By Tamatoa Jonassen, CEO, Cook Islands Financial Services Development Authority (FSDA).
Terrorist attacks in Europe, war in the Middle East, mass shootings in America, diseases such as Ebola in Africa, potential Weapons of Mass Destruction in North Korea, and an immigration crisis on Europe’s doorstep…
Crises and catastrophes are constantly in our newspapers, illustrating the turmoil in our global society. But it is awareness of these events that help us understand that what happens in the international arena could in fact reach out and detrimentally impact our own personal lives, and do so without warning. It is that kind of awareness that should logically propel us to plan for our future well-being and financial security.
The need to protect one’s assets in our society continues to grow, and the Cook Islands is the most recognized for effective international asset protection in the global financial services industry. The Cook Islands was the first to create legislation in the 1980s that has led to the modern day asset protection trust (APT), and many other jurisdictions have since adopted legislation that attempts to imitate the Cook Islands. However, despite the strength of its legislation, its ideal location in the heart of the Pacific between Asia and the Americas, and the confidence provided by its high regulatory standards, the Cook Islands is still relatively unfamiliar to some non- Pacific countries. The unfamiliarity of the Cook Islands in these parts of the world has thus led to some misconceptions about the jurisdiction as a Pacific-based financial centre.
One misconception about the Cook Islands is that it is a “tax haven.” The reality is that Cook Islands trusts and international companies are tax neutral. In other words, registering your entity in the Cook Islands generally would neither increase nor decrease your tax liability in your home domicile, and you should still pay all taxes that you are liable for. The Cook Islands government has not presently entered into an intergovernmental agreement (IGA) with the IRS for FATCA purposes, but banks and trustee companies in the Cook Islands are IRS registered and are FATCA compliant. The Cook Islands has also committed to implementing the Common Reporting Standard by 2018, and has already entered into more than 20 Tax Information Exchange Agreements (TIEAs), the majority of which are with European countries. Additionally, the Cook Islands has received positive reviews regarding regulation of its financial services industry.
Registering your entity in the Cook Islands generally would neither increase nor decrease your tax liability in your home domicile, and you should still pay all taxes that you are liable for.
In 2009 the Cook Islands received a positive evaluation by the Asia Pacific Group on Money Laundering (the largest FATF style regional body in the world), resulting in the Cook Islands being in the top 20 percent of the 165 nations assessed for implementing international regulatory standards. The Cook Islands also received positive evaluations in both Peer Reviews of the Global Forum on Transparency & Exchange of Information for Tax Purposes, the most recent of which was conducted in 2015. The strong legislation and ‘right-touch’ regulation in the Cook Islands should assure its international partners of the Cook Islands’ commitment to having a strong financial services industry and should provide confidence to both current and prospective clients of its financial services products.
A second misconception is that the country is not stable. The reality is that the Cook Islands just celebrated its 50th anniversary of self-government (five days before that of Singapore), and has close ties with New Zealand that serve to enhance the jurisdiction’s attractiveness as a financial services centre. Moreover, the Cook Islands currency valuation is pinned to the New Zealand dollar thereby, enhancing stability. Meanwhile, the judiciary is comprised mostly of senior high calibre and qualified New Zealand judges, resulting in first-class court judgements, meaning that the Cook Islands can claim a greater independence than many other offshore jurisdictions. Internationally, the Cook Islands maintains diplomatic relations with over 40 other nations, while its offshore financial centre has had the continued support of government since coming into being over 30 years ago.
The Cook Islands can claim a greater independence than many other offshore jurisdictions.
A third misconception is that the Cook Islands’ remote location is a disadvantage for international financial services. In this golden age of technology, the location of the Cook Islands is in fact ideal. Placed in the heart of Polynesia, it is in a superb time zone for transactions between Asia and North America, since one has to remember that engaging in financial services in the Cook Islands does not mandate a client to be physically present there. Meanwhile, given that there is no recognition of foreign court judgements, potential attackers of Cook Islands registered entities must commence litigation in the Cook Islands High Court and meet strict time and legal limitations.
Notwithstanding the turmoil in our global society, the Cook Islands is in fact uniquely placed as an ideal location for quality financial services, offering both safety and peace of mind.
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