FINANCE PS AWARE
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.
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.
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;
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.
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,