Offshore Companies

Professional Offshore Company Formation: The advantages are many if you make use of an offshore combination, and this you can read more about in the following.

Is it Legal to Use an Offshore Company?
YES! - But in the past, offshore companies have often been associated with fraud and tax fraud crimes. This has of course kept many companies as well as others, from using these types of companies, and has pushed crooks to exploit and abuse the regulations that ex. This is extremely regrettable since there are many legitimate advantages connected to founding a foreign branch of your company or setting up a new company in another jurisdiction, as long as the domestic regulations are carefully observed, and you are not using the company for tax and creditor evasion purposes. 

A Few Advantages Worth Mentioning

- Companies founded in offshore jurisdictions have the same status as other limited companies around the world.
- Many jurisdictions allow the company to give loans to shareholders or directors.
Accountant is not required on a permanent basis, and some destinations even don’t even have the duty to keep books.
- No duty to make the books public.
- Intellectual property can be isolated in en offshore company with great advantages, since this creates a stronger protection.
- Ownership of the company can be placed in a trust-fund or with a nominee shareholder, whereby it is isolated from the domestic company and its tax obligations. This creates competition enhancing anonymity.
- Depending on which destination is chosen, it is possible to design the exact legislation to be applied to the company and which courts shall be able to enforce potential decisions.

The countries we use as destinations have strict confidentiality obligations that entail criminal liability for financial institutions that leak information, when this is not done as a result of a court order or verdict.

As a result of the above, offshore companies are used widely by many public listed companies and private companies as well. This is especially due to the low costs and the limited personal liability.
Foreign companies are becoming more and more recognised by the domestic tax authorities; this shows for instance by a simple search on the Yellow Pages for Ltd., Limited, Inc., Int., Corp. etc.

With our offshore company-solution you get a professional solution from the beginning. We guarantee you a discreet offshore account for your company, and we will see to the necessary documents and applications. The opening of a bank account takes 1-2 weeks depending on what bank is used. We will also handle all paperwork in regards to the company by the use of a professional nominee service. This leaves it to you to only manage the daily tasks and the customers. The nominee services can be deselected, if this is preferred.

More Offshore Company Information

Today we think, plan and work far beyond the borders that used to be significant. Fewer companies run their business strictly domestically. More people need and require internationalisation. These facts have set the grounds for companies set up in foreign jurisdictions, the so-called offshore companies, or IBC’s (International Business Company). 

An offshore is the equivalent of a company with stocks, and it is limited to business with foreign partners and clients outside of the country it is domiciled in. This is why it is also known as an international business company.

The Quiet Business Partner
An offshore company works as a quiet business partner, since it is established in a country where it does not draw a lot of attention to itself from the local authorities since it is not subject to taxes.
An example of such a company is for instance some of the major Tele-companies that use an offshore company on E.g. Cayman Island to run a “sell and lease back” solutions to obtain substantial tax allowances that are much greater than if the Tele-companies themselves had owned these centrals.

Good Offshore Destinations
As god offshore destinations the following are worth noting: British Virgin Islands – also known as BVI, The Seychelles, Cayman Island, Panama, Bahamas, Vanuatu and the Canal Islands. Gibraltar has also been used as a destination for IBC’s for many years.
We usually recommend The Seychelles or BVI, but specific circumstances may make other destinations more opportune.

Popular Company Forms
The IBCs are clearly popular. In a small country like The British Virgin Islands with only about 22.000 inhabitants, it has more than 1.000.000 IBCs already registered and established. It is an outdated perception that IBC companies are only used by businessmen to cover up or hide their shady methods. These company forms are now being used within the limitations of their domestic legislations, and the major stock exchanges such as NASDAQ now recognize and permit that companies registered offshore be listed with them. This of course has been the most significant factor in the positive development.

Also worldwide auditing corporations such as KPMG and PWC have made good use of the options that are opening up in offshore jurisdictions. They have opened up branches of their offices in these jurisdictions, and are now both running the business and counselling clients from these areas. This has opened the market for them and given them a part of the market that is aspiring here.

IBC companies are often used for commerce. An Offshore company can for instance be used as a ”broker-company” - meaning a company that re-invoices goods, creating profits on the spread between the purchase and the selling price. This can be a great advantage, since these places the profits abroad instead of in a high-taxes domestic company. Through the 90’s where the IT-business had its golden years, many large distributors used an IBC as a permanent business partner for importing equipment from I.e. the Far East or The United States. This way the profits from the domestic sales are managed more easily.

IBC Offshore Companies – What is the story?
The first IBC Company was formed in one of the eldest offshore jurisdictions in the world: Liechtenstein. After World War I Liechtenstein wanted to distance itself from Austria and Germany and instead move closer to Switzerland who had a good and stable economy. Liechtenstein had a strong need for foreign investors and therefore they invented the IBC Company that wasn’t subject to taxes as long as it was doing strictly international business (as opposed to also domestic). In 1926 the legislation was passed and Liechtenstein’s new strategy hit a gigantic market resulting in a rapid growth in the national economy. Liechtenstein’s IBC companies were forerunners of the offshore companies we know today, where the structuring and strategy-planning of the corporations has become much more complex, and where financial protection and privacy is increasingly important.

Who is Using Offshore Companies?
Today offshore companies are used by both privates, businessmen and already founded companies, like for instance:
- Private investors
- Private day traders
- Private people wishing anonymous bank accounts
- Private people working freelance
- Companies with international business
- Companies that need a holding-structure and holding company
- Companies that wish to minimize their tax liabilities.

A good example on the use of offshore companies is for instance large international shipping companies that do business all over the world. Also export-oriented corporations as well as international banks have seen great opportunities in crossing the borders and entering other jurisdictions as well.

Other users of offshore companies are the so-called PT’s, Perpetual Travellers, that work all over the world. They don’t have a permanent address and are therefore not subject to taxes. They use an offshore company to invoice their clients and/or employers, placing the income in the IBC. This could be journalists working all over the world, artists, writers etc. 

Confidentiality, No Taxes and Other Benefits
There are many advantages connected to the use of offshore companies. One of the most significant advantages is confidentiality. An offshore company is not obliged to hand over any information about directors or shareholders. In the recent years however, authorities around the world have increased the pressure on offshore destinations to be able to make ownership more public. In these cases nominee services can be beneficial. Information about books, real estate and deposits are fully confidential in these cases as well. In regards to potential competitors these will be cut off from using this information to their own gain.

Also the requirements to the management are much more favourable in offshore jurisdictions, since only one shareholder is needed. There is not even a requirement that this shareholder be registered, since it is possible to use a so-called “bearer share”. The board can also consist of just one director, and there are no notification requirements to the authorities regarding the company books. The company is not subject to tax for the first 50 years, and the offshore company is fairly easy to set up since there are no minimum requirements to the founding capital or for the founding General meeting. If General Meeting is necessary for you, this can be held anywhere.

Offshore Comany Examples and Uses

An IBC offshore company can be used in many different ways and for several different purposes. Listed below are some of the things IBC companies can be used for with great advantages.

Commerce
When it comes to international commerce an IBC company kan  manage several different tasks. The company could for instance be used as a middle link when importing from other parts of the world. The offshore company re-invoices the delivery whereby the profits are shiftet from the domestic company into the offshore company instead. This model is used widely by importers of electronics and computer equipment, but it is also ideal in many other areas.

Equity Trading
Through the 90’s trading with equity became very popular amongst private investors. This introduced many new private players on the market as well as several new companies specialised in the trading business like for instance eTrade, SaxoBank, Nettrade and Nordnet. They offered private investors the oppportunity of trading in shares on the international stock exchanges over the Internet. These corporations are subject to domestic tax laws however, and therefor have an obligation to report all capital gains to the appropriate tax authority.
If an offshore company is used for the same purpose, there won’t be an income that can be characterised as personal, since it will only be profits made by the company. This changes the tax claims significantly.

The offshore company sets up an account with a foreign broker which makes it possible to trade on-line even as a privat person.

IBC Company as Owner of Licence Agreements, Patents, Copyrights etc.
Licence agreements, patents, copyrights and rights over software and similar goods can be held, owned by or sold to an offshore company. After the assignment, the complete ownership lies with the company and all profits will then tax-exempt as well as exempt from any domestic disclosure requirements. As a protection for intellectual property this is beneficial, and it simplifies the administrative procedures.

Property Management
Offshore companies with a nominee director can purchase real estate and then re-sell it without having to pay tax from the profits. This is possible because the profits belong to a foreign legal entity and not a domestic tax subject. The offshore company will also be able to rent out the property subject to lower taxes than the domestic citizens would be able to. Needless to say - this creates a higher income on the property.

General Rental
All letting of property, assets etc. can be done through an offshore company. This company works as the owner who rents out its property.  In case local expertise is required in connection with the rental-business, this can be set up through the use of your domestic company. This was the offshore company hires the domestic company to manage the necessary things, and payment for this will be done through regular billing.

Registration of Boats/Yachts
An offshore company can be the legal owner of a boat or a yacht, having this registered in a foreign country like for instance Panamas or Grenadas. This minimizes the expensive costs most other countries impose through stamp-duties and fees.

Holding Company
Countless companies have chosen to use an offshore company as a holding company for their European and offshore operating companies. Depending on where you choose to place your holdingcompany several administrative and tax-related advantages can be obtained. If the structure of the holdingcompany is set up correctly, it is possible to retrieve dividens, bonuses and complete tax exemptions.Anonymous ownership of holdingcompanies is also an option.

Consulting Business
Clients working all over the world on contracts can advantageously use an offshore company for billing costumers and thereby avoiding having to pay tax from the profits.
The structure of an offshore company dealing with consultancy needs careful clearing with financial advisors in order to ensure that your clients accept invoices from an offshore company, or in order to be 100% within the legislation.

Limitations for IBC Companies
IBC companies have a few but very important limitations. They are not permitted to own property in their homw country (I.e in the Seychelles if this is where the company is registered), and they are not permitted to run their business in this country. In these cases the local authorities no longer see the IBC as an international business and therefor it becomes tax-liable.

Also, an IBC company  (and therefor also all other offshore companies) is incapable of running business as a bank, insurance company, broker or similar areas. These types of companies require full disclosure og management and accounts. Most jurisdictions also require that financial institutions are subject to local financial authorities’ monitoring. 

Offshore Company Complete Solutions

1. The first construction is a good alternative to a domestic company retirement fund. By setting up an IBC (International Business Company) in for instance Asia, your domestic company can make purchases of for instance equipment, utensils, supplies (and any other conceivable object) directly from the company. The IBC (or offshore company) can be wholly owned by a trust-fund who is capable of retrieving all profits due to its shareholder status, or it can even re-invest the profits to create a rapid growth in the assets. This is all done tax-free, leaving the complete savings for the founder of the fund.

2. A second option is the use of a holding-construction where an IBC company is used as a holder of shares in one or more subsidiaries. This construction allows the IBC Company to retrieve all profits from the subsidiaries without having to pay taxes. This solution requires that double-tax agreements have been signed by both states, and therefore the set-up’s applicability is limited to a few destinations.

3. The third option we’d like to point out here includes the use of a UK company. When another European company purchases products or services from an English company, the English company is able to transfer its profits to its owner. If ownership is placed in a trust-fund profits can successfully be transferred into an offshore IBC, also owned by the trust-fund. If the European company then makes a loan from the IBC Company, it will be able to deduct all interests on the mortgage while the IBC is exempt from tax liabilities due to its offshore status. This construction is widely used by large companies in for instance the shipping business. This construction is impenetrable for the domestic authorities since there are no disclosure requirements regarding ownership for IBC companies.
This solution can also be extended to include the IBC Company’s bank, which will then make the loan in return for a strict commitment by the IBC. This way the operating company gets a loan directly from a foreign bank with the IBC as guarantor. This model removes the direct connection between your domestic and your offshore company, and is therefore in accordance with the strictest tax-laws everywhere.

A Standard Offshore-Solution
A solution that is applicable is almost all situations is the construction centred around an offshore company that will be the sole owner of receivables, contracts and clients. Through the employment of an agent who is a UK company or another company within the EU. Historically the EU has worked very well with offshore destinations where the IBC’s have been placed, and a smooth and easy administrative procedure is of great importance. The chosen EU company (oftest a UK), is in charge of the daily management, smaller services that need tending to, and billing of clients. The IBC receives a percentage of the total turnover but it is important that this is a justifiable fee for the services. It is imperative that a reasonable amount of tax is paid in the UK (or which ever country is chosen). Otherwise you are in breach of the corporate as well as fiscal laws.

Both the offshore company as well as the agent-company will be founded and owned by an ad hoc Trust-fund. This offshore fund is anonymous, it has no disclosure obligations, it is tax exempt, and it creates a solid protection for your assets.
When using an international trust-fund in the company form like this, a nominee solution is unnecessary. The price is the same for the first year, but if you have more than one company placed under the same trust-fund, you will soon realize how much you are saving by not paying nominee fees.

Trust-funds are applicable in many situations, but for company solutions these should only be used as a holding structure.