Offshore: Island mentality

Writing for the Gazette in June 2021, Harneys associate James Kitching (now counsel) was clear. The ‘never-ending sunshine and white sandy beaches’ of the British Virgin Isles were a welcome perk. But the BVI would not have been a sufficient draw if the work for this well-established offshore firm had not been of a very high quality. 

‘Working offshore means becoming a truly international lawyer,’ he reflected. ‘While most of the work that I was involved in previously was international in nature, it’s a whole other level working offshore.’ 

Kitching related talking, in the course of a day, to clients and lawyers in ‘half a dozen time zones’. His professional diet comprised mergers and acquisitions, done at speed, and engagement with emerging areas of ‘blockchain, cryptocurrencies, smart contracts and fintech’, which offshore jurisdictions were key to advancing. 

White sands and blue skies are not guaranteed for lawyers based in offshore jurisdictions, though BVI, Cayman Islands and Belize fit the bill. Others, for which the offshore element of their economies varies, include the Channel Islands and the Isle of Man, Singapore, Hong Kong, Panama and Cyprus. 

No/low taxation

Historically, offshore jurisdictions were largely defined as ‘no tax’ locations. There is now a ‘chasing pack’ of ‘low tax’ countries, which includes Switzerland, Ireland, the Netherlands and Luxembourg. 

International pressure on this fiscal boon has of course intensified, driven by governments concerned that their exchequers are losing out. There is a widespread perception that banking secrecy allowed for the concealment of funds that should have been taxed at ‘home’. 

One development resulting from that pressure has been the establishment of the Common Reporting Standard (CRS). 

Agreed by 47 countries in 2014, and formally referred to as the Standard for Automatic Exchange of Financial Account Information, signatories agreed to share information on their residents’ assets and income automatically. The object is to thwart tax evasion. The Standard is mandatory for EU and OECD member states, and its 100-plus signatories include all the key offshore jurisdictions. 

Many jurisdictions have since supplemented this with legislation on transparency of ‘beneficial ownership’. For example, Cayman’s legislation in this regard came into effect on 1 January 2025. 

So, while tax benefits remain for individuals, families and businesses who choose offshore trusts and incorporation, the purpose and priorities for their use of offshore jurisdictions are changing. Factors like service, concentration of professional expertise and structural flexibility are coming to the fore. 

‘We are witnessing a clear and sustained shift in client priorities,’ Judith Chatoo, head of private client at Saffrey Trust Geneva, tells the Gazette. ‘Where once tax efficiency was a key driver of wealth structuring for some clients, today’s high-net-worth and ultra-high-net-worth families increasingly value governance, transparency and long-term asset protection, whether it be their personal assets or planning the handover of the family business.’ 

'Many families now have three, and sometimes even four, generations simultaneously engaged in managing and shaping their wealth'

Judith Chatoo, Saffrey Trust

Security is a key consideration too, Chatoo adds: ‘Of course, many families in politically or economically volatile regions did, and still do, use structuring for risk diversification and safeguarding family wealth against instability. Across all clients, in the post-CRS world, the emphasis is on ensuring and managing the burden of compliance.’ 

Other factors are at play. Many wealthy individuals and clients are ‘becoming more geographically dispersed as their businesses evolve globally’, Chatoo notes. ‘Their children are educated and settle further afield.’  

Such clients do ‘shop around for more attractive tax regimes’, she notes. However, the question of the best way – and the best place – to organise such dispersed lives also points to offshore jurisdictions for many. 

‘Multi-jurisdictional structuring that provides flexibility, tax certainty and global compliance is, therefore, increasingly relevant,’ Chatoo explains. ‘This evolution has also been accelerated by generational change. As older generations live longer and therefore remain actively involved in family business and wealth, many families now have three, and sometimes even four, generations simultaneously engaged in managing and shaping their wealth.’ 

Predictability and stability are also directing choices, Marie McCallum, senior associate at Boodle Hatfield, tells the Gazette: ‘Across the board, clients are increasingly alert to the prospect of international tax landscapes changing at pace, and are taking a proactive approach to reviewing their planning. This is now even more reliant on a considered selection of where to position both their wealth – and themselves.’   

Offshore professional advisers are also having to face up to a change in old, default views on wealth management, Chatoo says: ‘The next generation’s expectations often prioritise transparency, ethical alignment and enabling technology that gives them a better oversight on their wealth.’

New expertise is in demand, Chatoo concludes: ‘The growing legitimacy of digital assets, evidenced by record inflows into bitcoin exchange-traded funds, underscores how rapidly attitudes to wealth ownership are changing.’

Shifting behaviours 

'Offshore jurisdictions, such as the BVI, move fast when it comes to legal adoption and adaptation'

James Kitching, Harneys

The fiduciary sector has had to evolve in response to these shifting behaviours and expectations. ‘The role of the trustee has expanded from that of administrator to strategic partner, one who supports families in navigating the interplay between regulation, purpose, and legacy,’ Chatoo relates. 

Digital capability is now an expectation rather than a luxury. Increasingly tech-literate clients, particularly from younger generations, want immediate access to a clear, consolidated view of their wealth. ‘Blockchain-enabled platforms such as Masttro are reshaping how information is shared and understood, providing real-time visibility across asset classes and jurisdictions,’ Chatoo says. ‘Firms that fail to invest in these types of technologies, or the expertise to apply them effectively, risk falling behind.’ 

The most successful practitioners will blend robust governance expertise – a must – with digital innovation and the agility to meet families’ evolving needs.  

Offshore jurisdictions are well placed to remain at the forefront of digital-asset regulation. As Harneys’ Kitching tells the Gazette: ‘Offshore jurisdictions, such as the BVI, move at a fast pace when it comes to legal adoption and adaptation. They can spot new challenges and opportunities and have the legislative mechanics to bring change sooner than might be the case in England and Wales.’

Digitally advanced 

In addition to being among the earliest adopters of the OECD’s Crypto-Asset Reporting Framework, key offshore jurisdictions are also setting legislative precedents that combine innovation with robust governance. 

‘Jurisdictions such as the BVI and Cayman are constantly adapting to maintain their relevance in a competitive global market for financial services,’ says Kitching. 

With the emergence of digital assets and blockchain technology, both ‘have taken the lead in supporting and pushing the sector forwards’, he adds. ‘Each has brought in legislation, in the form of Virtual Assets Service Providers Acts, and local firms have effectively become “onshore” leaders in being the first point of call on Web3 projects.’ 

This, Kitching notes, is a ‘change in the traditional offshore model, from offshore lawyers supporting onshore counsel, has meant a levelling up of local expertise and highlights the innovative and entrepreneurial nature of offshore legal work’. 

Others have responded too. Chatoo points to Switzerland’s Distributed Ledger Technology Act, introduced in 2021, one of the earliest legislative moves to regulate blockchain. Its Financial Market Supervisory Authority also set the pace with a tailored framework for virtual assets. Together, they represent Switzerland’s attempt to provide one of the world’s most mature regulatory environments for tokenised securities and blockchain-based services. 

Another notable development is Guernsey’s Lending, Credit and Finance Law 2023, which brought virtual asset service providers within the scope of financial supervision, ensuring consumer protection and transparency. 

Meanwhile, the Cayman Islands’ Virtual Asset (Service Providers) Act establishes a comprehensive licensing regime for exchanges, custodians and issuers, positioning Cayman as a regional leader in compliant digital-asset activity. 

‘These regimes show how established offshore centres can balance regulatory agility with investor confidence, ensuring their continued relevance in an increasingly digital global economy,’ says Chatoo.

‘With legislative flexibility and decades of established case law, international finance centres continue to offer the experience and expertise required to manage complex, cross-border family wealth effectively in stable jurisdictions,’ she concludes. ‘Looking ahead, we are likely to see an even greater move towards a hybrid approach in such regions with complementary on- and offshore structuring.’ 

Competition 

'Offshore clients now face a huge amount of uncertainty in attempting to navigate abruptly shifting policy in both the tax and immigration spheres in the UK'

Marie McCallum, Boodle Hatfield

Boodle Hatfield’s McCallum notes that a lack of certainty in policy, traditionally a strength for large, stable onshore jurisdictions, is now a consideration for clients. 

‘Offshore clients now face a huge amount of uncertainty in attempting to navigate abruptly shifting policy in both the tax and immigration spheres in the UK,’ she says. ‘Some [clients] have had to bring difficult decisions forward. Others are analysing a deluge of rhetoric emerging from a number of offshore jurisdictions competing to attract top talent, offering a favourable combination of both tax regime and lifestyle incentives.’  

McCallum says that points to ‘a fascinating moment for offshore wealth destinations, with some historically less obvious choices rapidly finding themselves to be very much in vogue. The ability of these destinations to capitalise on present anxieties to attract such highly sought-after internationally mobile wealth, could frame a very different future for offshore wealth structuring’. 

Drawn by zero? Insurance 

While private client priorities over tax and governance may be changing (see below), corporate tax regimes in the insurance and reinsurance sector are clearly competing using low- and no-tax rate regimes. 

Bermuda is firmly established as a global centre for the insurance and reinsurance sector. But is the Cayman Islands poised to become the next premier global hub? 

Writing in April on her offshore law firm’s website, Collas Crill counsel Shaela Rae explained: ‘While Bermuda remains the unquestioned leader, the Cayman Islands is increasingly being seen as a viable and attractive destination for re/insurance companies.’ 

Rae offered two explanations. First, ‘Bermuda has traditionally been known for its rigorous regulatory environment. However, recent changes have introduced increased regulatory supervision and tighter investment and group supervision rules… As an example, the Bermuda Monetary Authority made it clear that life re/insurers backed by private equity investment will be subject to particularly close scrutiny going forward, and in general, Bermuda has introduced stricter capital requirements on life and annuity re/insurers.’ 

Second, there is the tax rate, she noted: ‘In January 2025, Bermuda introduced the Corporate Income Tax Act, which imposes a 15% corporate income tax on businesses that are part of multinational enterprise groups with annual revenue of €750m or more (subject to certain carve-outs).’ 

At 0%, the Cayman Islands remains ‘tax-neutral’ for companies.  

At the coal face

Tax advantages alone are not enough to lure funds, incorporations and transactions, or the best professionals to support that work to offshore jurisdictions. 

Increasingly important are political stability, a legislative framework that can adapt to technological change, and a regulatory and compliance regime in which transparency assures, rather than concerns, clients. This allows the concentration of professional and financial services in an offshore jurisdiction to move to the forefront of new and emerging areas. 

Kitching says: ‘Because of the nature of “crypto”, and the constant change and challenges it faces, BVI and Cayman lawyers are constantly at the coal face when it comes to having to understand global changes in regulatory and commercial appetite – be that a high-profile collapse of a well-known name or a change in government, meaning a change in enforcement. 

‘From an individual perspective,’ Kitching concludes, ‘this means that the work I do is always interesting and, more often than not, exciting. I still work on traditional corporate matters, but more than ever, I have to act as “trusted adviser” to our clients, drawing on the wealth of experiences that we get from sitting in a jurisdiction that works with the entire world.’