Bermuda Government To Introduce Legislation For Reduction In FSC Registration Fees

HAMILTON, Bermuda, 19 November 1996 -- The Bermuda Ministry of Finance has announced that the Island's government intends to introduce legislation that will significantly reduced its Foreign Sales Corporation (FSC) registration fees. The announcement was made by the Minister of Finance, the Hon. Dr. Grant Gibbons, as he addressed the annual FSC/DISC Tax Conference in Orlando, FL, last evening.

If legislation is passed, it would mark Bermuda's first-ever reduction since gaining U.S. approval as a jurisdiction for FSC in 1988. FSC fees will be reduced from $1,700 to $500 for small companies and from $1,700 to $1,000 for larger companies. The planned legislation comes as Bermuda continues to grow as one of the world's premiere centres for international business.

"We feel that a notable reduction in registration fees will clearly demonstrate Bermuda's commitment to being a leading FSC domicile. Fee reductions coupled with Bermuda's proximity to the U.S. and advantageous tax structure will provide significant attractions to U.S. Foreign Sales Corporations," said Finance Minister Gibbons.

Bermuda already offers a number of competitive advantages over its offshore rivals including its incorporation and organization process, the Island's stable political, social and legal environment and lack of FSC franchise taxes.

The Chairman of Bermuda's FSC Association, Mark Moffat, said, "We know the important role that FSCs play in making Bermuda one of the world's leading offshore business jurisdictions. By creating a fee structure that is more favorable we will ensure that Bermuda establishes a clear competitive edge over other FSC domiciles."

FSCs fall into two broad categories: non-leasing and equipment FSC. In the first category, Regular, Small and Shared FSCs provide benefits for a range of exporters. In the latter, equipment leasing FSCs are used heavily in aircraft financing transactions by U.S. airlines and other carriers as well as for rail transport equipment and satellites. Ownership FSCs allow the FSC itself to own and lease aircraft.

Foreign sales corporations derive from the 1984 U.S. Tax Reform Act intended to encourage the export of U.S.-manufactured products. Under this tax incentive program, a FSC may be established in certain designated jurisdictions outside of the United States as an export subsidiary of a U.S. manufacturing entity. The FSC subsidiary is then exempt from income taxes on a portion of its profits attributable to exports.