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Globalization has made conduct of business in complete privacy almost impossible; businessmen are facing innumerable problems of excessive taxation, undue governmental control and growing rate of law suits, all these factors lead the business at brink of failure. Due to increasing business vulnerability businessmen are resorting to offshore business which is considered to be one of the best methods of tax reduction. The term “Offshore Business” is about benefiting from the asset protection services offered by various countries (known as ‘Jurisdiction’ or ‘Haven’) the legislation of these countries allows for certain important protection advantages i.e. strong asset protection feature, tax relaxation and business confidentiality. An offshore nation allows the registration of the business entity or trust also offer this entity or trust certain considerable tax reduction in lieu of an annual license fee.
An Offshore Company may be defined as, a company which is registered in any foreign country; it does not conduct most of its business in the country where it is officially based, mainly for the reason of tax reduction and freedom from government control.
Origin of Offshore Business
Tax havens and the offshore company are not new phenomena, and their use expanded in the last 20 years to encompass a range of new offshore company jurisdictions. Consequently, approximately two thirds of total global financial assets are housed offshore in ‘tax haven’ countries, often through an offshore company. The success of the offshore corporation means almost all leading companies bank, borrow and invest offshore. The following information provides an overview of the history and future evolution of the offshore company, as well as key aspects of offshore tax planning.
The concept of an offshore tax haven was originally the brainchild of the US and UK, who were trying to reduce foreign aid to certain developing nations. The idea was that, as an alternative to providing foreign aid, multinationals would be encouraged to invest in these offshore jurisdictions by setting up an offshore corporation. Offshore jurisdictions generally have simple offshore company laws. The offshore industry is worth approximately US$ 5 trillion. Most experts agree that an offshore corporation is a long-term solution, provided it is structured as part of a comprehensive offshore tax planning strategy. Major international organisations actively derive profits from an offshore company, including aircraft maker Boeing, oil giant Exxon Mobil, American Express and Chase Manhattan Bank.
The term “Offshore Company” is ambiguous. It may refer to either:
A company which is incorporated outside the jurisdiction of its primary operations regardless of whether that jurisdiction is an offshore financial centre (sometimes known as a non-resident Company) i.e. a Canadian Company may be 'offshore' for the purposes of a US Citizen; or
Any Company (resident or otherwise) incorporated in an offshore financial centre.
Types of Offshore Companies
Examples of offshore companies include the International Business Company (IBC). More recently new legislation has been enacted in a number of Jurisdictions, such as the British Virgin Islands, to replace the IBC type of company with the Business Company (BC).
The following types of Companies are common in both onshore and offshore jurisdictions:
Company having a share capital- These companies issue shares. Once the initial cost of a share (capital and premium) has been paid, the shareholders have no further obligation to the company. The shares may, subject to the rules of the company, be sold or transferred, and the shareholders have the right to enjoy the profits of the company or any proceeds of liquidation. The liability of the shareholder is therefore limited to the amount invested. Shares are assets.
Company limited by guarantee - The members of the company agree to pay up to a maximum limit in the event that the company becomes insolvent. They may acquire certain rights against the company, such as the rights to a dividend and the specific rights will be set out in the rules of the company. Membership may terminate on death, and guarantee companies have been used for not for profit organizations. There are also sophisticated estates planning schemes which make use of guarantee companies. Membership is a liability.
Hybrid - a combination of the above two classes - i.e. a company have bother liability class shares and asset class shares.
Protected cell companies - some jurisdictions permit cellular companies, where particular assets and liabilities are segregated into "cells", in such a way that the assets of one cell cannot be used to satisfy the liabilities of another. Cell companies are particularly used for umbrella mutual funds or unit linked insurance bonds. In this instance the separate cells are effectively distinct legal entities.
It is important to note though that the above is a gross oversimplification of the near infinite variety of types of company most sophisticated jurisdictions permit. Shares themselves come in many different types with the rights in respect of dividend, preference, voting etc being determined by the constitution of the company to which they relate. Also, it is by no means uncommon for companies to utilise many different classes in particular when they are soliciting for investment from third-parties.
However, many offshore jurisdictions offer increasingly specialised forms of companies (as well as specialised trusts and partnership) seeking to increase their share of the market. Examples include limited duration companies, unlimited liability companies, companies limited by guarantee and with a share capital, restricted purpose companies and hybrid entities such as limited liability partnerships, which are more akin to companies to actual partnerships, and foundations, which are nominally trusts but are more akin to companies than trusts.
Offshore companies are meant to provide the corporate business infrastructures to aid in opening any company in the specified jurisdiction. With increasing demand for such companies’ world over, the registration has been simplified in many offshore countries for the purpose of efficiency and time saving. The important factors to consider even before starting the process of offshore company registration are as follows:
I. Identify the jurisdiction
From which you want the Company registered. In doing this, you need to:
Know the level of security that the jurisdiction identified is able to give to the Company;
Know the taxation rate per every income received, the level of capitalisation should be of concern (the reason being that some jurisdiction imposes rules that only need little amount of capital to start) get to know the financial benefits that is offered by the jurisdiction countries to Offshore Companies; and
Know the cost of operating an Offshore Company in any offshore jurisdiction.
II. Ability to Pay Annual Registration Fee
The Company must be able to meet the nominal levy requirement that the jurisdiction charge on Offshore Company’s Trade.
III. Explanation of Objects of Company
The legitimate reasons for opening the Offshore Company in question must always be provided in details. This is because some individuals or group of persons tend to open the offshore companies with ill-motives. Some do it to finance terror gangs and other criminal activities, to evade tax, creditors’ evasion and fraud.
Procedure for Registration
With all these given important considerations, the process of Offshore Company Registration may therefore continue.
Obtaining the Required License
To begin the procedure, try and get the required license for the Company you need to register. The methods of dealing with such offshore bank account are the most difficult process. This requires careful and selective decisions that will enable you get the best services.
For an offshore to be registered, the following legal documentation and charges must be provided:
a. The Government Filing Fees
That is payable at the beginning of the first year. This is a renewal fee that must be paid at the end of the specified period. The fee varies with the jurisdiction of choice. An example of offshore jurisdiction where this fee is paid annually is Seychelles.
b. The Incorporation Certificate
Must be produced. This must adhere to the set rules and regulations of membership.
c. Letter of Appointment of First Directors
This letter shows the names of directors and managers that will be involved in running the Offshore Company.
d. A Special Declaration of Trust
Must be passed by all the stakeholders, who have been nominated to operate the Company.
e. The Memorandum & Articles of Association must be provided to show the agreement and role played by every member
This documentation acts as a proof of legality of the Offshore Company to be opened. In many offshore jurisdictions, the procedures for registering an Offshore Company is the same. However, in some jurisdictions such as US, the procedures are a little bit different.
Management & Control
It is worth mentioning at this juncture that taxation of a company somewhere other than its place of incorporation is not by any means an exclusively offshore concept. By way of example consider a UK incorporated company which traded exclusively in France. If the board of directors of this company were based in France there would be no doubt that the company would be subject to French tax.
Consider also a US citizen running a Bahamas company from the US, there is no doubt that the activities of that company is subject to tax in the US.
The same principle extends to regulation also.
Features of Offshore Companies
Memorandum & Articles of Association or by laws
These documents are fundamental to the existence of the Company. The Articles detail the rights of the members, the objectives of the Company and the internal processes of the Company and the Memorandum states the type of Company and its capital.
Certificate of Incorporation
This is issued by the Registrar of Companies or their equivalent, and is served as proof that the Company has been brought into existence. Other information may be necessary to prove that the Company has not been liquidated or struck off such as a certified of incumbency or good standing.
It is often the case that an agent must be appointed in the jurisdiction in which the company is incorporated for the purpose of dealing with official communications with the registrar. The Agent will have to be licensed and will assume some level of responsibility for the company's activities.
This is the official address of a company, to which official documents are sent and legal notices received. It is normal for the registration agent to provide a registered office. A company may have other business and correspondence addresses.
Shareholders or Other Members
These are the legal owners of the company. For administrative simplicity, or for anonymity, a corporate service provider may supply nominees who will hold shares on behalf of a beneficial owner, and act on his instructions.
Directors, Managers or their Delegates
The individuals who manage the day-to-day affairs of the company. In many jurisdictions it is possible for companies to be directors of other companies. Corporate service providers in offshore jurisdictions will often provide directors, provided they are able to control, and be satisfied with, the activities of the company. The company is generally considered to be resident for tax purposes at the place where the decisions are made. In many cases if a person is acting as a director they will be considered de facto to be a director in spite of not having recorded this with the relevant body.
In some cases, it has been shown that the formally appointed directors merely act as the alter ego of others, blindly following their instructions. In these cases, the courts have considered that those instructing the named directors really control the company, and that the named directors merely rubberstamp decisions. Companies managed in this way will be tax resident in the jurisdiction where the shadow director is resident.
This is the person or body corporate that is responsible for ensuring that the company meets its statutory obligations. Corporate service providers usually provide this service.
A company is obliged to maintain registers setting out certain information about the company. The mandatory records vary from jurisdiction to jurisdiction, as does the level of public access to the information contained in the records. Many jurisdictions require that the records are kept within the jurisdiction in which the company is incorporated. The records required may include minutes of meetings, registers members, directors, officers and charges.
Directors are generally required to keep proper records. They may be required to prepare audited accounts. Specific requirements vary between jurisdictions and may depend on the nature of the company's activity. For example all banks will need to prepare audited accounts, whereas a private investment.
Typical uses of Offshore Companies
Offshore Companies are beneficial for many purposes including at least some of the following:
Consultancy, Professional Services, Agency
Professionals, consultants, artists and many self-employed individuals can gain substantial advantages by working as employees or as external consultants of offshore companies, of which they may be the sole shareholders and, if they want to, the sole directors.
Employment of Expatriate Staff
Expatriates working overseas can frequently benefit from being employed through an offshore employment/consultancy company. This can avoid tax being deducted at source. By not remitting the full salary it can minimize tax and avoid exchange control difficulties in the country of temporary residence. This arrangement will be particularly attractive to expatriates working in politically unstable countries.
Property Owning Companies
There are often significant advantages in using an offshore holding company for the purpose of holding property. The advantages of such an arrangement include the avoidance of inheritance tax, capital gains tax and the ease of sale which can be achieved by transferring the property owned by the company and reduction of property purchase costs to the onward purchasers.
Funds accumulated through investment companies set up in offshore areas can be invested or deposited throughout the world and whilst generally returns or interest payable in respect of these funds will be subject to local taxation, there are a number of offshore areas in which funds may be placed as bank deposits where the interest and/or the capital gains are paid and kept gross. To invest in global securities including mutual funds not available to "local" citizens. Offshore jurisdictions are typically less invasive allowing for aggressive and unrestrained Free Enterprise.
Copyrights, Patents and Trademarks
Offshore Companies can purchase or be assigned the right to use copyright, patent or trademark. Royalties can then be accumulated offshore although often royalties may suffer withholding taxes at source. An interposing holding company in some cases may allow a reduction in the rate of tax withheld at source.
A high net-worth individual can save professional fees and unwanted publicity by owning property or other assets through an offshore company. ECI can provide a wide range of services in the field of privacy protection.
To file first position liens against assets and property closing the door to predatory litigation before it begins. To segregate high-risk investments from other more secure holdings. To protect retirement funds from possible bankruptcy. Provide for the transfer of assets, for the next generation in an efficient and discreet fashion. Nominee directors and officers can allow you to conduct business transactions for your benefit while you remain anonymous. To access your funds with corporate debit or credit cards thereby maintaining absolute confidentiality.
Advantages of Establishment of an Offshore Company
To summarise the reasons why should a businessman consider going offshore, these are main benefits for it:
It provides security against future claims such as judgment, divorce proceedings, bankruptcy, creditors and litigation.
Reducing Tax Liability
A foreign jurisdiction can offer unparalleled opportunities for reduction of your tax liabilities.
From competitors, claimants, ex-spouses, and other parties from whom you wish to keep your business interests private; and
Simplicity and Reporting
Except for regulated businesses, such as banks or other financial institutions, some jurisdictions make it relatively simple to set up and maintain companies especially with reference to lesser reporting requirements than so-called onshore jurisdictions - the level of information required by the registrar of companies varies from jurisdiction to jurisdiction.
Shifting business to an Offshore Haven removes restrictions, regulations and taxation. What can you do with 50% more time and money?
Protect the long-term survival of Multinational Companies
By moving their domicile from countries with poor economic or political instability to a more stable tax haven.
Simplify the transfer of assets and properties held in several countries
The sale or probate of properties in different countries can become complex and expensive. If these are collectively held by an offshore company, ownership can be transferred by company’s shares rather than by transferring the actual properties owned by the company.
Own or lease ships or pleasure craft
Vanuatu International companies may own or lease ships or pleasure craft and pay no taxes on income derived from the vessels. Registration fees are low and Vanuatu flag vessels are welcomed in ports world-wide.
Reduce payroll and travel expense administration
Offshore Companies set up in Vanuatu or the British Virgin Islands need not pay social security, withholding tax, or associated expenses of employees working in other foreign countries. This can be a major savings for companies that have staff working on overseas projects.
Allow employment or consultancy fees to accumulate in a low tax area
Offshore corporations can contract the services of professionals to employers resident in high tax locations or politically unstable areas. This allows the fees to accumulate in a low tax jurisdiction.
Protect investments in other foreign countries
International Companies can give loan funds to corporations in other foreign countries. Investors may set up, but not directly own, an offshore company that loans funds to a development company set up in another country and charge interest rates that will lower tax obligations and protect the long term ability to repatriate investment funds. This can be especially important when working in countries with strict exchange controls and high tax profiles.
Minimise tax exposure when dealing with international transactions
An offshore corporation can buy or lease products from one country and then sell or lease them to a company in another country so the profits of the transaction are accumulated in the offshore company where there is no taxation on profits.
Maximise profits from intellectual property rights, franchising and licensing
An offshore company can franchise or licence intellectual property rights in other foreign Countries allowing the profits to accumulate in a tax free environment.
Reduction of cost of business
An offshore jurisdiction may be the right choice both for a business activity and for a more cost-effective personal life organization. An offshore company formation and / or redomiciliation of a company to an offshore country, as well as changing one’s place of residency to a low-tax jurisdiction introduce effective solution to a more cost-effective business and life style.
There have been various attempts to define an offshore jurisdiction, and the most appropriate one is widely believed to be the following one: any country outside one’s place of residence. In addition, the financial industry has to be the only or the main economic activity, on which the whole country’s economy is based. Having stated that, almost the whole world has to be evaluated as an offshore environment, even though offshore countries, so called tax heavens of fiscal paradise, are usually referred to only low-tax or zero-tax jurisdictions.
List of Offshore Financial Centres
It is possible to incorporate offshore companies in many jurisdictions. In some onshore jurisdictions, such as the UK and New Zealand, there are particular types of companies which offer many of the advantages of typical offshore structures. Below is the list of some of most prominent Jurisdictions in the World:
Andorra, Anguilla, Aruba, Aruba, Bahamas, Barbados, Belize, Bermuda, British Virgin Land, Brunei, Cayman Island, Cook Island, Costa Rica, Cyprus, Delaware (see also Delaware General Corporation Law) Dubai, Gibraltar, Grenada, Guernsey, Hong Kong, Isle of Man, Jersey, Jordan, Labuan, Lebanon, Liberia, Marshall Island, Mauritius, Monaco, Netherlands Antilles, Nevada, New Zealand, Panama, Ras Al Khaima, Seychelles, Singapore, Trinidad and Tobago, Turks and Caicos Island, United Kingdom, Vanuatu
Services Offered by ZA-LLP
Global focus of ZALLP includes the area of:
Company Formation in all European Countries
Company Formation in all 50 States of USA
Company Formation in Asia, Australia and New Zealand
Offshore Company Formation in all major Jurisdictions
Branch Registration of Foreign Corporations
Company Management and Administration
Establishment of Trusts and Foundations
Trusteeship and Provision of Foundation Councils
Corporate Tax Planning
Configuring Market Entry
Compliance and Risk Assessment
Yacht Registration and Management
The International Team of lawyers, accountants and commercial experts of ZA-LLP are fully conversant with international business and the World’s tax treaties and are therefore able to offer you a bespoke advisory service which includes:
Advice on t he selection, establishment and maintenance of company or trust structures
Advice on the establishment and maintenance of foundations
Advice to client seeking to establish or restructure international or offshore operations
Corporate structuring, financial engineering and tax and VAT planning
Assist with the implementation of trading investment and other structures
Advice on domestic and overseas property ownership
Contractual matters, billing and other day to day affairs of corporate structures
Advice on utilising structures domiciled in high tax area for international tax planning
Advice and implementation of business start-ups
Advice and implementation of Cubical / Physical presence operations
Expertise in utilising double tax treaties
Company Formation and Domiciliation Services
ZA-LLP offers a customised incorporation service on a global scale. Whether you wish to establish a corporate presence in Europe, USA, Asia, Elsewhere or simply offshore, our service is rapid, cost effective and solution driven. Our incorporation and related services include:
Company Formation in all European countries
Company Formation in all 50 States of USA
Company Formation in Asia, Australia and New Zealand
Offshore Company Formation in all Jurisdictions
Branch Registration of Foreign Corporations
Representative Office Registration
Provision of Registered Office Facilities
Provision of Registered Agents
Provision of Local Representative and Agents
Company Management, Secretarial and Compliance
ZA-LLP provides you with the security of having your company structured properly in accordance with legislation, and the statutory records and annual return maintained on sophisticated company secretarial software to ensure the company fulfils its obligation each year. These services include:
Provision of professional directors and nominee owners
Provision of company secretaries, managers and other officers
Establishment and maintenance of statutory records
Issuance of share certificates or other ownership instruments
Preparation and filing of annual returns
Preparation and filing of licence applications
Preparation, filing and payment of licence fees
Translation service in all major languages
Corporate governance and international compliance
ZA-LLP is able to offer you a range of commercial services to support and enhance your business activities. These include:
A turn-key administrative service for client companies
Arranging for the provision of legal and taxation advice and opinions
Drafting commercial agreements, consultancy and employment contracts
Assistance with the opening and operation of bank accounts
Trading and letter of credit services
A turn-key service of companies trading in or with the European Union, including VAT registration, the filing of VAT returns, Management, accounting, audit documentary credit transactions, cash management, invoicing etc.
Payroll solutions and management
International personal pension scheme
By entrusting ZA-LLP with your accounting activities you are not only accessing our global expertise. Our proactive accountancy team provide:
Accounting, financial reporting and consolidation
The preparation of management and statutory accounts
VAT advice, registration and related services
Financial modelling and forecasting
Preparation of business plan
Preparation of filing of tax returns
Tax computation and submission
Debt analysis and recovery services
Transfer of Administration
For private and corporate clients who are either disqualified with their current administrations or for client who wish to consolidate their International Corporate Services through a dedicated Point of Contact, ZA-LLP can arrange to take over the management and administration of existing companies, trust and other structures at no initial cost to the client.
Virtual Office Services
Customised virtual office service of ZA-LLP allows you to set up everything you need to run an office without having to pay the rent, salaries and overhead costs of nominal office. These services include:
Use of a prestige city business address
A local telephone number answered by our customer service centres
Call transfer to wherever you are, worldwide
Use of fax number enabling receipt and forwarding
Mail accepting and forwarding
Wide range of business support services
Trust and Trustee Services
A fiduciary structure can help preserve your wealth and offer you greater flexibility over the management and distribution of your assets. The most common type of fiduciary structure is a trust, a binding arrangement whereby assets are transferred to a “trustee” who is required to administer the trust assets for the benefit of specified beneficiaries strictly in accordance with the term of the trust. Through licensed trust and trustee companies of ZA-LLP, clients are offered:
A bespoke service regarding the establishment of an offshore trust
Trusteeship and related services
Administration of trust funds
Trust accounting and maintenance of asset ledgers
Reporting and filing as appropriate
Foundation and Council Services
Foundations are a very important component when structuring the ownership of family and corporate assets and are particularly important where trusts are generally not requested. They are in many aspects similar to corporate entities but afford the protection and continuity practical use of trust. Practical uses include:
Holding assets which can be passes on from one generation to the next (estate planning)
Inheritance Tax planning
Avoidance of forced heir-ship rules
Maintenance of corporate control
Separation of voting and economic benefits
Employment share option scheme
Yacht and Aircraft Management Services
Through our operations based in the Isle of Man, you can avail yourself of tailor structure to own Yacht, other types of vessels and aircraft which include:
Yacht and aircraft registration in the variety of jurisdictions
Liaising with classification societies
Compliance and certification
Marine and aviation surveys
Tax and VAT mitigation
Temporary EU important services
Crew management services
Each year, an increasing number of investors around the world are attracted by international financial centres to establish business in a form of an offshore company, offshore trust, offshore mutual fund, and offshore insurance company, open an offshore bank account or even start their own offshore bank. It is estimated, that around 60% of the world's wealth is held on offshore accounts by using offshore companies or offshore trusts and that around 50% of the world's trade in goods are transacted through various offshore jurisdictions.
As the years have progressed, so has the application of offshore services along with the number of offshore jurisdictions offering such benefits. Offshore companies or offshore trusts are not the illicit hideaways from tax authorities as sometimes presented. When setup and managed correctly, they can in fact provide enormous tax savings and asset protection in a perfectly legal manner. In simple terms, an international business or offshore company is usually a normal limited liability company, which is used as a tool by corporations and individuals throughout the world to legally direct profits out of high tax countries into offshore jurisdictions or so called international offshore centres, thus taking advantage of the low or zero taxation and various double tax treaties.
ZA-LLP helps its clients to achieve effective, safe, confidential and affordable corporate structuring, tax planning and asset protection, guiding them every step of the way. We have tried to be a one stop facility for all our clients' investment, corporate and tax planning needs. We offer offshore services and management in almost all offshore jurisdictions. If you need legal advice and representation or you are facing court proceedings against you or your company, our team of experienced lawyers will do their utmost to defend your assets, legal rights and commercial interests.