Offshore and the Law

Although most countries have a carefree approach to their resident wishing to protect their asset elsewhere rather than in their home country. There are, however, a number of countries such as the United States that requires it citizens disclose detail of all their financial affair whether they be in their home country or not. It is therefore important that you, consult a lawyer in your country to confirm the legalities.

Remember, you are doing nothing illegal by establishing an offshore company or trust. Individuals and other entities are forming companies or opening bank accounts all over the world. All you are going to do is form a company/trust in a country that promises not to charge you any taxes. Each country has it's own policy and requirements relating to it residence going offshore. Taking professional advice will ensure that you stay well within the law no matter how harsh they may seem to be. Remember that Tax Evasion is illegal Tax Avoidance is not.

It is absolutely essential that an individual understand the difference between "Tax Avoidance" and "Tax Evasion". "Tax Evasion" involves being taken to court and charged with a criminal offence. With "Tax Avoidance" the worst case scenario is the government disagrees with you on a tax issue and they make a strong enough case that you have to pay the tax. The best case is you don't pay any tax. 

Fraudulent Transfer

There are many Federal and State Regulations regarding steps you make to discourage creditors. Before starting any asset protection plan, you must understand the legal restrictions on transfers of assets, which impairs the rights of a creditor. For years people have made attempts to conceal their ownership of property in order to avert the claims of their creditors. Camouflaging or concealing assets may be by physically hiding them, or making a "contractual gift" to friendly parties or relatives which is accompanied by private non-disclosed agreements to return the property after the annoyance has passed. If you are tied up in a case where your assets may be seized and are considering hiding your assets by moving them offshore to avoid your creditor then spear of few thoughts to the Uniform Fraudulent Conveyance Act and the Uniform Fraudulent Transfer Act and their consequences. English speaking courts have made an effort to protect creditors from this endless game, invalidate transfers made by a person with the intent to defraud his creditors. Commonly known as a fraudulent transfer (this occurs when your property is transferred in an effort to prevent a legitimate creditor from seizing the asset, in order to realise the debt.), such action is considered to be a criminal offence and your offshore jurisdiction will not protect you. As a matter of fact the law grants that the shield of secrecy be removed in such cases and any transfer of property which is proved to be a "fraudulent conveyance" may be set-aside by a court. The transfer will be ignored under these circumstances, and the property will be treated as if still owned by the debtor. That means that the judgment creditor can seize the property.

You must not do anything that is considered illegal such a fraudulent transfer. By having yourself declare solvent before the intending transfer, you can avoid the transaction being viewed as fraudulence. The ideal time to create an asset protection plan is before there are any potential creditors. This way, transfers of assets to an IBC or Trust should not fall within the fraudulent conveyance statutes.

Movement Of Funds

Many countries have some sort of exchange control regulation to discourage the movement of large sums of funds across their borders When transferring funds to and from an offshore jurisdiction you must take into consideration the laws of the onshore jurisdiction. For instance in the United States and United Kingdom any transaction amount in excess of $10,000 and £10,000 respectively will automatically be reported by the financial institutions. This is just a reporting requirement not a preventive measure for the movement of funds. Although the U.S. government does frown on anyone taking their money offshore, there is not and will never be a law to prevent funds from being transferred outside of it's borders. As the country depends on international trade its economy would be severely damaged. Since most U.S. international trade is in U.S. dollars, there would be no exports or imports, due to the fact that the United States would not be able to buy and sell goods.

Transferring legally obtain funds to an offshore jurisdiction providing taxes have been paid to the relevant authorities should not cause reasons for concern. This is entirely legal and you are free to transfer your money anywhere you choose. For those who wish to keep a low profile move your funds in small amounts you should avoid such exposure.

The movement of funds to the mainland by an individual may be a little more difficult since it could appear as earned income and liable for personal tax unless you take certain precautions. Your managers should be able to secure International Money Orders for small amounts, which will allow you to pay your suppliers etc. You could have the company pay for a number of high priced items.

The most popular and successful method for the repatriation of funds to the mainland is through the use of a secured offshore credit card in your company's name. Such as Visa, MasterCard or Amex. This will enable to access funds through ATMs worldwide.

U.S. Citizens And Offshore Companies/Accounts

The United States of America has one of the most severe tax systems in the world. U.S. citizens are required to pay U.S. taxes on their worldwide income and capital gains regardless of where they may reside and filing tax returns. Citizens of United States are required by law to state whether they hold controlling interest or similar influence on an offshore company. If it is declared that there is a controlling interest, then profits and/or interest will be liable for Federal tax. They are also required to notify the Department of Treasury if they have an overseas bank account that holds over US$10,000 and report any income from offshore investments for the purpose of taxation.

Although some individual are quite comfortable with the idea of not making such a declaration, since no detail of Directors, Shareholder or Bank Accounts can be obtained by outside agencies, it may be considered as "Tax Evasion" if discovered and be deeming illegal. Although to our knowledge, no such appeal has been made to date in an offshore jurisdiction. For those of you that wish to stay on the right side of the law there are a number of legal ways to overcome this requirement. The most popular and effective is not to have a controlling interest of the company or account. You must have great confidence in your offshore Management Team. For your peace of mind you can stipulate that two signatures be required when signing on the accounts, yours being one. Seeing that each signature is in actual fact worthless on its own, it can be argued whether you have a controlling interest. A less practicable option to avoid all taxes is to give up your citizenship.

For the self-employed you can form an offshore management company and employ yourself, pay yourself a modest salary and declare it to the taxman. Your salary should reflect your lifestyle. Naturally all the companies profit go offshore since payment for your services are made to the offshore company tax-free.

For a solution to your particular circumstances it would be best to seek advice from an attorney. When obtaining such advice bear in mind that tax consultants do not have the same client/Attorney relationship when it comes to confidentiality and are therefore more like targets during an investigation.

Remember when going offshore you should above all, keep a low profile, don't provoke the taxman, pay some tax and avoid disclosing your Offshore Status.

What is an Offshore Company?

An "offshore" company is any company which is formed in any of the so-called tax favored or "tax haven" jurisdictions. In the past few years, among the most commonly-used countries are the British Virgin Islands, the Cayman Islands, Nevis and the Bahamas and Barbados. The more traditional and longer-established havens include the Isle of Man, Jersey, Guernsey, Gibraltar, Panama and Liberia.

What these countries have in common is the fact that they generally impose no (or an extremely low) tax on companies which are formed there but which do not do any business in that country. The type of the entity formed differs country by country but they usually have most of the characteristics of a US corporation or Limited Liability Company. International Business Companies (IBCs) and Limited Companies are probably the most common. These companies can be formed for various reasons - to hold investment property such as real estate and financial portfolios or to engage in international business transactions.

If you are a citizen of a country that does not tax income earned outside of its borders, an offshore company can be most advantageous - your money can grow tax-free (and therefore a lot faster!) until it is repatriated. Some countries have tax systems like the US  -  "global" taxation where all income is taxed regardless of where it is earned. If this is the case, you must declare any income earned when you file your return so there are few tax advantages.

However, many US citizens find another legitimate advantage to offshore companies - asset protection. In our increasingly-litigious society, many people keep their nestegg offshore. It's much more private (the confidentiality laws of these jurisdictions are usually very strong) and it's much harder for potential creditors in a frivolous lawsuit to get at your money.

It's best to begin this planning as early as possible. Many courts can seek to set aside such a transfer of funds as fraudulent if it's within a certain period of time (generally 3 years) of a lawsuit or "in contemplation" of litigation.

Offshore company – the most common definition describing an entity incorporated in a jurisdiction with low level of taxation and no exchange control. There are about 50 states that have reduced taxes.

One of the main advantages of incorporation of a company in a jurisdiction with low taxation is comparatively low cost of registration – around  $1000 and almost the same price annually for a registered address. Thus some states stimulate budget revenues from registration and annuals fees.

Companies incorporated in such tax havens are as a rule either Corporations or partnerships and have the status of the International Business Company (IBC).

International Business Company (IBC)

An International Business Company is a corporate vehicle having limited liability, which, provided it has no business activities in the jurisdiction of registration, is wholly exempt from taxation on its income and from inheritance or estate tax on its shares. Only a nominal annual fee is payable to the Government.The IBC is a very flexible and well tried corporate vehicle suitable for a wide range of trading, investment and asset protection activities and solutions. IBCs can be formed in a day and with a minimum of formality.

An IBC can have bank accounts in any jurisdiction, deal with lawyers, accountants, trust companies and other professionals locally, hold company meetings and keep its accounting books and records in the same jurisdiction without breaching this restriction.

Tax base

There are popular fallacies that persons or entities pay taxes only in the country of their residence. In most countries taxes are levied from everyone who stays there for 6 months or more. For example, one who stayed in Great Britain for six months and then moved to USA and stayed there for another six months can be treated as a taxpayer in both countries. Thankfully there is an Agreement about avoidance of double taxation between those two countries but the person  in our example would pay taxes on the highest rates applicable in the both countries.

A similar situation may arise for companies as well. Most of the countries treat as taxpayer a company that is managed or controlled from their territory. The company is considered as managed from the country's territory if the company's directors reside in that country. So if a company is incorporated in the USA and it's directors reside in UK the company will have to pay taxes in both countries. That is why British taxes are levied on all offshore companies that are managed and controlled from British territory. 

''To Offshore Or Not To Offshore''

Many of the people who have established offshore companies have felt their governments has far too much control over their destiny. One of the first thoughts that comes to mind when the phrase "offshore investing" is mention to an individual, is tax savings, but consider this. In today's ever changing society the respect for an individual's or corporation's right to privacy has been lost completely. All personal and corporate transactions are carefully watched and in some cases if you deposit more than a certain sum of cash it is reported to various government agencies. Besides that, the financial institutes are all too willing and ready to disclose the detail of your personal private records to different agencies, such as credit bureaus when asked for.

If you reside in an onshore country, there is no privacy when incorporating a local company. Information relating to the names of past and current shareholders, directors, officers and financial records are easily obtained through the corporate registry and are available to anyone for a small fee. Fortunately offshore companies are not under such regulatory disclosure requirements and benefit from more extremely flexible legislation and no direct taxation.

It must be said that you are doing nothing illegal. Individuals and other entities are forming companies or opening bank accounts all over the world. All you are going to do is form a company/trust in a country that promises not to charge you any taxes.

There are a variety of reasons why someone would choose to conduct their financial affairs offshore, here are a few reasons:

1.       To achieve financial privacy - Within the next two years western governments will be able to have immediate access to the details of your bank accounts. The US government is currently setting up a new multimillion-dollar system that will enable them to have access all your banking details, this system will rapidly spread worldwide. Already fifty-six thousand investigations have taken place in the past few years within the U.S. alone. Thousands of innocent citizens have already been convicted for trying to protect their hard-earned cash. With the current advances of the U.S. government this number will rise tenfold.

With offshore jurisdictions it is possible for you to conduct your financial affairs in private, away for the intrusive eye of the authorities.

It is a criminal offence, punishable by fine or imprisonment for the Company's Trustee(s), Management Company or Bank to reveal the personal details of their clients or his financial affairs without the express written permission from the client. However, there is an exception to this rule. If the principal has been convicted of a criminal offence relating to the conduct of the business in his home country and that same offence was also committed and considered a criminal offence in the jurisdiction of incorporation, the affairs of the Company can be disclosed under the instructions of a court order;

2.       To avoid taxes in your resident country - For anyone wishing to invest without the burden of taxes on their returns, there are substantial tax savings to be gain by conducting their transactions in an offshore environment.

Due to the low costs of setting up an offshore company or trust, many smaller entrepreneurs and investors have been able to form offshore companies and/or trusts and enjoy the benefits of having made that decision. They have either reduced or eliminated the amount of tax they pay within the first year.
Laws state that we must pay taxes on our Worldwide Income. They are correct in that respect, but the important word here is Income.
Income: Say you invested US$50,000.00 in your home country which yields 10% interest per annum, the US$5,000.00 earned must be declared as Income which is taxable. If you are placed in the 50% tax bracket then you only have US$2,500.00 to re-invest.
On the other hand if you have your offshore company or trust invest the US$50,000.00 at 10% interest per annum then that US$5,000.00 earned is only declared as Income if you pay yourself the US$5,000.00. If you choose to leave that money in your company/trust, which it exempt from paying any taxes, and continue to re-invest it, the compounding effect of that money comes into effect very quickly. The results can be very dramatic over time. This is known as tax avoidance not tax evasion;

3.       To protect their assets - High net-worth individuals or anyone who has assets which can be connected to a possible lawsuit (for example doctors, surgeons and other professional) can, by placing their assets in an offshore company and/or trust, makes it a very costly, time consuming and difficult procedure for anyone seeking to gain custody by a lawsuit, not withstanding the fact that offshore jurisdiction have created a climate less favourable to the harassment of individuals and trivial lawsuits, making the aggressor's chances of success significantly slim;

4.       To conduct business under more favourable legislation - Offshore jurisdictions are ideal should anyone wish to run a business where regulations are not as restrictive as those in their own country of residence;

5.       To avoid exchange controls - With a number of Offshore Bank accounts worldwide held by an offshore company, allows the movement of funds in any currency anywhere worldwide. Note: exchange controls are not imposed in the domicile country;

6.       To protect property against seizure during legal proceedings - Providing you act early and adequate steps has been taken, you can protect your assets against all manners of claims.

7.       For the transfer of ownership - As the majority of Offshore Companies can issue bearer shares, the ownership or title to all manner of things can be easily transferred by hand to a person, corporation, trust, or other entity, anonymously and confidentially;

8.       To reduce the charges on the sale and purchase of real estate - By placing real estate title into the hands of an International Business Company, when the need arises to sell the property, on closing, the registration fee, stamp duties and notary fees can all be avoided by transferring the shares of corporation rather than the property title itself;

9.       To raise capital by sell its shares- Depending upon the jurisdictions involved the legislations are not as strict for these types of transactions as in the onshore states.

Offshore legislations have been created to provide a suitable vehicle for all the reasons mentioned above and many more. The use of offshore companies and/or trusts are only limited by the imagination of the individual, and new ideas emerge day by day.

Offshore jurisdiction by their very nature preserves the privacy of individuals, as well as the integrity of their industry and it is absolutely legal to form an International Business Company, establish an International Trust, open an offshore bank account and conduct other business in an offshore tax haven. However, you should consult a lawyer in your country to confirm the legalities. Each country has it's own policy and requirements relating to it residence going offshore.

So as you can see whatever the reasons for choosing to go offshore it is clear that there are numerous advantages in doing so.

Which Offshore Jurisdiction?

The question will always remain "Which is the best jurisdiction to establish my offshore structure?" In actual fact the products offered by most Tax Havens are virtually mirror images of each other. The decision will largely depend on the quality of after sales service, objectives and goals of the purposed corporation or trust and the Clients own personal and business circumstances. There are however, a number of factors which must be considered, these are the principal indicators which determines the merits of a good tax shelter.

1.       Stable political and economic climate - The offshore jurisdictions should not be subject to violent political factions, civil unrest, poor economic performance or the likelihood of invasion or military coup.

2.       Quality of Communication - Good telecommunications capabilities is more important than the location of the Tax Haven. By using state-of-the-art communications your chosen jurisdiction must be able send and receive electronic transfers and your representative must be able to receive instructions by letter, telephone, fax, or telex or any other means.

3.       Language - It is essential that you are able to have your instructions understood by your representatives.

4.       Legal System - Good legal foundation with modern corporation laws is essential. Jurisdiction who base their legal system on English common law with local modifications are very popular.

5.       Confidentiality and Secrecy - Privacy is important and valuable when conducting business offshore. The offshore centre must have the ability to control and sanction unauthorised disclosure of information relating to its offshore clientele and their financial affairs.

6.       The lack of exchange, currency and capital controls - It is important that you can freely move your money in and out of the country. The best situation is to bank in a country with no exchange controls. Money that is restricted from movement can be easily subject to possible seizure. Note: companies may open bank accounts in jurisdictions other than the jurisdiction of the corporation.

7.       Banking and Professional Services - Selecting a bank for the corporate account will be far more important than selecting the jurisdiction for the incorporation. The jurisdiction should offer superior and state-of-the-art banking in addition an excellent professional service such as accounting, legal, management and trust services should be readily available if required by the client.

8.       Taxation - Jurisdictions that have tax-free environment and no tax treaties with other countries are the best choice.

9.       Restriction imposed on IBC's - You should be able to conduct your legally without unnecessary restriction.

10.   Cost of Formation, Annual Fees & Services.

11.   Location - Although not of great importance in today's high-tech world a personal visit may be in order for added privacy.

12.   Clear and easy procedures for incorporation with minimum corporate disclosure requirements. 

13.   Government Attitude - A government that welcomes offshore business and possibly offers financial incentives sends a positive message to offshore investors. Many jurisdictions actively promote themselves as a tax haven and welcome offshore business and investment capital, while others just tolerate it. A government that does not completely support the activities of their offshore industry can adversely change their policy overnight.

comparison table

Forming An Offshore Company

Establishing an International Business Company to suit your individual needs may not be as difficult as you might of first thought, and with our assistance the process is even simpler.
Whether you require the simple company formation or complete incorporation package we can structure your company correctly. Closely working with a selected group of top legal and financial experts we then create the most appropriate corporate structure, ensuring that it is set up in such a way as to comply with any legislation in your country regarding the operation of offshore structures.
We will first assist in the selection of a jurisdiction based upon a number of factors, ensuring that: legislation in the offshore jurisdiction is compatible with your desired objectives; and tax treaties are effectively used where applicable.

Most offshore companies are sold with limited advice and little or no after sales service, the only communication being a once a year is a demand for fees to cover statutory and nominee duties. Opting for the cheaper basic services may leave you with no after sales support once your company has been incorporated. If you intend to achieve your original objectives then you will need all the help available, the additional cost for the ongoing support is well worth considering and these cost are rapidly recovered by the tax savings made.

By forming of your Offshore Company we provision Registered Agent, Registered Office and all relevant company documents including the company seal.

With special arrangements we could undertake the complete management and administration of your offshore company including:

·        An International Business Company incorporated in your desired jurisdiction, where total confidentiality is required by law. Your company will feature in addition to strict confidentiality enforced by law: Nominee Shareholders and Directors (as you might require. The beneficial (legal) owner is not disclosed. Bearer shares are issued and delivered to you or to whom you name.

·        Prepared Power of Attorney with minutes and resolution to allow anyone authorised by you to act on behalf of the Company on all its matters, including opening and operating brokerage and bank accounts

·        Registered Agent and Registered Office Facilities as required under law for the first year are included.

·        A US Dollar Bank Account with Secured Credit Card allowing 24 hours access to your funds through the use of ATM's worldwide.

On request we could provision an administrative office for nominal fees based upon services required. These services can include phone, fax, email and mailing address (not P.O. box).

Bookkeeping and accounting, invoicing and fulfillment services are available. 

The Incorporation Process

Requirements for incorporation of an International Business Company have been kept to a minimum. This makes for a cost effective, efficient and speedy service. The process is as follows:

a)       You must first decide on the Company Name with appropriate abbreviation (Inc., Limited, A.G., etc.).
Please give 3 alternatives in order of preference.

b)       After careful consideration decide upon a suitable jurisdiction that will meet your objectives.

c)       Complete the application form email, fax, or print the form and mail to us with the appropriate
remittance by wire transfer.

d)       We will begin the incorporate process of your company once we have received clear funds in our bank account.

Establishing a bank account can be a time consuming exercise for the set up of an offshore company structure.
Should you require our assistance (for a modest fee) opening an offshore corporate bank account, you must provide the following documents:

1.       Copy of Certificate of Incorporation and the Memorandum and Articles of Association.

2.       Notarised copy of passport, Birth Certificate or driver's licence with photograph for each shareholder/director or authorised signature to the account.

3.       For each shareholder/director or authorised signature to the account a letter of reference from their present bank or recognised investment institute confirming their address, signature and that they have held the account with the bank for three or more years.

4.       A current utility or phone bill confirming residential address for each shareholder/director or authorised signature to the account.

5.       Funds to deposit in the account (US$ 1,000.00 minimum).

We will supply all the relevant documentation required and make the introduction to the bank.