Proposal for Tax and Regulatory Reforms in St. Helena Company Registry

St. Helena Government is proposing tax reforms to broaden the tax base, enhance transparency, and comply with international standards. Key aspects include taxing global profits, minimum tax charges for companies, and following EU substance rules for company management. The aim is to create new revenue streams, improve regulatory oversight, and provide employment opportunities for locals in company administration and finance.

• Tax Reform
• Regulatory Compliance
• Global Profits Tax
• Company Registry
• EU Substance Rules

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1. Draft Company Registry Policy Nicole Shamier Chief Economist St Helena Government May 2020

2. Principles St Helena Government, in developing its Company Registry, follow the principles of: Openness and transparency Sound Business Practice Non-discriminatory taxation Anti-tax avoidance www.cr.gov.sh

3. Objectives of the Policy Broadening the St Helena taxation base Becoming a fair tax jurisdiction and possible tax raising options Compliance with international standards of company administration and financial services administration, including substance and transparency initiatives Effective regulation of Company Registry within St Helena Enactment of legislative changes required to achieve the policy.

4. Current Issues Lack of ability to tax companies on their worldwide income Limitation of existing Company Registry system capability Lack of direct regulation of company incorporation or administration (need of a anti money laundering handbook) Lack of ability to allow companies to be continued in St Helena (legally transferred to a new jurisdiction whilst retaining name and legal entity) Lack of ability for certain company types to be incorporated in St Helena (such as GmbH, Sarl etc) United Kingdom s requirements with regards to the publication of registers of beneficial ownership Revenue raising opportunities

5. Proposal New tax rate of 20% of a St Helena company s global profits to be taxed at existing St Helena tax rate, meaning that global companies will pay an effective tax rate of 5% in St Helena. Minimum tax charge for medium and large companies to be at least 1% of global turnover (not profit) to ensure that all companies will pay tax in St Helena. Registered branches of foreign companies to pay 20% of their branch profits on redistribution of such profit away from St Helena New economic revenue stream for St Helena, provided the legislative, transparency and international requirements set out in this policy are complied with. New employment opportunities for St Helenians and training potential to assist international businesses with company administration, company secretarial work, preparation of accounts, assisting with bookkeeping services, client relationship skills, international finance experience etc.

6. Proposal 2 Follow EU substance rules. Companies must: be directed and managed in St Helena; at least two directors present in St Helena for AGM for example. conduct its core income-generating activities in St Helena / principal administration activity in St Helena. have adequate people, premises and expenditure in St Helena. Make regular (annual) regulatory filings in St Helena. Report annually on their economic substance credentials and a formal hierarchy of sanctions for non-compliant entities can be enforced by the EU. Negotiation and conclusion of as many Tax Information Exchange Agreements as possible and sign up to Common Reporting Standards to demonstrate SHG s commitment to global financial transparency

7. Proposal 3 Consider participating in the US Foreign Account Tax Compliance Act (FATCA), an information standard for the Automatic Exchange of Information (AEOI) regarding bank accounts to the US tax authorities Develop Double Taxation Agreements with other countries Comply with recommended anti Base Erosion and Profit Shifting standards: Non-preferential taxation regimes economic substance tests Tax Information Exchange Double Taxation Agreements: commitment dealing with treaty shopping to ensure a minimum level of protection against treaty abuse Complete a template report on an annual basis on the income, profit and taxes paid by multi-national enterprises in their respective jurisdictions

8. Consultation Questions Consultation question 1: Do you believe that 20% of global profits should be deemed local to St Helena and taxed at local rates (25%) resulting in an effective 5% tax rate on profits made globally? Alternatively, should the effective tax rate be 3%, 7% or something else? (See section 2.1 within the Draft Policy report) Consultation question 2: Should for medium and large businesses, a minimum tax rate of 1% of turnover should apply to ensure that all medium and large businesses pay tax on St Helena? If not, should this be 0%, 2% or something else? (See section 2.2 within the Draft Policy report) Consultation question 3: Do you agree that the definition of medium business should be defined as one with a turnover of between 25,000,000 and 50,000,000 and the definition of large business be one with a turnover of more than 50,000,000 per annum, for purposes of charging a minimum tax rate? If not, something else? (See section 2.2 within the Draft Policy report)

9. Consultation Questions Consultation question 4- Do you believe that St Helena should participate in the Common Reporting Standard (CRS), an information standard for the Automatic Exchange of Information (AEOI) regarding bank accounts on a global level, between tax authorities? (See section 3.3 within the Draft Policy report) Consultation question 5- Do you believe that St Helena should participate in the US Foreign Account Tax Compliance Act (FATCA), an information standard for the Automatic Exchange of Information (AEOI) regarding bank accounts to the US tax authorities? (See section 3.4 within the Draft Policy report) Consultation question 6- In your opinion, which countries would it be most important for St Helena to set up double taxation agreements with? (See section 3.5 within the Draft Policy report) Consultation question 7 Do you have any other comments on the Draft Policy and its annexes?

10. Next steps Consultation with FSRA and FCO May - July Public Consultation 29 May 14 July Please respond to our consultation survey by 14 July 2020 by using the link at https://www.surveymonkey.com/r/CompanyRegisterPolicy2020 or by emailing Chief Economist, Nicole Shamier, at Nicole.Shamier@SaintHelena.gov.sh or contact by phone on (+290) 22470. Return to EDC for recommendation to EXCO Legal Drafting Endorsement by EXCO Agreement by LEGCO (Policy/Legislation/Budget) (Particularly) Tax Ordinance changes in place by 1 April 2021. Recruitment of new Company Registrar Engagement with international organisations which provide Company Formation and Administration services for marketing purposes.