The Turks and Caicos Islands are situated some 600 miles to the South East of Florida. They have the status of a British Overseas Territory presided over by the Governor as the Queen’s representative and a Legislative Council.

The Turks and Caicos Islands are situated some 600 miles to the South East of Florida. They have the status of a British Overseas Territory presided over by the Governor as the Queen’s representative and a Legislative Council.

The official currency is the US dollar (USD).

Legal System
The laws of the Islands are a mixture of English common law, some UK statutes, which have been extended in whole or in part to the Islands, and local statutes (Ordinances) as well as a number of international conventions to which the UK is party. The Islands have a Supreme Court and a Court of Appeal from which appeals lie to the Privy Council in the UK.

Trusts
The concept of trusts as developed under English common law has long been accepted and recognised in the Islands. The Trusts Ordinance 1990, which came into force in February 1991, sets out the essential characteristics for the formation, administration, variation and termination of trusts, including the powers and duties of trustees, and resolves conflict rules relating to recognition of trusts. The underlying philosophy of the Ordinance is to give settlors and their professional advisers great latitude in drafting trust instruments.

The Ordinance recognises the Hague Convention on the Law Applicable to Trusts and on their Recognition, 1 July 1985. It provides that, irrespective of the law under which it was created, a trust shall be recognised by and enforceable under the laws of the Islands, except to the extent that the trust purports to do anything or confer any right or power or impose any obligation which is contrary to the laws of the Islands.

Most Frequently Used Trusts
All forms of trust are used, discretionary trusts being popular. Since the Islands have no direct taxation, and there are no local inheritance taxes, Turks and Caicos trusts are used principally for purposes of estate planning by residents of other jurisdictions.

As in English law, it is not possible to create a wholly ‘purpose’ trust other than for charitable purposes.

Other Forms of Legal Entities
The Turks and Caicos Islands do not have separate legal regimes to regulate their ‘onshore’ and ‘offshore’ business organisations. The Companies Ordinance 1981, as amended (Companies Ordinance), provides a basic company form (‘ordinary company’) with certain special provisions and exemptions applicable to companies formed for particular purposes or with special characteristics.
Incorporation procedures are based on English law and practice, and incorporation of any type of company may, in case of urgency, be accomplished within 24 hours.

Ordinary Company
An ordinary company’s main business is carried on within the jurisdiction of the Turks and Caicos Islands. It is subject to all the provisions of the Companies Ordinance and other laws of the Islands. In particular, it requires a licence under the Business Licensing Ordinance in order to carry on its business in or from within the Islands.

Exempted Company
An exempted company is incorporated in the Islands, but conducts its business mainly outside the Islands. The exempted company is exempted from a number of the provisions of the Companies Ordinance. In particular, the names of the shareholders, beneficial owners, directors, and officers are not filed with the Companies Registry as a matter of public record. A share register and a register of directors and officers must be maintained (on a private basis) by the corporate agent in the Islands. It will be exempt from all tax or duty for 20 years from the date of its incorporation.

Limited Liability Company
A limited liability company (LLC) is often used for conducting business in the US. It is a hybrid between a limited company and a partnership. As a company, liability for the debts of the LLC is restricted to corporate property. An LLC is taxed in the US as a partnership provided that it has certain essential characteristics:

• centralised management
• unrestricted transferability of interest
• continuity of life, and
• liability for debts limited to corporate property.

If the LLC has more than two of these characteristics, it will be taxed as a corporation; if it has two or less, it will be taxed as a partnership.

Guarantee Company
In a guarantee company, the liability of any member is limited to the amount that the member has undertaken to contribute to the company’s assets in the event of it being wound up. This corporate vehicle is usually used by non-profit entities, such as professional/trade associations and research organisations, and by business organisations for pooling information and resources e.g. joint research and product development.

Hybrid Company
The Companies Ordinance provides that a company limited by guarantee may also have share capital. In this hybrid company, a member who is also a shareholder has a twofold liability – one being the liability to pay the amount unpaid on the shares, and the other being the liability under the guarantee on winding up.

Such a company could be structured with two classes of members with, for example, the rights to income and capital assigned to the guarantor members, and the voting rights solely in the hands of the shareholder members. The ability to separate economic interest from management and control may be useful for estate planners. A hybrid company may be used as an alternative vehicle to an inter vivos family trust, particularly where the assets of the trust may consist of a family business or where the settlor is reluctant to place assets totally beyond the settlor’s control.

Foreign Company
A foreign company, which establishes a place of business in the Islands, is required to register as a foreign company under Part X of the Companies Ordinance, enabling the foreign company to carry on business without incorporating a local subsidiary.

Limited Partnership
The Limited Partnerships Ordinance 1992 provides for the creation of limited partnerships based principally on the US Unified Partnership legislation.

Taxation
The Turks and Caicos Islands can generally be classed as a ‘non-direct tax’ jurisdiction. There are no taxes (either for individuals or corporations) on income, turnover or capital gains, withholding, estate, inheritance, or gift taxes. Stamp duty is payable on the transfer of real property (see below) but there are no periodically assessed rates, duties or similar taxes in respect of real property located in the Islands.

Tax System
Revenue is raised by indirect taxation. The principal source of revenue is customs duties levied on the majority of goods imported into the Islands. Generally, duty is assessed according to the value of the goods, at rates ranging from five per cent to 45 per cent, with the standard rate being 30 per cent. A surcharge of ten per cent of the assessed duty was imposed in 1991 and has not yet been removed. Certain products, such as liquor and tobacco, are assessed at flat rates based on volume or weight.

Stamp duties, imposed by the Stamp Duty Ordinance 1992, are another important source of revenue, accounting for some USD2million in 1991/2. In most cases, the duty rates are nominal but duties in respect of the conveyance of real estate are substantial; 9.75 per cent (at the highest rate) in respect of the principal Island, Providenciales, but only three per cent in the other major islands.

There is also a duty of one per cent of the value secured on any security by way of mortgage, or charge, which principally affects security provided in respect of bank lending.

Although generally there are no taxes on goods and services, the Hotel Accommodation (Taxation) Ordinance 1985 imposes a ten per cent tax on the amount payable by hotel and villa guests for specified services (primarily the provision of sleeping accommodation and meals/beverages) as well as meals/beverages supplied at designated restaurants/bars.

Other revenue is collected from work permits, business licences, airport departure tax, and various fees, licenses and miscellaneous charges.

Anti-Money Laundering
The principal anti-money laundering legislation is the Control of Drugs Trafficking Ordinance 1988 (CDTO), the Proceeds of Crime Ordinance 1998 (PCO) and the Proceeds of Crime (Money Laundering) Regulations 2000 (PCR). The Turks and Caicos Islands also follow the recommendations of the Financial Action Task Force on Money Laundering (FATF) in relation to anti-money laundering measures.

The CDTO was introduced in 1988 in order to give effect to the UK’s international obligations under the Vienna Convention. It has effect solely in respect of the proceeds of drug-related crime. The PCO extended, among others, the scope to embrace all indictable crimes (without limitation), redefined the offences, as well as broadening the scope to include assistance rendered with suspicion of the involvement of the proceeds of crime, and introduced a more formal reporting procedure.

The PCR introduced procedures, to be followed by all professionals in the financial industry, in terms of customer identification, record keeping, internal reporting, training and reporting to the local Reporting Authority.

The other anti-money laundering legislation are the Al-Qa’ida and Taliban (United Nations Measures) Order 2002 (UNMO) and the Anti-Terrorism (Financial and Other Measures)(Overseas Territories) Order 2002 (ATO).

The UNMO was introduced in 2002 in order to give effect to certain United Resolutions seeking to prohibit the supply of arms, technical assistance, training to, and funding of, Al Qa’ida and the Taliban and their followers. It does this by prohibiting certain dealings with any person designated by the UN Sanctions Committee as a member or associate of these organisations.
The ATO creates an equivalent anti-terrorist funding regime in the Islands to that established in the UK under the Terrorism Act 2000 and the Anti-Terrorism, Crime and Security Act 2001. The ATO is intended to stop or disrupt the financing of terrorism. It introduced new offences of fundraising for the purposes of terrorism and the laundering of terrorist property.