FI­NANCE PS AWARE

Observer on Saturday - - News -

Min­istry of Fi­nance Prin­ci­pal Sec­re­tary Bheki Bhembe has con­firmed that some in­di­vid­u­als have ap­proached the min­istry with the idea of mak­ing the coun­try an IOFC.

How­ever, Bhembe was quick to state that he was not privy to the Bill which is in pos­ses­sion of the Ob­server on Satur­day.

“What we have done as a min­istry is to di­rect such peo­ple to the Cen­tral Bank of Swazi­land as the reg­u­la­tor of the fi­nan­cial ser­vices sec­tor in the coun­try.

“The Cen­tral Bank is the one that deals with the Repub­lic of South Africa when it comes to is­sues that af­fects the Com­mon Mone­tary Area (CMA).

“Our be­hav­iour as a mem­ber of the CMA has to be con­sis­tent with the ma­jor econ­omy and we must not be found want­ing when it

The func­tions of SIFAC

The doc­u­ment stated that the func­tion of the Swazi­land In­ter­na­tional Fi­nan­cial Cen­tre (SIFAC) are:

To reg­u­late in­ter­na­tional busi­ness ac­tiv­i­ties within Swazi­land; and

To cer­tifi­cate the right to con­duct such in­ter­na­tional busi­ness ac­tiv­i­ties within Swazi­land

It is said that suc­cess­ful ex­am­ples of a ded­i­cated Au­thor­ity con­trol­ling off­shore ac­tiv­i­ties are to be found in Malaysia, Malta and Mau­ri­tius.

The main Act will es­tab­lish SIFAC as the au­thor­ity.

(a) (b) ROLE OF SIFAC

SIFAC cre­ates the reg­u­la­tory and ad­min­is­tra­tive frame­work to make the in­ter­na­tional fi­nan­cial hub work ef­fi­ciently and prof­itably.

To this ef­fect, SIFAC is granted those pow­ers nec­es­sary to set up and run an IOFC in Swazi­land, in­clud­ing the pow­ers to charge the fees re­quired to run the Cen­tre and to grant li­cences and cer­tifi­cates which en­ables SIFAC to con­trol the op­er­a­tions and trans­ac­tions car­ried on within the frame­work of the cen­tre.

Ad­min­is­tra­tion and Reg­u­la­tion of SIFAC

Ad­min­is­tra­tion of SIFAC is by the board of Gov­er­nors, con­sist­ing of a chair­man, a vicechair­man comes to the move­ment of large sums of money within the CMA.

“The Re­serve Bank of South Africa is charged with over­see­ing the flow of cap­i­tal within the CMA mem­bers states,” he said.

The idea of the IOFC takes the coun­try as a bank, where there is free flow of cap­i­tal with­out the in­vestor wor­ry­ing about his as­set los­ing value.

“The ex­change con­trols are lib­er­alised and as you do that you don’t want to cre­ate a black sheep where some other coun­tries would sus­pect or not trust our sys­tems. It calls for heavy in­vest­ment in sys­tems and tech­nol­ogy that will de­tect el­e­ments of money laun­der­ing and fund­ing of ter­ror­ist ac­tiv­i­ties,” he said.

Bhembe said the Cen­tral Bank of Swazi­land will vet or reg­u­late the in­vestors of the Swazi­land In­ter­na­tional Fi­nan­cial Ad­min­is­tra­tion Cen­tre. and three other per­sons with wide busi­ness ex­pe­ri­ence.

The board’s prin­ci­pal func­tions are as fol­lows:

De­ter­mine poli­cies and pro­ce­dures; Process ap­pli­ca­tions for li­cences or cer­ti­fi­ca­tion; Is­sue li­cences and cer­tifi­cates; Pre­scribe and reg­u­late the pay­ment of fees for li­cences and cer­tifi­cates;

De­ter­mine the va­lid­ity and du­ra­tion of li­cences and cer­tifi­cates; and

Ad­min­is­ter the cen­tre The board will process the li­cenc­ing and cer­ti­fi­ca­tion of in­ter­na­tional trusts, in­ter­na­tional busi­ness com­pa­nies, in­ter­na­tional co­or­di­na­tion cen­tres, in­ter­na­tional in­for­ma­tion tech­nol­ogy cen­tres, in­ter­na­tional cap­tive in­sur­ance com­pa­nies, in­ter­na­tional li­a­bil­ity com­pa­nies, rep­re­sen­ta­tive of­fices of for­eign banks and mu­tual funds.

SIFAC de­ter­mines its own in­ter­nal reg­u­la­tion and may del­e­gate pow­ers.

Con­fi­den­tial­ity

All re­lated doc­u­ments and other in­for­ma­tion are con­fi­den­tial in­so­far as this not over­ride cer­tain other leg­isla­tive pro­vi­sions, in par­tic­u­lar re­lat­ing to anti-money laun­der­ing.

Mak­ing the fi­nan­cial cen­tre work

All of the fol­low­ing el­e­ments will have to be brought into op­er­a­tion, with the nec­es­sary co­op­er­a­tion be­tween SIFAC and the govern­ment of the King­dom of Swazi­land: Ad­min­is­tra­tion of the fi­nan­cial cen­tre Mar­ket­ing of the King­dom as a Fi­nan­cial Cen­tre

As­sist­ing in the con­clu­sion and func­tion­ing of Dou­ble Tax­a­tion Agree­ments

Cre­ation of the right kind of in­ter­na­tional busi­ness struc­tures

Train­ing and ed­u­ca­tion of Swazi­land na­tion­als in the op­er­a­tion of the Fi­nan­cial Cen­tre

Im­por­tance of reg­u­lat­ing the is­sue

Swazi­land has main­tained the tra­di­tional tax sys­tem whereby tax­pay­ers are taxed on their do­mes­tic source in­come. In 2011 South Africa changed its tax sys­tem in favour of a res­i­dency based sys­tem un­der which South African res­i­dents are taxed on a world­wide ba­sis.

This caries a po­ten­tial dan­ger for abuse by South African and other tax­pay­ers from coun­tries with res­i­dency based tax sys­tems, who may seek to take ad­van­tage of the Dou­ble Tax­a­tion Agree­ments con­cluded by Swazi­land.

In­so­far as a tax­payer were able to claim that his per­ma­nent home avail­able was sit­u­ated in Swazi­land, then he would be able to ben­e­fit from a Dou­ble Tax­a­tion Agree­ment in such a way that the South Africa or other King­dom treaty tax au­thor­i­ties would not be able to tax on the ba­sis of world­wide in­come.

For this rea­son it is con­sid­ered im­por­tant to reg­u­late strictly the right of aliens who seek to take ad­van­tage of the fis­cal ben­e­fits of any Dou­ble Tax­a­tion Agree­ment con­cluded by Swazi­land.

The pro­vi­sions will not of course ap­ply to any per­son who is a na­tional of Swazi­land.

Pro­ce­dure

Where the tax­a­tion au­thor­i­ties of a ju­ris­dic­tion that has en­tered into a Dou­ble Tax­a­tion Agree­ment with Swazi­land re­quest in­for­ma­tion in re­spect of an in­di­vid­ual sub­ject to the pro­vi­sions of Dou­ble Tax­a­tion Agree­ment, and the re­quest is made un­der the ex­change in­for­ma­tion ar­ti­cle of such Dou­ble Tax­a­tion Agree­ment, then the Swazi­land Tax­a­tion Au­thor­ity may de­clare that such an in­di­vid­ual is a bona fide res­i­dent of Swazi­land, pro­vided that cer­tain con­di­tions have been com­plied with.

The con­di­tions in re­spect of which com­pli­ance is re­quired be­fore the Swazi­land Tax­a­tion Au­thor­i­ties that de­clare an in­di­vid­ual is a bona fide res­i­dent of Swazi­land are;

i)

That the tax­payer must have his or her per­ma­nent home avail­able within Swazi­land and must oc­cupy such place of res­i­dence in a man­ner com­pat­i­ble with the nor­mal le­gal cri­te­ria of or­di­nary res­i­dence; and

That the mar­ket value of such place of res­i­dence must be com­pat­i­ble with that of a per­son in his in­come and/or cap­i­tal bracket/s; and

That the tax­payer shall have made an in­vest­ment in Swazi­land, which in­vest­ment shall have been ap­proved by SIFAC; and

That the tax­payer must pro­duce to the tax­a­tion au­thor­i­ties of Swazi­land a cer­tifi­cate is­sued by SIFAC stat­ing that such tax­payer has com­plied with all of the re­quire­ments as set out above.

The cer­tifi­cate of bona fide res­i­dence will be valid only dur­ing the cal­en­dar year in which it is is­sued, and its va­lid­ity ex­pires au­to­mat­i­cally at the end of each year.

In this way there will be a per­ma­nent con­trol of the bona fides of tax­pay­ers claim­ing to have their per­ma­nent home avail­able in Swazi­land.

ii) iii) iv) Fi­nan­cial ben­e­fits to Swazi­land of the res­i­dence pro­gramme

The fi­nan­cial ben­e­fits that could be de­rived from reg­u­lat­ing in this man­ner the rights of per­sons who are not na­tion­als of Swazi­land to be reg­is­tered as Swazi­land res­i­dents for the pur­poses of a Dou­ble Tax­a­tion Agree­ment, could be very con­sid­er­able.

In par­tic­u­lar;

The re­quire­ments re­lat­ing to in­vest­ment could en­able SIFAC to di­rect for­eign in­vest­ment to those projects that the govern­ment wishes to fos­ter; and

The bona fide res­i­dence re­quire­ment would lead to con­struc­tion of hous­ing and the use of air­ports, ho­tels and en­ter­tain­ment fa­cil­i­ties as well as to other re­lated ser­vice in­dus­tries.

Source of rev­enue

Rev­enue from the new IOFC will ac­crue to: The King­dom of Swazi­land both di­rectly,

1.

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