Offshore Banking & How To Remain Private

It may be possible to open a Corporate Offshore Bank Account without your name appearing in the bank records as the beneficial owner of the Account/Company. 

 

How/why this can happen is due to the unique features of the Seychelles Foundations Law (you can view a copy of the Act via this link: http://documents.ocra.com/information%20for%20clients/laws/seychelles/Foundations_Act_2009.pdf )

 

Allow me to explain:

 

When you set up a Private Interest Foundation (“PIF”) in an Order Form your Service Provider will ask you to nominate beneficiaries as/if applicable.

 

Persons who are to receive a benefit from the PIF are called Beneficiaries.

 

There are essentially three ways that you can approach the issue of who to name as Beneficiaries (and when). The first (more traditional) method is to clearly set out in the Order Form the names of the persons (which may include you and eg your partner/children) who are to ultimately benefit from the PIF. Some people feel more comfortable if they can see, from the outset, their names appearing as beneficiaries. Note: in this instance you would need to list the parties which are to be the beneficiaries of the foundation either by name or by reference to another party (i.e. the children of XYZ).

 

Discretionary or Potential Beneficiaries (& Purpose Foundations)

 

The second, more creative approach is to set up a Discretionary Foundation and to maximize the “Discretionary” nature of the structure to avoid any person’s names appearing anywhere eg in the Regulations or Order form.

 

One of the key features of Discretionary Foundations is that the Council/lor retains the power to add or substitute further beneficiaries after the PIF has been formed. What you can do in this instance is nominate (in the section of the Form asking for details as to beneficiaries) an internationally recognized charity such as Oxfam or Unicef or The Red Cross to be the primary beneficiary from the outset. (Usually  the order form also gives you the option of being named as a beneficiary after the Foundation is formed and original beneficiaries declared). Note: The Bank will never see the order form.

 

If you are setting up a Seychelles Foundation this may not really be necessary however as under the Seychelles law there is no deemed entitlement for beneficiaries. Hence if you nominate yourself/your spouse/family members as beneficiaries it should not give rise to tax consequences onshore (ie unless or until the Foundation actually pays you/the beneficiaries a Distribution).

 

The 3rd option is the Foundation could be established as a Purpose Foundation in which case no beneficiary need even be named {see Seychelles Foundations Act Section 3.2 & 4(2)(e)}!

 

Banks

 

When applying for a Bank Account for a Company and the sole shareholder is a Foundation the bottom line is, (and even if individuals are named as beneficiaries in the Regulations):

 

  1. The beneficiaries have no legal or beneficial interest in property owned by the Foundation (unless or until such time as that property is transferred to the them – see section 71 of the Seychelles Foundations Act).
  2. The Foundation is a legal entity in its own right not a mere Trustee (See section 23 of the said Act)
  3. The Councillor of the Foundation owes no Fiduciary duty to the beneficiaries (see section 63 of the said Act)

 

As such there is no “beneficial owner” of the Foundation. The beneficial owner of any property/asset owned or held by the Foundation is the Foundation itself.

 

Obviously you would need to disclose to the bank the name of (and provide DD/KYC re) the signatory (which doesn’t have to be you). You will also have to disclose to the bank the names and DD/KYC re the Company Director, Foundation Founder and Foundation Councillor (all of which are usually nominee entities supplied/owned/managed by your Offshore Service Provider).

 

So in any/every Bank’s Corporate Account Application – where it asks for Ultimate Beneficial Owner Information (if it’s a Seychelles Foundation) this can either be left blank or have the name of the Foundation inserted.

 

Even some top level banks accept this legal argument.

 

Bottom line is it is possible to create an International Corporate Structure where you don’t have to disclose to the Bank the “beneficial owner’s” details.

 

For more information on Foundations please click on these links:

http://offshoreincorporate.com/private-interest-foundations/

http://offshoreincorporate.com/seychelles-foundations/

 

India & Seychelles Sign Tax Information Exchange Agreement

According to an announcement by the Indian Government’s information bureau, the Indian Cabinet has approved the signing of a tax information exchange agreement between India and Seychelles.

 

The agreement will enable the Competent Authorities of India and Seychelles to provide assistance through exchange of information that is foreseeably relevant to the administration and enforcement of the domestic laws of two countries concerning taxes covered by the agreement.

 

Information received under the agreement is to be treated as confidential and may be disclosed only to persons or authorities (including courts or administrative bodies) concerned with assessment, collection, enforcement, prosecution, or determination of appeals, in relation to taxes covered under the agreement. Information may be disclosed to any other person or entity or authority or jurisdiction with the prior written consent of the country sending the information.

 

The agreement also provides for a Mutual Agreement Procedure for resolving any difference or for agreeing on procedures under the agreement.

 

The agreement will enter into force on the date of notification of completion of procedures required by the respective laws of the two countries.

 

India has signed similar bilateral agreements for Exchange of Tax Information with Argentina, Bahamas, Bahrain, Belize, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Liberia, Liechtenstein, Macao, Monaco and San Marino.

 

For Indian citizens/tax residents wanting to do tax effective business Internationally (and/or for whom privacy is a concern) the following Company jurisdictions should be considered (and if you have a Seychelles Company presently you would be wise to forthwith migrate/redomicile it to one of the below referred jurisdictions):

 

 

 

Samoan International Companies

 

Samoa (formerly Western Samoa) is a group of lush tropical islands in the middle of the South Pacific, located approximately halfway between Hawaii and Sydney Australia, is 2,842 sq. km in size and with a population of circa 215,000. The legal system of Samoa is based on English Common Law and includes a sizeble body of New Zealand statute law, on account of New Zealand having administrative power over Samoa prior to independence. Whilst local Polynesian is the predominant first tongue English is the language of Government and Commerce.

 

The Samoan International Companies Act passed in 1987 provides for the incorporation of Samoa international companies, the redomiciliation to Samoa of existing companies, and for the incorporation of U.S. style limited life companies. With a solid Corporate Law, a history of political stability since independence and a sophisticated international satellite telecommunication system Samoa is a popular location for incorporation of tax free International Business Companies.

 

Feature and Benefits of Samoan International Companies Include:

 

 

  • Nil Corporation or Business Tax is levied
  • Chinese character names may be registered.
  • Chinese character memorandum and articles of association may be filed.
  • An international company is not required to have a share capital (“Creditor Controlled” companies).
  • There is no minimum share capital requirement or capital duty on share capital.
  • Fully paid registered shares may be issued as bearer shares transferable by delivery.
  • Fully paid registered shares or bearer shares may be exchanged for share warrants to bearer, also transferable by delivery.
  • Redemption of shares and reductions of capital can be effected simply and quickly and without the necessity of a court order.
  • A company may finance the purchase of its own shares.
  • A company may repurchase and cancel its own shares.
  • Company registration may be for periods of one, five, ten or twenty years in advance, with discounted fees (annual registration renewals are due on 30 November).
  • In the absence of a public offer, shareholders can resolve not to have the accounts audited and not to hold annual general meetings.
  • Annual returns do not have to be filed.
  • Only one director and one shareholder is required.
  • Particulars of directors and secretaries do not have to be filed.
  • Accounts do not have to be filed.
  • Provision can be made for alteration of the memorandum and articles of association by directors’ resolution.
  • Meetings may be held by telephone, closed circuit television or other audio or audio-visual means.
  • Annual meetings are not required, but if held, need not be held in Samoa.
  • Directors’ and shareholders’ resolutions may be passed by circulating written resolutions (including facsimile copies) for signing.
  • An international company need not have directors resident in Samoa.
  • The use of a common seal is optional for execution of documents.
  • The Companies office is subject to strict confidentiality provisions.
  • Companies can be redomiciled into or out of Samoa.
  • Companies can be liquidated. There is also a straight forward striking-off procedure.
  • Speedy Incorporation – 2 to 3 days max
  • Has not signed Tax Information Exchange agreements with either the US or the UK (and only with no EU members save for The Netherlands & Ireland)

 

Do You Have To Pay Money To Your Offshore Foundation?

In most cases an Offshore Private Foundation is set up to hold the shares of an Offshore Trading Company or Offshore Investment Company. 

In short you don’t need to pay your nil tax Offshore Company’s profits to the Offshore Private Foundation. In the usual model all the money revolves in and through the Tax Haven Offshore Company (see below re how to access that money).

 

Why is that?

 

The zero tax Offshore Company does the buying and selling. The Private Foundation is completely passive; all it does is it holds the shares of the Offshore Company.

 

In the usual model the Company doesn’t pay any dividends to the Foundation unless or until you are ready to wind up the business and retire.

 

And what the really clever clients do at that point is they shift tax residence for a year or two to a country which does not have Capital Gains Tax (nor, ideally, income tax) at which time the tax free Offshore Company pays all remaining capital to the tax free Offshore Private Foundation as a dividend; The Foundation then pays Distributions to you/your family. If you choose the right place to live for a year or two those distributions could be received tax free…

 

You don’t have to live in the “tax haven” forever. After a year or two you could decide, for whatever reason (eg you can’t handle the climate, you have family back home that needs you, an exciting business opportunity back home is calling you), that the expat life is not for you and decide to return home.

 

And what better way to return home than with a fat (tax free) check in your back pocket?

 

Note for this to work you’ll need to take certain steps before you expatriate to achieve non-tax resident status in your home state. Usually this entails you being seen to have cut your ties with your home country. A specialist Tax Lawyer in your country of residence should be engaged to provide you with the necessary advice of how to achieve non tax resident status well in advance of your planned expatriation.

 

How to Bring Offshore Money Onshore

 

Often I’m asked how can I access money earned by my Tax Free Offshore Company?

 

There are 5 ways to bring home money from a nil tax Offshore/International Business Company:

 

1. Set yourself up as an arms’ length consultant and have the IBC pay you consulting fees periodically. This means you should only have to pay tax on what you bring into your home country (and even that you should be able to minimise as a lot of what otherwise-might-be personal expenses could be written off as business costs, eg home office, utilities, car, phone, electrical/office equipment, stationery, computers, travel etc etc etc). The rest of the IBC’s income can remain offshore and be (re)invested offshore in tax friendly investments. Say your target capital base is 3 million Euro and every year you can leave at least half the IBC’s income offshore. Because you’re not paying tax yearly on all the IBCs income instead of taking 20 years to accumulate 3 million Euro, with the power of compounding, you could accumulate 3 million within 5 to 7 years. This is what my/our smarter clients do ie they pay a little bit of tax at home each year on their overseas earnings but most of their income is kept offshore and reinvested offshore.

 

2. Bring back the money as a loan. Yes this can be done but great attention to detail will be required particularly with respect to lending parties, loan terms and documentation.

 

3. Use an anonymous debit card and withdraw cash from automated teller machines. This can still work in some places though it should be noted that some of the bigger countries now have the ability to trace and connect one to such withdrawals.

 

4. Have your IBC form and fund a subsidiary ie 2nd tax free Offshore Company and then have that 2nd Offshore Company buy any substantial assets you’d like to have onshore (eg cars, real estate, shares, general investments etc). Yes in theory you could have your IBC buy these things but, given most likely there will be a Consultancy Agreement in place between you and the IBC (and payments going from the IBC to you which will be visible to your local tax authorities) the smarter thing to do would be to have a 2nd (seemingly unrelated) IBC buy these items for you.

 

5. Another option is to take the long hold view. What this entails is letting your capital base build over a period of years; Then, when you get to the stage where you are ready to close down your Offshore business, (or you are ready to retire) you can do one of two things: Either:

 

(a) Expatriate your home country and become “non-resident for tax purposes”, shift to a country which has no income tax and/or CGT (eg Panama, Seychelles, Monaco, etc etc etc) and draw down the capital from your offshore entity (and bank the money tax free); or

 

(b) Expatriate your home country, become “non-resident for tax purposes”, and become a PT ie a Perpetual Traveller. How this can work is you spend say 4-5 months a years in one country, 4-5 months a year in another country and the rest of your time travelling. This way, assuming you are not seen to have substantial ties with any one country, you should not be considered as tax resident in any one country. Then you simply draw down the capital from your offshore entity (and bank the money tax free).

 

Note unless you live in a country that does not have Controlled Foreign Corporation laws (and/or unless or are structured in a tax effective/compliant manner) you may still be required to declare and pay tax at home on your IBC’s earnings.

 

Local laws can have an impact. Hence you should seek local legal +tax +financial advice before committing to do anything contemplated by the above.

 

 

Where To Live Offshore Tax Free?

I’m often asked where can I live Offshore and pay the least amount of taxes?

 

If you’re earning good profits from your investments there’s no real reason why you need to stay where you are. In the internet age, in most instances, you could just as easily trade from overseas as you could from your current place of residence.

 

One of the key questions though is where to go Offshore? There’s no point in ‘jumping out of the frying pan and into the fire’. You need to ensure that wherever you move to overseas the net result will be a reduction in the amount of tax you pay each year across the board. If you want to avoid tax altogether on your income and/or capital gains as applicable you essentially have 4 choices:

 

  • Nil tax havens
  • Countries with no income tax
  • Foreign Source exempt havens
  • Countries with no Capital Gains Tax (“CGT”)

 

Nil Tax Havens


These are simply countries that do not have any of the three main direct taxes:
• No income tax or corporation tax
• No capital gains tax, and
• No inheritance tax

 

Many of the nil tax havens you’ve probably heard of or read about in novels. You may even have holidayed in some of them. They include:
• The Cayman Islands
• St Kitts and Nevis
• Dubai
• Monaco
• The Bahamas
• Bermuda
• Vanuatu
• The Turks & Caicos Islands
• Anguilla

 

Although there are no taxes in these Offshore Jurisdictions, the tax haven governments still need to generate some revenue to provide public services. They may therefore impose small fees for Offshore Company Incorporation documents or annual registration fees for companies. However, these charges are fixed and usually small.

 

If you’re looking at living in one of these Offshore Jurisdictions and generating profits from financial investing or trading most of these charges won’t apply and you should be able to live with little state involvement in your affairs. The only tax charges that would then affect you would be import duties or local sales taxes.

 

Countries With No Income Tax

 

The below mentioned countries generally speaking do not levy a tax on income regardless of where the income is/was sourced:

  • UAE
  • Qatar
  • Oman
  • Kuwait
  • Cayman Islands
  • Bahrain
  • Bermuda
  • The Bahamas
  • Saudi Arabia
  • Brunei Darussalam

 

NOTE:

 

Re UAE: While expatriate employees don’t pay for social security in the Arab country, U.A.E. citizens must make monthly contributions of 5 percent of their total earnings for social security. Employers of citizens also have to make monthly contributions of 12.5 to 15 percent of the worker’s base salary for social security and pensions.

 

Re Qatar: Qatar nationals have to pay 5 percent of their income for social security benefits, while employers contribute 10 percent for the fund.

 

Re Oman: Oman citizens must contribute 6.5 percent of their monthly salary for social security benefits.

 

Re Kuwait: Kuwaiti nationals must contribute 7.5 percent of their salaries for social security benefits; their employers make an 11 percent contribution.

 

Re Bahrain: For social security benefits, Bahrain citizens contribute 7 percent of their total income to the government, while expatriates pay 1 percent. Employers must also make a contribution of 12 percent of a citizen’s income for social insurance, and pay 3 percent for expatriate employees.

 

Re Bermuda:  While there is no income tax, Bermudan workers may be asked by employers to contribute just under half of a 14 percent payroll tax

 

Re Saudi Arabia:  No tax on salaries applies in SA but self-employed expats are taxed at the rate of 20% (Saudi employees also pay 9% social security levy)

 

Re: Brunei Darussalam: In BD employees must pay 5% to a Social Security Fund

 

Foreign Source Exempt Havens


These countries do levy taxes and sometimes they can be pretty high. However, what makes them tax havens is the fact that they only tax you on locally derived income. In other words, if all your income is derived outside the tax haven you will not pay any tax.

 

Good examples of foreign source exempt tax havens are:
• Panama
• Costa Rica
• Hong Kong
• Singapore

 

Many of these also don’t have any CGT. The net result is that share or financial investors could certainly live in one of these countries to avoid tax on an overseas investment portfolio.

 

If you are actively trading from the country there is a risk that the local tax authorities could tax the income. In practice though many financial traders, providing they are trading on international markets, would not be subject to any local taxes.

 

Countries With No Capital Gains Tax

 

A Capital Gain is a profit made on the sale/disposal of a Capital Asset (eg a piece of real estate, or a business or a parcel of shares).

 

Countries who do not levy CGT Include:

 

  • Belgium
  • Malaysia
  • New Zealand
  • Belize
  • Hong Kong
  • Malta (no CGT on gains made outside of Malta)
  • Seychelles
  • Belize
  • Puerto Rico
  • Bulgaria
  • Barbados
  • Isle of Man
  • Jamaica
  • Sierra Leone
  • Singapore
  • Sri Lanka
  • Taiwan
  • Thailand
  • Turkey

 

Note re Singapore: For those who trade professionally buying and selling securities frequently to obtain an income for living (ie professional “traders”) these trading profits will be considered income and subject to personal income tax rates.

 

Note re Taiwan: No tax is collected from individual investors whose annual transactions are below T$1 billion ($33 million). Transactions above T$1 billion will be charged with a 0.1 percent tax.

 

Note re Thailand: There is no separate capital gains tax in Thailand. If a capital gain arises outside of Thailand it is not taxable. All earned income in Thailand from capital gains is taxed the same as regular income. However, if an individual earns a capital gain from buying and selling a security in the Stock Exchange of Thailand, it is exempted from personal income tax.

 

Note re Turkey: The Capital gains tax rate on share certificates for residents is 0% as of 2013 for two years of holding period

 

How To Trade 3rd Party Funds Using a Power of Attorney

A Power of Attorney is a formal document giving another person the authority to make legally binding decisions on your behalf.

 

There are two types of power of attorney a general power of attorney and enduring power of attorney.

 

Powers of Attorney are commonly used by Traders (eg Forex Traders) to trade funds for a 3rd party.

 

How it works is:

 

(a)   In the case of forex etc trading an account is opened in the name of the 3rd party investor (“the Account Owner”).

 

(b)   The Trader sets up a tax free Offshore Company (“IBC”)

 

(c)    The Account Owner (ie 3rd party investor referred to in a PoA as “the Principal”) signs a Power of Attorney with the Trader’s IBC which appoints at law the Trader’s IBC as the Account Owner’s Authorized Trader and attorney-in-fact (the “Agent”).

 

The Trader/Agent is then given full power and authority on behalf of the Principal to buy, sell (including short sales) and trade in a range of things as specified in the PoA/Authority document including for example:

  • Currencies
  • Stocks
  • Mutual funds
  • Index funds and securities
  • Bonds
  • Options (including uncovered option writing)
  • Physical commodities
  • Financial instruments
  • Commodity futures contracts
  • Financial futures contracts
  • Equities and single-stock futures contracts
  • Foreign commodities
  • Foreign commodity futures contracts
  • Forward contracts
  • Contracts in unregulated foreign exchange markets, and options and other derivatives on each of the foregoing, on margin or otherwise.

 

In many IBC jurisdictions no form of special license will be required to form a Company of this kind.

 

What you will need here is:

 

  1. To incorporate a standard (eg Seychelles/Belize/Nevis etc) IBC
  2. To have a tailored agreement drawn up that will be signed by the 3rd party investor and the Trader’s IBC
  3. A tailored Power of attorney enabling the Trader’s IBC to trade funds via the Interactive Brokerage
  4. An Offshore Corporate Bank Account for the Trader’s IBC’s performance fees to be paid into

 

1.      Incorporate a standard IBC

 

If your IBC is seen to be managed and controlled from onshore (ie where the Trader lives) it could be taxed onshore. Hence if you are the Trader, you will want the IBC to be seen to be managed and controlled from Offshore. How that can be achieved is via including a Nominee Director/Shareholder as part of the Corporate structure.

 

For detailed information on how that can work for you please read these pages:

http://offshoreincorporate.com/faq/should-i-engage-nominees-or-should-i-direct-and-hold-the-shares-in-my-offshore-company/

http://offshoreincorporate.com/faq/how-can-i-protect-my-underlying-ownership-of-my-offshore-company-where-a-nominee-is-engaged-to-act-as-director-or-shareholder/

 

How it will work practically speaking is the Trader’s IBC will trade the 3rd Party Investor’s funds (and be paid its performance fees) via the Brokerage account.  If/where you are the Trader (and assuming you’ve included Nominees as part of your Corporate structure), so that you can effectively steer the Company, you would either be given a Power of Attorney or be appointed as a Consultant of your Trader IBC. For detailed information on the pros and cons of each option please visit this page: http://offshoreincorporate.com/faq/should-i-select-a-general-power-of-attorney-or-a-consultancy-agreement/

 

Ideally you (the Trader) would be appointed as a Consultant or as an arms’ length adviser to the IBC Director with certain areas of responsibility. In such a case you might be paid a commission (eg percentage of business or sales introduced) or a retainer or a combination of the two. As part of your brief you should also be given signing power on a bank account reporting/answerable to the Director. However that relationship is structured for legal reasons, it would need to be seen to be commercially realistic.

 

The income you generate from this would be paid to you (or your local company) which I imagine would be assessable income at home (but against which your CPA should be able to deduct a significant number of expenses eg home office, car, equipment, travel etc which could eliminate most onshore tax). The remainder of the profit could be held (and/or reinvested) offshore potentially tax free.

 

2.      A Tailored Agreement Between the Investors & Your IBC

 

What is envisioned here is that a tailored legal agreement would be created that will in essence (a) give your Trader IBC the authority to trade funds on behalf of the investor and (b) entitle your IBC to an agreed performance fee. Usually this agreement would authorise the Broker to pay your IBC those performance fees directly.

 

3.      A Tailored Power of Attorney Enabling You To Trade Funds Via the Brokerage

 

From experience the brokerage, before giving you the power to place trades on behalf of a 3rd party Investor, will need to see that you have the power at law to open and trade an account for and on behalf of the investor. To meet this requirement you will need to produce a tailor drafted Power of Attorney signed by the Principal (ie the 3rd party investor)

 

 

4.      An Offshore Corporate Bank Account for your performance fees to be paid into 

 

Of all the things you as a Trader will need this will be the most challenging to deliver. Every week we assist client IBCs to open accounts at “name” banks including HSBC Hong Kong, Barclays Bank Seychelles, Barclays Bank Mauritius, OCBC Bank Singapore etc.

 

For most Traders working under a PoA you will need to be very careful about what information you provide to the bank as regards the IBC’s proposed business activities. Most banks (especially the bigger/name banks) are VERY conservative and EXTREMELY risk averse. If you come straight out and tell them that your IBC is going to trade 3rd party funds in Broker’s accounts under Power of Attorney they will almost certainly ask you to show firstly that the Company has a Broker’s License or a Fund Manager’s license or a Financial Adviser’s license in the country of incorporation. Hence you will need to supply the bank with a carefully tailored business plan to maximise the chances of the account being opened.

 

Another consideration is banking privacy. If you live in a country which has agreed to be part of the OECD Bank Account Info Sharing Initiative (See below for details of what that is) to minimise the chances of local authorities being made aware of your relationship to or involvement with the Trader IBC then ideally you will want to open an account at a Bank in a country which has NOT agreed to be part of this initiative.

 

As always local laws can have an impact. Hence you should seek local legal/tax/financial advice before committing to embark on an endeavour as envisioned by the above.

 

 

What is the OECD Account Info Sharing Initiative?

 

In 2014 a number of countries committed in principle to the OECD Bank Account info sharing initiative. Under the initiative, a range of OECD and other countries have agreed to pass new domestic laws that will allow them to collect information on any foreign bank account holder (or any non-local underlying beneficial owner of a Corporate bank account holding entity) and then automatically exchange that information with other participating countries. The list of countries who have committed in principle to the initiative include:

Albania

Anguilla

Argentina

Aruba

Australia

Austria

Belgium

Bermuda

BVI

Canada

Cayman Islands

Chile

Colombia

Costa Rica

Curacao

Cyprus

Czech Republic

Denmark

Estonia

Faroe Islands

Finland

France

Germany

Ghana

Gibraltar

Greece

Guernsey

Hungary

Iceland

India

Indonesia

Ireland

Isle of Man

Italy

Jersey

Korea

Latvia

Liechtenstein

Lithuania

Luxembourg

Malta

Mauritius

Mexico

Montserrat

The Netherlands

New Zealand

Norway

Poland

Portugal

Romania

San Marino

Seychelles

The Slovak Republic

Slovenia

South Africa

Spain

Sweden

Switzerland

Turkey

Turks & Caicos Islands

The United Kingdom

The United States

 

If you want to avoid your interest in an Offshore account being reported to local authorities you have 2 choices:

 

(a)   Open an account in a country which is not in the above list; and/or

(b)   Set up a Seychelles Private Interest Foundation to hold the shares of the Offshore Company account holder (as this shifts legal and beneficial ownership of the Company to the Foundation by virtue of section 71 of the Seychelles Foundations Act)

 

How to Close Down an IBC

I’m often asked How can I close or shut down my IBC? 

 

Whilst you could, if legal circumstances require it, go down the path of a Formal Liquidation or Winding Up Application (eg if you are owed money by the Company and want to claim priority of payment over other creditors – you should seek legal and/or accounting advice to determine whether it’s in your best interests to proceed that way) the most simple way to bring an IBC to a close is to not pay the annual renewal fees for the company in which case its registration will lapse. It depends on the jurisdiction but generally speaking come 31 December of the current year it will be struck from the register (though it can be restored, depending on the jurisdiction, up to 10 years subsequent to that date). 

 

A formal winding up or liquidation may give you priority of payment if you are an unsecured creditor of the company and there are creditors pressing, no secured creditors, and not enough funds to pay all the creditors.

 

To dissolve an IBC it is necessary to issue a Resolution of Dissolution signed by the director(s) of the company. The procedure of dissolution usually takes from 1.5 to 2 months provided that the company does not have any assets which must be attributed to the shareholders, and no debt obligations or other liabilities.

 

Thus if an IBC does not have any assets or liabilities, it will have to submit:

 

1. Bank statements
2. A Declaration signed by the directors of the company and confirming that the company does not have any assets or liabilities
3. Resolution of Dissolution signed by the director(s) of the company.

 

In the case when the company had business transactions and maintained financial records, it will have to provide financial statements, returns, and other documents confirming the financial position of the company at the time of dissolution.

 

The above documents must be sent to the Company’s Registered Agent, who will prepare Articles of Dissolution, publish a note in a local newspaper and then register the winding up with the authorities. After that the Registrar will issue a Certificate of Dissolution.

 

Lawyers would have to be briefed at a similar cost to what you would pay in the UK etc for the same legal procedure. Estimated cost is circa $US1,500 -2,000.

 

Note also the company should be in good standing to apply for liquidation and any unpaid annual renewal fees will need to be met before the procedure can begin. 

 

To close the IBC’s bank account usually entails the Company Manager and or Account Signatory advising the Bank of that request in a written communication to the bank + details of where you want excess funds to go.