Author: Murray Snider
The legal system in Turks and Caicos is based on English common law, with certain adaptations to local circumstances. This summary provides an overview of the legal framework and key aspects of conducting business in the Turks and Caicos Islands.
The Turks and Caicos Islands
The Turks and Caicos Islands (“TCI”) is a British Overseas Territory (“BOT”) situated south of the Bahamas and approximately 500 miles southeast of Miami. TCI’s language is English, and the official currency is the United States dollar. TCI is known as an offshore jurisdiction and financial centre. The legal system of TCI is based on English common law with local statutes and some UK statutes extended to apply specifically to TCI. TCI has a codified constitution, a Supreme Court (court of the first instance) and a Court of Appeal. The Judicial Committee of the Privy Council remains TCI’s final appellate court.
Unless expressly authorized to do so by the United Kingdom (“UK”) government BOTs such as TCI do not have the authority to become party to international treaties and the UK must extend its territorial scope to include them. The UK government cannot compel BOTs to request the extension of treaties but can extent treaties to them for acceptance. Currently, the TCI has 11 Bilateral Investment Treaties (“BITs”) that have been extended to them including, Belize, Bolivia, Grenada, Guyana, Hungary, the Republic of Korea, the Philippines, Singapore, St. Lucia, and Tunisia. Compared to other BOTs and other offshore jurisdictions TCI provides investors with a higher degree of investment protection.
In addition to conventional litigation, TCI offers resolution through alternative dispute resolution with both arbitration and mediation available. The Arbitration Ordinance CAP 4.08 governs domestic and international arbitration agreements and arbitration proceedings. There is no restriction on what subject matter may be arbitrated and parties are free to make choice of law and procedural decisions. The Court-Connected Mediation Rules 2021 have also been introduced in TCI and allow civil matters to be referred to mediation.
TCI is a tax-neutral jurisdiction with no direct taxation. There is currently no income, corporate, capital gains, personal, or inheritance tax. There is however stamp duty payable on transfers of land, duties on imports ranging from 5% to 45%, consumption tax, and other forms of indirect taxes for those who choose to work and live in the TCI. While there are no double tax treaties within TCI, the TCI is a party to a network of tax information exchange agreements with several jurisdictions.
There is a flexible, commercially minded, and user-friendly corporate regime in TCI for the incorporation, management, maintenance, and operation of companies in TCI. The Financial Services Commission (“FSC”) of TCI oversees all regulatory aspects of the TCI financial services industry and all companies are required to adhere to annual reporting and disclosure obligations. TCI’s anti-money laundering (“AML”) regime is consistent with international best practices and AML and anti-terrorist financing is a priority of both the TCI government and the FSC.
The European Union Code of Conduct Group for Business Taxation, the Companies and Limited Partnerships (Economic Substance) Ordinance 2018, and accompanying regulations exist across financial centres in BOTs, including TCI. Economic substance requirements apply to resident entities carrying out relevant activities. TCI defines entities to which economic substance applies as incorporated companies, registered partnerships, or foreign companies registered in TCI. Resident entities must be managed in TCI, conduct core income-generating activities within the jurisdiction, and have a physical office. Entities that satisfy the criteria for economic substance must file a report to the relevant authority on an annual basis. There are significant penalties for non-compliance with economic substance requirements, including monetary penalties and removal from the Register of Companies, and/or liquidation or dissolution.
Bankruptcy and Insolvency
TCI is home to over 16,000 registered corporations, many of which carry on business with and within the jurisdiction. The TCI Companies Ordinance 2017 and the regulations govern restructurings, reorganizations, and voluntary liquidation in TCI. Insolvency proceedings are described by the Insolvency Ordinance 2017, the Insolvency Rules 2019, and other regulations. The Companies Ordinance and the Insolvency Ordinance provide for company arrangements, administration, receivership, liquidation, plans and schemes of arrangements. There is also a compulsory licensing regime for insolvency practitioners in TCI.
The FSC is responsible for the supervision and regulation of financial services in TCI including trust companies and the trust industry more generally. The Trusts Ordinance 2016, Trust Companies (Licensing and Supervision) Ordinance 2016, Trust Companies (Regulations) 2016 and Trust Companies Code 2016 provide a modern comprehensive regime for the regulation of the trusts industry and trust companies in TCI. The new trusts regime enacted in 2016 thus makes TCI competitive with other competing offshore financial centres.
The current economic, political, and business outlook for TCI is positive. TCI has one of the fastest growth rates in the Caribbean and enjoys a tax-neutral regime, investor protection, consistent and modern legal environment and regimes well as a robust regulatory framework promoting development in the financial sector. The legal, financial, and constitutional stability of TCI is reflected in annual growth rates of more than 5% since 2013 and a credit rating of BBB+.