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How to use offshore structures?
ANONYMITY
Besides tax aspects
and advantages, a number of clients prefer offshore locations thanks to
the anonymity and confidentiality on the part of local authorities, which
is guaranteed by legislation of those countries. This anonymity and confidentiality
can be exported even to the onshore locations as an offshore firm entry into
a onshore company when the offshore firm purchases ownership interests of
the onshore company.
A majority of offshore jurisdictions guarantee full confidentiality of ownership
of offshore companies, which is based on the legal standards of the offshore
jurisdiction in question, where it is a criminal offence to cause disclosures
of information concerning the beneficiary owners of the companies, and a
number of jurisdictions punishes such a conduct not only by imposing significant
financial penalties but also through imprisonment for up to several years
without suspension, if this confidential information is disclosed. In some
jurisdictions, a number of acts are made in the presence of a video camera
in order to have clear evidence about the persons who have been made familiar
with the document in question.
This legal regulation applies also to possible questions on the part of
third country governments, authorities or tax inspectors, concerning the
beneficiary owners of the company in question. In general terms it is possible
to state that no beneficiary of an offshore company will be disclosed to
third parties by the authorities of the country where the offshore company
is registered and where a similar code of confidentiality is recognised,
as long as the company is doing business in a legitimate field of business
activities, which of course includes also international tax planning and
optimising the existing tax burden or asset protection.
There is also a possibility of issuing bearer shares, which enables a maximum
flexibility if there is a need to transfer or assign ownership rights concerning
the offshore company in question. We at SloGold are
convinced that it is necessary to take a confidential approach to all information
and to protect it properly. One piece of unimportant information does usually
not mean anything but one hundred pieces of unimportant information about
a person or company can already provide you with quite a good profile of
an individual with which you can continue to work. It is also one of the
reasons for which dozens of offshore jurisdictions have adopted laws protecting
personal and corporate privacy, known as Confidence Protection Laws, under
which it is a criminal offence to disclose any information about a company,
founders, shareholders or other information concerning the entity in the
country in question.
LONG TIME INVESTMENT
Depositing free
financial means in various currencies in foreign banks on term deposit or
current accounts can protect the depositors from envying neighbours, competitors,
executions, but it also sharply reduces the risk of economic bankruptcy
connected with the economy of one country through diversification of assets
into foreign jurisdictions. Another advantage is represented by the fact
that the yields of term deposit accounts are not subject to taxation in
offshore banks.
If we take into consideration that the average annual yield on a dollar
term deposit account at a serious foreign bank established in a tax heaven
is from 4.5 per cent to 8.5 per cent p.a., then it surely pays to consider
an investment in an offshore jurisdiction. It is good to remind you that
at present more than 2/3 of the liquid capital is concentrated in offshore
financial centres or comes from these centres. The requirements on the registered
capital of the bank are in a majority of offshore jurisdictions lower than
in the onshore countries. Why
should one consider the administration of offshore funds through an offshore
company? Mainly for the fact that the assets are not owned by you as a natural
person, but as a legal entity. Thus you can separate the ownership relation
which will help you protect your assets and bank accounts in the case of
a stress situation (execution, divorce, asset forfeiture through a judicial
decision, etc.).
CONSULTING
Consulting and advisory
services are the most frequently used manner of tax planning. An advisory
company of the offshore type can enter into the structure of your business
activities, such as contractual advisory and consulting company, which provides
your home company with qualified advice of how to proceed in individual
business cases. It will search for new commercial markets for you, suggest
and prepare commercial contracts, etc. Since it is a commercial company,
it will charge appropriate remuneration for its services, which will be
sent to your company in a form of invoices.
Your home company will respond to the invoices obtained by releasing a corresponding
financial amount serving for the settlement of the invoice in question,
which thus becomes a tax-deductible item, as any other legitimate service
for which it is normally necessary to pay.
REAL ESTATE PLANNING
A very popular practice
is that a real property item is purchased by an offshore company which is
registered as the proprietor in the Land Registry, and if the proprietor
of this company (i.e. The beneficiary owner of the real property in question)
wants to sell the real property, it is sufficient to sell the shares of
his or her offshore company and thus avoid the real property transfer tax.
(the proprietor - the offshore company is the same). The above mentioned
structure is only possible in those jurisdictions where it is possible that
a foreign entity owns the real property in question. In the jurisdictions
where this is not possible, the real property
can be owned in such a way that it is purchased by a company there
which is owned by a foreign offshore company.
This way it is possible to achieve:
- Asset protection (nowhere are you listed as proprietor)
- You can avoid tax inheritance (after the death of the proprietor the bearer
of the shares becomes a new proprietor)
- real property transfer tax, etc. (the proprietor is the person who owns
assets of the offshore company)
- protection from forced inheritance or from heirs at law.
PATENT, ROYALTY + COPYRIGHT HOLDING
Offshore companies
are an ideal tool for administration and management of licenses.
For example, a majority of software companies
license their users through companies which are established in an offshore
jurisdiction, or through a firm, which is not established in a classical
offshore jurisdiction, but is controlled by such a firm.
Typical examples of such users include without limitation:
- software companies
- companies doing business in information technologies
- license and copyrights to books, articles, music, films, etc.
- certification authority, publishers of professional certificates, etc.
INTERNATIONAL TRADE
International business
activities are another one of the most often uses of an offshore company,
which thus can use for:
- exports
- imports
- re-exports
- mediation of business and contracts
A business company basically acts in the role of business mediation company,
in the most ideal case it is doing business by itself. By its being registered
in a liberal tax jurisdiction it taxes its profits at an acceptable tax
rate or it does not tax them at all if it is subject to such a fiscal system
which enables it to do so.
As an example it is possible to use the onshore company which exports goods
to Ukraine. The profit achieved this way must be taxed
according to the current conditions at an unacceptable tax rate, which impedes
the development of entrepreneurial activities of onshore company.
After a qualified restructuring, the sugar will start to be exported to
Russia e.g. by a company registered in offshroe jurisdiction situated in for example
the Caribbean. The tax achieved by the company this way is taxed
at a zero rate, which is really a more acceptable taxation in comparison
with the existing tax.
The company established in Nevis is in a good business relationship with
onshore company, and that is why nobody will be surprised that it likes to
fund the projects of onshore company in all countries of the world. Onshore company
thus has a partner with sufficient liquid capital for further development
of its activities.
E-COMMERCE
Shifting business to an Offshore Haven removes restrictions, regulations and taxation. What can you do with 50% more time and money?
SHIP MANAGEMENT + YACHT OWNERSHIP
Many important offshore jurisdictions
(Panama, Liberia, the Isle of Man, Madeira, Jersey, Gibraltar, Cyprus, the Bahamas,
Belize and Mauritius) have modern ship and pleasure craft registration facilities
for the purpose of providing low cost registration fees and exemption
from tax on income derived from shipping and chartering activities.
The owners of pleasure craft operating within EU waters for extended
periods require specialist advice with regard to VAT.
HOLDING COMPANIES
Offshore corporations often hold investments in subsidiaries and/or associated companies,
publicly quoted and private companies, as well as joint venture projects. Capital gains
arising from the disposal of particular investments can be made without taxation. In the
case of dividend payments, reduced levels of tax on income can be achieved by utilising
a company incorporated in a zero or low tax jurisdiction that has double tax agreements
with the contracting state.
Many large corporations are interested in investing in countries where no double
tax agreement exists between the country of the investor and the country in which
they are investing. In this case, an intermediary company is established in a
jurisdiction with a suitable treaty. For example, the Madeira SGPS Company has
been used for investments in the European Union, since corporate entities registered
there can avail themselves of the EU Parent/Subsidiary Directive. Cyprus has an extensive
double tax treaty network with many Eastern European countries and countries of the former
Soviet Union, and the use of Cypriot companies for inward investment into these countries
provides a tax efficient conduit.
If you have questions about offshore services please contact us.
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