Vistra's latest report on the corporate services industry – Vistra 2020 – reveals that the trend toward onshore and mid-shore jurisdiction for doing business continues, with Hong Kong the most popular jurisdiction, the British Virgin Islands and the UK second, and the US and Singapore following them.
Globally there has been an increase in demand for transparency as a result of negative publicity towards offshore centres, says the report, as evidenced by the changing regulatory landscape. But the research shows limited change in the popularity of jurisdictions compared with last year's report, with the top five made up of the same jurisdictions.
“We found there is a continuing trend towards onshore and mid-shore jurisdictions, with the top five dominated by international financial centres either in or close to the world’s political centres,” said Jonathon Clifton, Regional Managing Director, Asia & Middle East, Vistra.
“This confirms our overall research findings that despite the uncertainties of globalisation, the industry continues to be optimistic towards driving economic growth.
“That said, we have recently witnessed a decline in demand for certain offshore jurisdictions such as the BVI and Cayman Islands due to uncertainty driven by the European Union’s recent economic substance requirement. We will need to keep a close watch on how these jurisdictions fare in the future in light of new regulations coming into play.”
Top three jurisdictions
• Hong Kong – A rise in Chinese companies listing on the Hong Kong Stock Exchange and a growing base of Chinese high-net-worth individuals with increasingly sophisticated needs have largely contributed to the city’s leading position. Hong Kong appears to be an attractive platform thanks to its lower tax rate and a stable legal system. Despite 33% of respondents believing political upheaval has affected Hong Kong’s reputation as an IFC, any harm has been offset by the city winning business from offshore regions, particularly among clients in Asia.
• BVI – Despite the Panama Papers in 2016 and the Paradise Papers in 2017, the BVI remains at number two and has experienced growth in new incorporation volumes, much of it reliant on Chinese investment. Where the BVI is seen as challenged, this has primarily been due to perception rather than the quality or prospects of the jurisdiction. However, it will be interesting to see how new regulatory changes may impact the popularity of this jurisdiction in the future.
• UK – In prior years, Brexit was not an issue and the UK’s favourable corporate tax rate and flexible labour legislation provided a friendly environment as an IFC. Today, respondents take a dimmer view of Brexit’s implications, with only 35% expecting the UK to become more open to the industry and IFCs after Brexit. If the country cannot provide attractive conditions for business, it is expected that a greater number of organisations will switch to Luxembourg or Frankfurt as their European headquarters.
Vistra's survey draws on the insight of 800 industry professionals in the corporate services industry globally through quantitative and qualitative research conducted between June and August 2018. To download the full report click here