INTERNATIONAL BUSINESS COMPANIES AND TRUSTS

The Central Ingredient to your Offshore Structure

We form International Business Corporations, Foundations and Trusts in a wide range of offshore centres. All come with company seals and a full range of documents required to open an account at most banks worldwide. We can arrange accounts with a wide variety of banks in a range of leading jurisdictions.

Most structures can be obtained within days with "off the shelf" structures available at a slightly higher cost. Just e-mail us for a summary sheet  for the location you desire if it is not featured on this site.

There are a wide variety of reasons for setting up an offshore structure and we have summarised some of the main ones below.

Divided into a weekly figure this works out at $10.57 / €7.20 / GBP6.60 per week. It goes without saying that if you can’t save at least 25 times that sum each week through tax reduction and increased profits, you probably don’t need an offshore company!

Unfortunately, many so called experts who set up offshore companies will sell you numerous facilities you do not really need, others will send you a list of what’s available and let you choose for yourself, without bothering to help you determine if you are making the right choices. Of course, only you can make the final decision as to how you structure your offshore entity although actual needs can generally be determined based on a combination of commonsense, your personal requirements and a basic business plan setting out your objectives. The key is  at all times beware of hidden charges and unpleasant surprises. Our intention is always  to ensure that you know exactly what you are getting for your money and to clearly explain the various alternatives which are available.

Returning briefly to hidden charges and underhanded tactics, a typical example which we came across involved an existing client who contacted us and asked us to take over the management of an offshore company originally brought from another firm, the only problem was that the firm were demanding $1600 / €1400 / GBP1280 in order to resign as agents and release the company to ourselves. No valid grounds can possibly exist to levy such a charge; it just represents extra money in their pockets, and is not ethical or justifiable in anyway. We don’t charge anything to release a company, (unless a fee is required from a registrar or a third party which is beyond our control) after all if we are doing our job right why would a client want to go elsewhere?

Finally, when forming an offshore company structure always stand back and consider how the basic set up looks to your clients. The primary consideration is that certain jurisdictions appear to suggest specific things. If you mention the Channel Islands in the UK, people think of tax avoidance, which is not always the case. If you mention a Colombian company people might think of Cocaine, if you say you are incorporated in Liechtenstein, it suggests substantial assets. Whilst the first two are more often than not wrong, the third is usually a correct assumption, this is because a Liechtenstein company or foundation is very costly to operate both in regard to the initial formation and the ongoing annual costs.

The key point is that where you set up your arrangements is important when it comes to creating a favourable image in the eyes of your clients. After all it’s pointless to save 35% in tax, only for the location of the business frighten off 40% of the potential clients! Our speciality is in looking at the options and helping you to put together the right package which will both maximise your profits and create the correct impression.

How can an offshore company be used?

The actual way an offshore company could be used in practice is examined below, one or more of the options will probably fit with your own plans.

International trading

Export and import transactions can be made significantly more tax efficient by the use of offshore companies.

The use of an offshore company between a seller and a buyer of products or services in different countries can allow profits from the transaction to be accumulated offshore. The company can be designated as a marketing or export consultancy. Nominees or representatives can be appointed who can respond to phone calls, emails or faxes, when required; this will greatly enhance the operation of your company and make it appear much more substantial.

Invoicing can normally be carried out via the offshore company, but goods can normally travel direct from source to destination.

Such structures can be particularly beneficial to transactions within EU countries. Problems of VAT accounting can be solved by registration in a suitable location. A UK or Irish onshore company can often be useful in conjunction with another corporate vehicle for example a Belize company.

Factoring of debts using an offshore company also offers possibilities to move money from a high tax to a low tax area.

Manufacturing

Some countries have a preferential tax rate for manufacturers, this can be exploited by establishing a manufacturing company in the appropriate jurisdiction and separating the manufacturing parts of the company’s operations by basing it in either a free trade zone, or a country that offers favourable tax breaks. If your affairs are structured correctly, huge savings can be made.

Investment companies

An offshore company is often used to make investments and accumulate wealth offshore. The company can invest in stocks, shares, property or commodities as well as a number of other investment opportunities.

In most jurisdictions ‘withholding tax’ is levied on income remitted out of the jurisdiction, the careful use of double tax treaties can reduce or even eliminate tax on the investment income. This may enable the investor to make investments in high tax countries from an offshore base with a minimal tax liability.
In some countries interest is paid gross on tax free bonds or bank deposits, these can be integrated into the client’s tax planning.

The investment may be rolled up in certain circumstances without income being remitted.

A jurisdiction can be chosen where death duties and capital gains taxes can also be avoided.Use of an offshore company also protects the identity of the ultimate beneficial owner.

Holding companies

Holding companies can handle dividend receipts from a spread of subsidiaries. This allows a group to centralise its resources and maximise the tax benefits. Careful use of tax treaties is needed to obtain the best results

Various locations, both on and offshore, can be used; the holding company can also fund subsidiaries in a tax efficient manner.

Property owning companies

Owning overseas property through an offshore company provides a number of advantages.
It is possible to avoid inheritance tax, capital gains tax, and death duties;

The process of sale is simplified. In some countries the establishment of title is time consuming and costly. Once title has been established for a company owned property it never needs to be established again. Sale can be made by transfer of the shares in the company, the title to the property then remains vested in the company.

Sales by share transfer also saves legal fees as well as the transfer and value added taxes that are levied in some countries. Government stamp duties and capital gains taxes can also be avoided. Perhaps more important when the purchase needs to be competed quickly is that exchange control delays can also be prevented.

An example of how an offshore company can be employed in the UK is apparent in the case of a UK non resident owner who can use an offshore company to gain relief from income tax, capital gains tax and inheritance tax on ownership of a UK property, the same benefits are generally achievable by most nationals.

Corporate ownership has the additional added benefit of shielding the identity of the ultimate beneficial owner of the property.

Probate

The ownership of a portfolio of investments, properties or other assets through a single offshore holding company can simplify probate procedures upon the owner’s death. Probate can be applied for in the offshore jurisdiction rather than in several different countries where the assets are located.

Legal fees are often significantly reduced and publicity can usually be avoided for high profile individuals and families.

Consultancy and services

Consultants, financial advisers, real estate agents and those providing services, such as, musicians, security consultants, bodyguards and entertainers often receive much of their income from overseas.
This income can be remitted to an offshore company, which in turn employs the individual and pays over a modest amount for expenses, retaining the bulk of the funds offshore.

Employment overseas can be facilitated by the use of an offshore employment company. This can either employ an individual or a group of individuals working overseas. The employee keeps the bulk of his income outside the country of employment. This type of structure can also reduce currency exchange problems and circumvent a number of employment and residency obstacles.

Ship and yacht ownership

It is often advantageous to own title to a vessel in an offshore location; this can have significant tax benefits. It can also provide an easy registration procedure for yachts, which in certain countries can only register on the major national register with onerous compliance requirements.

A separate offshore company may be formed to operate or charter the vessel thus separating ownership and income which offers further potential tax benefits.

Intellectual property

Patents, copyrights, trademarks, franchises and other rights such as those in music, computer software, and technical knowhow can all be transferred into the ownership of a licensing company, which can either be offshore or onshore. The licensing company enters into licence or franchise agreements and the original company then receives royalty payments and licence fees.

Inheritance tax protection

Ownership of assets through an offshore company can often eliminate liability in the owner’s own country to inheritance tax and death duties.

Insurance companies

Most offshore centres will only accept registration of insurance companies which are subsidiaries of existing insurance groups, or which are very heavily capitalised. Surprisingly in several first class jurisdictions it is still possible to register an insurance company with relative ease.

Internet Trading

One of the fastest growing areas of international trade is the Internet. The international nature of the trade and the potential tax complications of dealing internationally can be solved by the creation of a specialist internet trading company offshore.

To obtain favourable tax treatment, it is best to locate the server physically offshore (somewhere other than where you are based) and to have an appropriate domain name, for example if your current domain name is www.williamsbrown.co.uk or www.willembruin.nl you could opt for a tax free British Virgin Islands domain such as http://www.anycompany.vg or simply a .net or .com

Though the opinion is often expressed that such operations are all in cyberspace and therefore location is not important, in reality regulation is increasing and planning should anticipate possible future developments. As things currently stand (December 2009), the Americans seem determined to keep the internet tax free, but no one really knows how it will turn out long term, certain legislation concerning the sale of downloadable products and services relating to the payment of EU VAT are making things somewhat more complicated. An example of this is eBay, if you live in the EU you have to pay VAT on your invoices but if your billing address is outside the EU you don’t hence the benefits of a good offshore virtual office service see www.haeflirusterholz.com. This situation was the result of EU legislation which came into force in July 2003 but fortunately a bit of creativity can circumvent the problems.

Coming back to the US - which to a great degree seems to dictate the direction in which the internet develops we need to look at the 1998 Internet Tax Freedom Act which was authored by Representative Chris Cox, R-CA and Senator Ron Wyden, D-OR and signed into law on October 21, 1998 by President Bill Clinton in an effort to promote and preserve the commercial potential of the Internet. This law bars federal, state, and local governments from taxing Internet access and from imposing discriminatory Internet-only taxes such as bit taxes, bandwidth taxes, and e-mail taxes. The law also bars multiple taxes on electronic commerce. The bill has been extended three times by the United States Congress since its original enactment and was last renewed on October 30, 2007 for 7 years so this seems a pretty positive sign for the future.

E-Commerce

Asset Protection

A trust can be established whereby the settler, having transferred title to certain items to the trustees, no longer visibly controls these assets. This means that they cannot be seized in cases of insolvency, marital proceedings or professional negligence.

If however, the trust was set up intentionally to avoid a known current or future liability it may be set aside by the courts. Particular care is needed in the US and since the 2004 budget the UK is also looking closely at trusts.

Regardless of problems in some countries trusts, when correctly structured, are excellent asset protection vehicles, and are extremely flexible in times of political and economic instability.

A further advantage of trust formation is that 100% anonymity is still possible and a trust can perform all the functions of a company without the restrictions.

Family wealth protection

Trusts are often used to protect the continuity of family wealth by imposing conditions on the use and distribution of the moneys on present and future generations. Such an arrangement may also replace a will in certain circumstances. Trusts can be used legitimately to avoid ‘forced heirship’ provisions affecting inheritance. Inheritance, capital gains and income taxes can all be minimised in this way.

Re-invoicing and transfer pricing

A tried and tested tax reduction strategy

Introduction

We get a lot of calls from people who open by saying “I'd like your help in forming an offshore company which will receive income that I am receiving from abroad. I want to keep most of the income outside the country where I live and the company can then pay me a small percentage of what is left, so that I don’t have to pay income taxes on the full amount.”

Of course this is everyone’s dream, to be able to avoid paying income tax, while allowing the money to grow tax free in a secure offshore location. Depending on how this is done it can amount to either avoidance which is legal, or evasion which is not.

How it works.

A businessman (whom we will call ‘client’) creates an International Business Company (IBC) in a tax free location to which the proceeds of the businesses sales are diverted. The intermediary company then marks-up the price during the transfer (hence, ‘transfer pricing’) and ‘reinvoices’ the client’s local company at the higher price. This means the profit in the high tax location is greatly reduced and with it the tax liability.

What is re-invoicing?

Re-invoicing is the use of a tax haven corporation to act as an intermediary between an onshore business and it’s customers. The profits of this intermediary corporation and the onshore business allow the accumulation of some or all profits on transactions to be accrued to the offshore corporation. It should be noted that a similar structure can be utilized by an importer or a consultant.

What would be an example of re-invoicing?

An onshore corporation sells $1,000,000 of goods or services to Norway each year. Assuming the cost of the goods and services sold including operating expenses are $600,000 and the onshore corporation therefore earns $400,000 on its sales before taxes. Taxes will average, for example, $160,000 - although this will depend on which country you reside in - thus reducing net profits to $240,000.

If the onshore corporation establishes an offshore corporation to act as intermediary with an offshore representative who can speak to accountants, lawyers, clients and suppliers if needed. The onshore corporation then sells its goods and services to the tax haven corporation on paper, for example for $600,000. The tax haven corporation in turn sells the goods and services to the Spanish client for $1,000,000. The tax haven corporation thus earns $400,000. Since there are no taxes, $400,000 is the net income after taxes. The exporting corporation shows no profit. ($1,000,000 gross sales less $600,000 cost of goods sold)

The $400,000 in tax free income is then deposited in a bank account or other investment instrument in Zurich, Cyprus or the BVI according to the wishes of the onshore corporation. The account is under the control of the onshore corporation.

The basic process of re-invoicing in this example saved the onshore corporation $160,000 in taxes!

Why are the tax haven corporation’s profits free of taxes?

The intermediary corporation is formed in a country that has no taxes on import and export transactions, for example, Belize, the British Virgin Islands, the Seychelles and Panama have no income taxes on reinvoicing transactions.

How is the offshore company structured?

To provide anonymity, nominees, front men or representatives can be provided by the agent who manages the company. The actual decision as to what type of structuring is needed will depend on the individual circumstances. If you go down the nominee route the shares will be issued and delivered to you as proof of ownership. Having said that in many cases a pair of offshore representatives will suffice because in the main locations we recommend the directors do not appear on public record making a wide variety of options possible.

Will the offshore company’s bank account have to be located offshore?

Ideally it should be in a separate jurisdiction from the onshore company and often in a different location from the offshore company as well.

What about confidentiality?

It is the policy of Häfli Rusterholz that information is never released without consent. All records etc are always kept in different countries to those in which our clients are based. For example if you deal with the office in Zurich or Berlin and are based in the UK the records will be kept solely in Zurich or Berlin.

What happens to the offshore tax free profits that are earned?

You can invest them as you see fit or simply place them on deposit.

If the offshore company is managed from xxx, does it follow that the merchandise has to be sent there or the services performed there?

No, the merchandise can be sent directly to the exporter’s client. Services can be performed in any offshore location, a common enough process in the new economy. The only functions performed, in xxx, are the preparation and dispatch of the new invoice and the management of the banking operations.

What happens if the owner should become incapacitated and the offshore company at that time has in its name substantial assets such as cash?

Assuming you ensure that your beneficiaries have access to the company records, then if such a case should occur, they would simply produce the will or legal documents such as power of attorney to the management company together with some sort of evidence of your incapacitation and all control of assets will be transferred to whoever you nominate. There would be no transfer taxes, estate duties or other forms of taxation levied on the assets.

What other functions will Häfli Rusterholz provide?

Once the offshore company has been established Häfli Rusterholz will arrange for any additional items you may need for example, offshore address, secure email, telephone and facsimile services, in fact anything you might require for use by your offshore company.

What are the fees for reinvoicing? How do I determine whether such an operation is to my financial advantage?

If you arrange your own re-invoicing there are no fees.  If we appoint a firm to manage the accounts and set up an online invoicing system which both you and they can access the set up costs are generally less than one would think. There would generally be a 3% charge on all reinvoicing operations. This fee includes use of the accounting firm’s voicemail, fax and email system as well as management and initial set up of the online invoicing system.

TRUSTS

A Trust is one of the most flexible existing financial mechanisms, able to handle almost any purpose and it can also be 100% anonymous and structured in such a way that unless someone can find the trust deed they have no chance of determining the parties to the trust.

Its concept is based on the separation of legal ownership of the Trust assets (which rests with the Trustees) from the Beneficial ownership (which rests with the Beneficiaries).

It has been specially designed to achieve the best asset protection.

A Trust is a legal device that allows title to - and possession of - property (asset) to be held, used and/or managed by one person, the Trustee, for the benefit of another different person or , the Beneficiaries.

A few other examples of its possibilities:

- It can avoid probate and inheritance taxes;?- Invest in all kinds of securities, real estate, cash, futures, bonds, stocks;?- Hold title of any real or personal property, business interests, insurance policies, home, boat, car;?- Pay support in marriage, to elderly, children, medical or educational expenses... etc.

Most frequent uses:

- To offer flexibility in the distribution of the client's assets following his or her death ;?- The Trust will avoid lengthy and complicated probate court procedures as well as inheritance taxes;?- A trust, specially if operative for several years is less probably to be legally challenged than a will, specially regarding the charge of mental incompetence so often used against will written late in life;?- To keep confidential the beneficial ownership of property or share stock (assets);?- To hold property (asset) for those who cannot hold it for themselves, e.g. minors or bankrupts, or simply for those who wish to have guaranteed 100% anonymity;?- To minimize taxation by means of the client divesting himself of income or assets in favour of the Trustee, who may be located in low or no tax jurisdictions;?- To protect property and other assets from legal and political actions that may be taken against the client by transferring legal ownership to the Trustees (Asset Protection).

In privacy conscious jurisdictions such as Belize, there is no requirement to register the Trust with the government, and the terms of the Trust agreement and the Beneficiaries are protected against disclosure, they are not available in public records either.

The Trustees aren't allowed to disclose information about the Trust unless a local court order requires it. But in this can, you can appoint your own IBC as the Trustee, thus full controlling this feature.

PRIVACY OF THE SETTLOR ?The main advantage of non public registration is that privacy of the Settlor is 100% protected, so the Trust's activities and the identity of the Beneficiaries are 100% secure.

Since the Trust is a Belize Trust, it imposes no tax of any kind on the Settlor, the Beneficiaries or in the income or capital gains earned by the Trust.

Furthermore, there is no requirement for the Trustee to file Trust accounts with the local tax authority thus further preserving the confidentiality of the Trust's activities.

Depending upon the residence for tax purposes of the Settlor and the Beneficiaries, it is often possible to make distributions of capital or income from the Trust completely free of tax. In this matter, many reporting requirements are either eliminated or vested in the Trustees.

Our Trusts are specially designed Trusts that can effectively protect the Settlor's assets from attack by erstwhile creditors, thereby preserving the Settlor's assets for the enjoyment of the Settlor and his or her selected Beneficiaries.

The Trustee of a Belizean Trust can be any person that is of the legal age who under the laws of Belize has the capacity to own and transfer property can be a Trustee. A Belize IBC cannot be a Trustee of a Belize Trust.

The documents that comprise the Trust are as follows; Two US Dollars are all that is required to bring the trust into existence and this is enclosed in the fee of / EUR650.00 / $975.00 / GBP595.00 which is payable to form the Trust.

TRUST DEED ?Deed of Transfer – When you transfer items to the trust or you purchase items in the name of the trust you must list them on a Deed of Transfer; also if you remove items from the Trust you must also list them on the Deed of Transfer and a copy of each must be sent to the Trustee.?Letter of Wishes – This is used to instruct the Trustee as to distribution of the Trust. You may submit Letters of Wishes any time you feel that it is necessary to make changes or submit a request.

Minutes of Meeting appointing the General Trust Manager?Power of Attorney to conduct the day to day of Trust.

THE BENEFICIARIES PROTECTION ?When forming a Trust in Belize, we do not always include the Beneficiaries in the Trust Deed and you can state who you wish to be the Beneficiaries at any time. You simply submit it in the Letter of Wishes. As a general rule we request the names of the Beneficiaries at the time of formation but the option is there to keep these confidential even from ourselves.

TRUST NAME ?The name of a Trust in Belize is unrestricted.