Establishing an Investment Fund: Where and How? A Detailed Guide

Recently, clients have become increasingly interested in opening an investment fund. Our previous article described what an investment fund is and what fund types are there. Today we will consider jurisdictions that are the most popular investment fund destinations, and why.

Setting up an investment fund – in which jurisdiction?

Choosing a location for opening an investment fund is one of the most important and complicated questions.

Even though each country offers appealing investment opportunities, there are certain jurisdictions distinguished by optimum conditions for creating funds and other investment mechanisms.

The jurisdictions’ rating depends on various characteristics which may be associated with a wide range of investment schemes. Investment funds can be established in keeping with applicable laws, tax treatments or investment privileges.

The Bahamas

Hundreds of financial institutions and trust companies have their representative office in the Bahamas. Why the islands are attractive:

• A long history of parliament democracy
• Simple offshore company registration rules
• Laws on anonymity ensuring maximum investor confidentiality
• Minimum requirements: one shareholder and one director

While companies do not incur direct taxes in the country, the Government partially covers licensing fees.

In early 2018 the country was blacklisted by the EU as a tax shelter due to its failure to comply with EU’s tax transparency standards. But the Government took immediate steps, and the Bahamas were removed from the EU’s blacklist two months after.

In 2013 the Bahamas became the first country granted the “A” status by the International Organization of Securities Commissions on the strength of its regulatory standards.

Luxembourg

Why open an investment fund in Luxembourg:

• A stable political and economic environment
• Privileged tax policy: Luxembourg’s corporate tax is 18% for companies with EUR 30,000+ income
• Additional tax benefits
• Strict confidentiality

One-third of Fortune 500 companies have subsidiaries in Luxembourg.

Luxembourg boasts low taxes and secure storage for safekeeping valuables such as art, precious stones, and vintage cars.

Switzerland

Switzerland is a popular destination for establishing offshore funds. Over 1.8 billion US dollars of overseas funds went through the country, making one-fifth of the total offshore market.

Pressured by regulatory bodies of the USA, EU, and a number of other countries, Swiss institutions were forced to share information more willingly for the prevention of money laundering and other financial crimes. Switzerland’s banks, however, still adhere to strict confidentiality policies and were the pioneers of reliable and secure bank technologies.

Singapore

International companies have made Singapore a key location for offshore subsidiaries.

Unlike some other offshore countries, Singapore charges corporate tax (currently 17%). The Government offers a reduction of the rate by applying a number of tax benefits. Companies providing financial services can be exempt from income tax and do not have to pay withholding taxes at source on certain transactions involving foreign individuals.

Singapore has become a major destination for entities looking to avoid regulatory problems. The country’s confidentiality laws allow data exchange with overseas regulatory bodies and law enforcement authorities. 

The Cayman Islands

The Cayman Islands offers an appealing corporate infrastructure:

• Stable government
• Developed a Legal Framework
• Business-oriented policy + absence of corporate tax or profit tax

The Government earns money by charging licensing fees from offshore entities.

The Cayman Islands is pressured to reform confidentiality rules in order to promote better transparency, and the concerns voiced by regulatory authorities made some companies decide to open elsewhere. Most of the EU’s and Great Britain’s recent actions granted corporations and jurisdiction managers time until the year 2020 to comply with new rules.

Those are the key aspects clients need to be aware of before venturing to set up an investment fund. In our previous article, we provided a detailed description of all requirements for opening investment funds.

If you are thinking of establishing an investment fund, it is best to rely on professionals. SBSB has an extensive portfolio of successful investment fund openings in various jurisdictions. Email us at info@sb-sb.com or message via our Telegram chat for a free top-quality consultation.