Government of the TCI: www.tcimall.tc/government
Bar Council of the TCI: www.tciba.tc
Exchange of Information Unit: www.gov.tc/eoi
STEP branches in Turks and Caicos
There is one STEP branch in Turks and Caicos, which forms part of STEP's Caribbean and Latin America region.
Firms in Turks and Caicos
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Members in Turks and Caicos
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