Overseas trusts offer remarkable secrecy because of stringent privacy laws in the jurisdiction they operate in. So, why are trusts set up? And why overseas? What should you also know? The Indian Express investigation reveals this. This could be to ensure ownership of the enterprise within the family.īut trusts are also used by some as secret vehicles to park ill-gotten money, hide incomes to evade taxes, protect wealth from law enforcers, insulate it from creditors to whom huge moneys are due, and at times to use it for criminal activities. A businessperson can set conditions for ‘beneficiaries’ to draw income being distributed by the trustee or inherit assets after her/ his demise.įor instance, while allotting shares in the company to say, four siblings, the father promoter set conditions that a sibling can get the dividend from the shares and claim ownership of the shares, but not sell it without offering the first right of refusal to the other three siblings. True, there are legitimate reasons for setting up trusts - and many set them up for genuine estate planning. If it’s legal, what’s the investigation about? India also recognises offshore trusts i.e., trusts set up in other tax jurisdictions. While Indian laws do not see trusts as a legal person/ entity, they do recognise the trust as an obligation of the trustee to manage and use the assets settled in the trust for the benefit of ‘beneficiaries’. The Indian Trusts Act, 1882, gives legal basis to the concept of trusts. Is setting up a trust in India, or one offshore/ outside the country, illegal? At times, the ‘settlor’ appoints a ‘protector’, who has the powers to supervise the trustee, and even remove the trustee and appoint a new one.Īlso Read | What ‘bankrupt’ Anil Ambani didn’t tell: his $1.3-billion web of offshore firms It helps large business families to consolidate their assets - financial investments, shareholding, and real estate property.Ī trust comprises three key parties: ‘Settlor’ - one who sets up, creates, or authors a trust ‘trustee’ - one who holds the assets for the benefit of a set of people named by the ‘settlor’ and ‘beneficiaries’ - to whom the benefits of the assets are bequeathed.Ī trust is not a separate legal entity, but its legal nature comes from the ‘trustee’. It is generally used for estate planning purposes and succession planning. The trusts can be set up in known tax havens such Samoa, Belize, Panama, and the British Virgin Islands, or in Singapore or New Zealand which offer relative tax advantages, or even South Dakota in the US, the biggest economy.Ī trust can be described as a fiduciary arrangement where a third party, referred to as the trustee, holds assets on behalf of individuals or organisations that are to benefit from it. The Pandora Papers pierce the corporate veil and reveal how trusts are prolifically used as a vehicle in conjunction with offshore companies set up for the sole purpose of holding investments and other assets by business families and ultra-rich individuals. Subscribe to The Indian Express e-Paper here. ?️ Read the best investigative journalism in India. The Pandora Papers investigation shows how businesses have created a new normal after countries have been forced to tighten the screws on such offshore entities with rising concerns of money laundering, terrorism funding, and tax evasion. The Panama and Paradise Papers dealt largely with offshore entities set up by individuals and corporates respectively. How is Pandora different from the Panama Papers and Paradise Papers? But a scrutiny of the papers also shows how the objective of many is two-fold: i) to hide their real identities and distance themselves from the offshore entities so that it becomes near impossible for the tax authorities to reach them and, ii) to safeguard investments - cash, shareholdings, real estate, art, aircraft, and yachts - from creditors and law enforcers. The purposes for which trusts are set up are many, and some genuine too. The Pandora Papers reveal how the rich, the famous and the notorious, many of whom were already on the radar of investigative agencies, set up complex multi-layered trust structures for estate planning, in jurisdictions which are loosely regulated for tax purposes, but characterised by air-tight secrecy laws.