This is the fifth post in the Jurisdiction Spotlight series. Today we will be taking a look at one of the most versatile of the IBC jurisdictions in the world: the independent state of Samoa, formerly — and still sometimes called — Western Samoa. While investment into Samoa is rather limited, using Samoan registered companies companies, trusts, or banks can be extremely flexible.

As always, we begin a long, long time before our present day.

History

Samoa was first reached by Polynesian explorers around 1500 B.C. Not much is known about the time period 1500 to 1000 B.C., aside from some pottery found left behind. Over the centuries, Samoa blossomed into a major Polynesian trading hub by 200 B.C.. Fiji and Tonga were major trading partners at the time.

Not much noteworthy is recorded until 1200 A.D., when Samoan settlers found and colonized the Tokelau Islands, now a part of New Zealand.

The first sighting by European explorers was in 1772, when the Dutch explorer Jacob Roggeveen, sailing for the Dutch West India Company, passed via Cape Horn into the South Pacific and found Bora Bora, Maupiti, and Samoa.

46 years later, in 1768, the French explorer  Louis-Antoine de Bougainville arrived in Samoa. Together with what today is American Samoa, he named the islands Navigator Islands.

However, contact with Samoa and the Samoans remained limited, fuelled by an incident in 1787. A French ship, christened La Perouse, landed at Samoa where they were greeted by hostile locals. In what was called the 1878 Massacre at Tutuila, twelve of La Perouse’s crew were killed in the attacks.

It was not until 1830 that more permanent relations were established, with the arrival of British missionaries John Williams and Charles Barf. They are responsible for the disappearance of the traditional Samoan religion and introduction of Christianity.

German-owned J.C. Godeffroy and Son founded a depot in Apia, present-day capital of Samoa, in 1857. This helped make Samoa the primary trading post in the Pacific Ocean.

The 1889 Treaty of Berlin ensured Samoa’s independence under its own king, while also regulating the influence the United States of America, Germany, and Great Britain had on the island and its economy. The treaty was signed during the Samoan civil war, fought between 1886 and 1894, between Samoan factions. Germany assisted in defence of their preferred monarch. A second civil war broke out in 1898, following a dispute between Germany, the United States of America, and Great Britain. The war ended in 1899, with Germany and the USA dividing the island in half the Great Britain being given other Pacific islands belonging to Germany. The American part is nowadays known as the unincorporated territory of American Samoa, whereas the German part is the focus of this post: the independent state of Samoa, then called Western Samoa.

New Zealand seized control of Western Samoa in 1914, at the beginning of World War I. After the end of the war, New Zealand maintained control, as mandated by the League of Nations. The USA stationed troops in Western Samoa during World War II, between 1939 and 1945, but no battle was fought.

Western Samoa became independent from New Zealand in 1962 and joined the Commonwealth of Nations in 1970.

In July of 1997, Western Samoa changed its name to The Independent State of Samoa. It became a republic in 2007, following the death of king Malietoa Tanumafili II.

In 2011, Samoa skipped one day, omitting the 30th of December. This was done to facilitate trade with Australia and New Zealand. Previously 23 hours behind Sydney, it is now three hours ahead. The nation’s previous timezone was chosen to facilitate trade with the USA.

Overview Data

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Samoa Incorporation

Samoa’s offshore sector, regulated by the Samoa International Financial Authority (SIFA), offers a wide range of legal forms.

International Companies (IC)

It all started in 1987 with the International Companies Act. This is a clever legislation, in particular section 228(B) Asset Protection. By this clause, if a specified event occurs a member of the company can elect to have his shares vested in a specified person. A specified event can be a court order, foreign government expropriates, or any other event. As an example, a foreign court order to seize the assets of a company can be considered a specified event whereby the ownership of the company immediately shifts to another person (legal or natural).

When it comes to asset protection, a Samoa IC is among the strongest methods in the world.

Another thing that stands out with Samoa is the annual fee for ICs can be lowered by paying for several years in advance. While the standard fee is 300 USD, a company can opt to pay for five years (1,000 USD), ten years (1,500 USD), or twenty years (2,000 USD) in advance.

Like most other IBC or IC legislation, Samoa ICs need not file any accounts, can hold annual meetings anywhere, require only one director and shareholder, and the names of members do not appear in any public records. A registered address must be maintained with a licensed trustee in Samoa. SIFA lists all licensed trustees on its website. Auditing is not requirement, but companies can elect to do so. ICs are exempt from all taxation.

A former clause of the International Companies Act (227 4 c) stated specifically that no exchange of information will take place if there is or will be any risk of taxation for the company or its members. While this made TIEAs useless, the clause has since been repealed and Samoa now has TIEAs. Unfortunately, many websites – and even some offshore service providers – still tout this piece of legislation and, thus, misinformation on their websites.

Limited Life Company (LLC)

LLC was added to the International Companies Act in 1996 by an amendment. It is based on the Wyoming LLC legislation.

This company form was introduced in part to ensure that Samoa has a legal form which classifies as an LLC in the eyes of IRS in the USA.

Unless otherwise specified, the company’s duration is 50 years.

Segregated Fund International Companies (SFIC)

Another interesting legislation from Samoa, the Segregated Fund International Companies Act (SFICA) provides for a strong asset protection vehicle. The International Companies Act applies to SFICs.

A SFIC is permitted to create investment cells (Segregated Funds), where the rights and liabilities of members and creditors are separate for each segregated fund.

The main purpose of a SFIC is typically to let shareholders carry on multiple business activities through a single entity, with the ability to segregate and isolate risks.

International Partnerships (IP)

A Samoan IP is a form of offshore partnership, where one partner must be a licensed trusee, international company (IC), or a foreign company. The partnership agreement need not be lodged.

IPs fall under the International Partnerships and Limited Partnerships Act, first issued in 1975 and revised in 1998, with subsequent amendments.

Similar to ICs, IPs do not have to do to any annual filings and are not subject to audit unless it opts to do so. IPs are exempt from all taxation.

Special Purpose International Companies (SPIC)

This relatively new (2012) legislation is based on the International Companies Act and introduces an entirely new form of hybrid company. As of writing, this type of legislation is unique to Samoa.

A SPIC is a hybrid between a company and a foundation, in that it has directors (like companies) but no shareholders (like a trust). There is no legal ownership of a SPIC, since they effectively own themselves. It is aimed largely at being an alternative to trusts. Companies registered under the Special Purpose International Companies Act (SPICA) are required to maintain accounts.

While a SPIC can operate as a company, it must do so ultimately for a charitable cause. This immediately makes SPICs attractive to charities, but it may also be useful for those seeking a more easily operated form of trust. It also means that a SPIC can be used as a holding company. All companies owned by a SPIC is legally owned by no one since the SPIC has no legal owners. Banks may frown upon this, but it can be used for asset protection.

SPICs are exempt from all taxation.

In its 2012 peer review of Samoa, OECD has stated that “the confidentiality measures found under the SPICA do not expressly provide for an exception for information sought by the Commissioner for [Exchange of Information] purposes.” This may mean that SPICs are exempt from Samoa’s TIEAs.

International Insurance Act

Companies registered under this act are authorized to offer international insurance services. Such companies may not offer its services to Samoan residents.

Capital requirements for international insurers depend on services rendered:

• Captive insurance: 100,000 USD
• Re-insurance: 250,000 USD
• General or Long-term insurance: 500,000 USD (for each type)

A company with a license to offer captive insurance is permitted to only accept premiums from companies. This is mostly useful for self-insurance, where the insurer is a subsidiary of a parent company or is owned by parent companies.

A re-insurance licensed company can only accept premiums from other insurance companies.

Companies that hold a general or long-term insurance license are permitted to accept premiums from anyone for any type of insurance business (including life insurance).

A company can hold one, two, three, or all four types of license. A company holding all four licenses is required to have a paid-up capital of in total 1.3 million USD.

Companies registered under the International Insurance Act are exempt from all taxation, though it must be annual license fees. The license fees range from 250 to 2,000 USD per year depending on license(s) held.

International Trusts (IT)

Samoan International Trusts are regulated by the International Trusts Act (ITA).

Among its key distinct features is that the trust’s language can be any, as long as an English translation exists, and trusts can be perpetual or for a fixed period. Perpetual trusts can be changed to a fixed period.

There is strict confidentiality in place for ITs.

As expected, trusts are exempt from any taxation.

Samoa Offshore Bank Formation

Offshore banks, or international banks, are incorporated under the International Banking Act (IBA).

The IBA provides for three different types of licenses: A, B1, and B2. Irrespective of type of license, each director must undergo a due diligence process and be deemed fit and proper to act as a director the bank. International banks are exempt from all taxation and duties.

Class A license requires a capital reserves of at least 10 million USD. This is an unrestricted license which authorizes the licensee to accept deposits and issue credits, provided that no customer is resident in Samoa. This license is intended to be issued to already established international banks and financial services providers, although a Class A license could be issued to anyone who fulfils the requirements.

Currently, no Class A licenses have been issued.

Class B1 licensee is very similar to Class A, except the capital reserves are set to 2 million USD and its activities are more limited. It can only accept deposits over a certain amount determined in the license (different for each license holder). B1 license holders are also limited in which currencies it can trade. While B1 are permitted to accept deposits from anyone, there is currently no B1 license holder doing this.

Less than five Class B1 licenses have been issued so far.

Both Class A and Class B2 licenses must file accounts every quarter.

Finally, Class B2 is a license used for in-house or captive banking. Class B2 license holders cannot accept deposits from the public, instead only being permitted to accept deposits from and issue credits to those listed in its license. Class B2 licenses are typically used for a group of companies to consolidate its finances and perform internal treasury and banking. Because it is much more restricted, Class B2 license holder need only 250,000 USD in capital reserves and file accounts only every six months.

There are presently less than ten Class B2 license holders.

In addition to the capital reserves requirements, banks must pay a one-time application fee and recurring license fees. The fees for a Class A license are 25,000 USD for application and annual renewal. For a Class B1 license, the fees are 15,000 USD for application and annual renewal. A Class B2 licensee must pay 10,000 USD for application and for annual renewal.

All international banks are exempt from taxation.

Offshore Banking in Samoa

None of the banks incorporated and licensed under the IBA are open to the public, even if they have a license that permits doing so. Instead, the international banking licenses are used for tax planning, wealth management, and asset protection.

While there are four commercial banks in Samoa, they are not licensed under the country’s International Banking Act. These banks are not subject to the same advantageous taxation and high confidentiality as international bank.

In short, Samoa is not attractive for banking, unless you are the bank.

Samoan companies are generally accepted in Asia and the Pacific Islands. European and South American banks are less familiar with Samoan companies and it may require some convincing before they will accept you. Companies incorporated under SPICA are still quite untested with banks. It is likely that banks that do not know and trust you already will reject applications by SPICs, due to their still unknown nature.

Living in Samoa

While stunningly beautiful and decently accessible, with semi-frequent flights to New Zealand, Australia, and Honolulu, Samoa does not offer any taxation advantages to residents. Global income is taxed at up to 27%.

Costs of living are low. A large part of the population speaks English very well.

It is a very religious and family-oriented country, with churches every few hundred meters in the larger towns.

Final Words

Samoa is one of the most creative offshore jurisdictions out there. At its foundation, the SIFA set out to shape Samoa into a haven for legal tax planning and asset protection.

It appears that they have succeeded very well. The veritable buffet of company forms and banking license ensures that Samoa has something to offer almost everyone.

Click here to see other posts in the Jurisdiction Spotlight series.