Funds: Private Equity, Hedge and All Core Structures

Chapter 7

Principal ‘Offshore’ Fund Locations

7.1 WHAT ARE THE CHARACTERISTICS OF AN ATTRACTIVE INVESTMENT FUND LOCATION?

In recent times we have seen an increase in global competition from countries that seek to attract investment funds and companies. For example, in Europe, Ireland offers a corporate tax rate of 12.5%;¹ however, recent reports have suggested that subsidiaries of Apple Inc. were offered a corporate tax rate of less than 2%.² In the UK the present corporate tax rate is 23% (down from 24% in 2012), and is due to decrease to 20% in 2015. Evidently there is competition from jurisdictions to provide an attractive tax environment for companies and investment funds, hence the focus for fund managers and investors in analysing the taxation regime, as well as the regulatory environment and ease of incorporation and administration of funds within a jurisdiction. In addition, rules around permanent establishment and the investment managers’ exemption (see Chapter 11, section 11.2.4) seek to encourage fund managers to locate onshore and advise funds that are offshore. In this chapter I will review a number of attractive investment fund locations, and the review will include an analysis of the regulatory and tax environments of the various locations.

Many of the jurisdictions in this chapter are often identified as offshore. The term ‘off-shore’ has been used by some to refer to a jurisdiction perhaps perceived to be a ‘tax haven’ and certain political parties across the world ...