Swiss Trust Companies (STCs) are one of the premier captive entities available anywhere in the world. Owners of a Swiss Trust Company are typically looking to accomplish one of three main goals; increase profit, gain asset protection or cut costs. With Part 2 of our Special Report, we explore how Swiss Trust Companies can save both time and money. It is very important to reiterate that a STC is not a tax shelter and you should always consult your tax professional to understand international tax ramifications as a business owner.
Industries that Benefit from Savings:
Inexpensive to Acquire:
The first element of any acquisition is immediate out-of-pocket costs. Business owners familiar with international markets and corporate structures may find it surprising that an entity from a prominent jurisdiction such as Switzerland can be inexpensive to acquire. But in fact, when compared to similar entities from other locations, gaining ownership of a Swiss Trust Company requires an extremely reasonable initial investment. Most frequently, STCs are explored and then targeted as alternative to bank ownership. Therefore, a direct comparison to buying a private bank is the most valid evaluation when it comes to potential savings of time or money. At this point, it is important to stipulate you cannot call an STC a bank and it should not be confused with an Asset Protection Trust. With that in mind, however, St Vincent and the Grenadines offers the perfect structure to compare and contrast it to.
St Vincent is a Caribbean island nation located in the Lesser Antilles chain which is often considered one of the most favorable locations for new owners to license a private bank. Even though it would be difficult to place the two countries side by side in terms of profile, we have found in relation to expense and time it is a good comparison. St. Vincent actually offers the best possible alternative to an STC with all others being drastically more expensive. To submit an application to St. Vincent for a banking application you would need to budget between USD$75,000 to USD$125,000. Exact numbers are very difficult to nail down since it is an application process and therefore subject to many hidden costs. At first glance this might seem to be a wash since it is a similar cost range to acquire an STC but keep in mind that ST. Vincent is an application process. Therefore, we are discussing the difference between a guaranteed outcome and a subjective review. In either case, USD$75,000 to USD$125,000 is one of the lowest ranges available to acquire a financial entity anywhere in the world.
Low Paid-in-Capital Requirements:
Paid-in-Capital refers to the amount of money which must be held for the benefit of the entity and is similar to a posted bond. It cannot be working capital. In the Case of St. Vincent captive bank the minimum paid-in-capital is USD$500,000 but this is subject to review by the Ministry of Finance and could be much higher. In many cases the Paid-in-Capital required has been established for applicants at USD$1,000,000. In any case, these funds must remain on deposit with the Central Bank of St. Vincent for the life of the bank. In contrast, a Swiss Trust Company really does not have Paid-in-Capital requirement. An STC must only post an amount equal to share capital only once per year and otherwise all capital can be working for the entity. Of course, the STC must still have funds to back any instrument issued by the STC. In finally analysis, however, the cost savings here is easily between USD$400,000 to USD$900,000.
Continuing with our St. Vincent comparison, a candidate for ownership will encounter an application procedure which can easily take 12 months or more. In final analysis, most business owners considering such a move will not be able to afford this long of a delay or at the very least the benefit would be diminished. Plus, there is no absolutely no guarantee that you will get approved. Thus, all fees paid can be lost along with the time invested. It is also important to note that a similar application process is the norm in most jurisdictions. For example, even in within an extremely efficient jurisdiction like Bermuda the application process will usually take 6-8 weeks to gain approval for a Captive Insurance Company. STC ownership can be transferred within days, so there is no real comparison.
For the business owner looking to bring critical financial functions in house the Swiss Trust Company structure has no equivalent. It saves time, large sums of money which will need to be posted in potentially remote locations and is less expensive to acquire than almost every other alternative.