Legislative Changes to Improve Disclosure in the Financial Services Industry

The Cook Islands Parliament recently passed a number of bills related to the financial services industry which will assist companies in the industry to meet the requirements of the United States of America Foreign Account Tax Compliance and the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes.

Provision of Customer Information Bill

The Provision of Customer Information Act 2013 removes legislative barriers which currently prevent Banks and Trust Companies operating in the Cook Islands from providing to the tax authorities of other countries information relating to their citizens. The legislation will only apply in respect of those countries prescribed by legislation. It is the Government's intention immediately to identify the United States of America and Australia as countries to which this legislation applies and so enable disclosure by banks and trust companies to the Inland Revenue Service (IRS) in the United States and the Australian Taxation Office (ATO) in Australia.

Changes to Accommodate the OECD Global Forum

In the Global Forum’s Phase 1 Peer Review of the Cook Islands offshore financial environment some deficiencies were identified around the ability to identify customers, particularly in relation to beneficiaries of International Trusts, accounts to be kept and the retention of various entity records. Amendments to the following legislation will improve the ability to identify beneficiaries of trusts and foundations and ensure the retention of various entity records and accounts.

 Financial Transactions Reporting Amendment Act 2013;

 Foundations Amendment Act 2013;

 International Companies Amendment Act 2013;

 International Partnership Amendment Act 2013;

 International Trusts Amendment Act 2013; and

 Limited Liability Companies Amendment Act 2013.

The Cook Islands is scheduled to have its Global Forum Phase 2 Peer Review in the first part of 2014 where these amendments will demonstrate that the Cook Islands will demonstrate forward movement by the country in the area of transparency and exchange of information. In drafting the suite of legislation the Government consulted with both the Bankers Association and the Trust Companies Association. The Bill will come into force on the day on which it is assented to by the Queen’s Representative.

Changes to the Income Tax Act in Relation to Wound Up Companies

Upcoming changes in the Income Tax Act will also see the removal of Section 17.2.b which allows the records of a company which has been wound up and dissolved to be destroyed before the general five year retention period required by the Income Tax Act.

TIEA with the United States

Historically the Cook Islands Government has sought to enter into a Tax Information Exchange Agreement with the United States of America. The Cook Islands has now entered into negotiations with the US on a TIEA