How To Launch an Initial Coin Offering (“ICO”) Offshore

Are you looking to launch a new form of Cryptocurrency? 

 

If so you’ll be pleased to know that such an endeavor lends itself well to an “Offshore” Corporate Structuring Plan. 

 

Cryptocurrency/coin is in effect a product. As A creator of same you will manufacture (or oversee manufacture of) the product and then offer it for sale in the market place. 

 

At the source of the product is a piece of Intellectual Property. Typically in such situations a twin Company structure is conceived ie a Trading Company (“TC”) + an IP Company (“IPC”). See below which explains how/why that works. 

 

Then, depending (largely) on where you live and how much privacy you require, you would probably want to set up a tax free Offshore Trust or Private Foundation to hold your shares in the TC/IPC as/if applicable. 

 

How and Why To Set Up An Offshore IP Company 

 

Intellectual property (“IP”) is a creation of the mind and includes things like inventions, literary and artistic works, designs and symbols, software code, names and images used in business. 

 

IP is commonly protected in law by way of patents, copyright and trademarks which enable the person who came up with the idea to securely earn recognition or financial benefit from whatever it is he/she has invented or created. 

 

An Offshore IP company is an ideal vehicle for the administration and management of licenses and intellectual properties including computer software, technical know-how, patents, copyrights and trademarks. 

 

Practicalities 

 

So how does it work from a practical perspective? 

 

At core the Offshore IP Company (which is usually set up in a nil or low tax country) is used to divert income from Trading Companies or Businesses trading in developed or high tax countries. 

 

The first step is to transfer ownership of the IP rights to the Offshore Company/Entity. 

 

Once that’s done the Trading Business then enters into a legal agreement (contract) with the IP Company whereby, in return for being allowed to use the IP, the Trading Company agrees to pay the Company royalties or license fees. The income arising from these agreements can then be accumulated offshore in a nil or low tax environment. 

 

Timing is of critical importance – It is clearly preferable to acquire the IP (for example, a patent) at the earliest possible time (e.g. at the patent pending stage) before the IP becomes highly valuable. That way the capital payment for the acquisition of the IP (e.g. patent) can be set at a lower amount i.e. before its true worth has been determined in/by the market. (These capital payments may even be deferred and or staggered by way of an instalment contract such as would enable the IP Company to use subsequent royalty payments to fund the cost of the IP). 

 

If a deal is struck for the Offshore IP Company to buy the IP before the IP gives rise to a product or service which is offered/advertised in the market the IP might even be transferred for nominal consideration enabling the IP inventor/creator to transfer patent, copyright or trademarks in favour of the low/nil tax company before the IP suffers significant appreciation in value. 

 

Businesses Who Pay Royalties or License Fees for the use of IP 

 

Once it has acquired the Property the Offshore IP Company can then issue (IP) sub-licenses or exploitation rights to appropriate third party structures. 

 

For example, a majority of software companies license their users through companies which are established in an offshore jurisdiction, or through a firm, which is not established in a classical offshore jurisdiction, but is owned or controlled by such a firm. 

 

Typical examples of businesses that might pay license fees to a nil/low tax Offshore Company include:

 

- Software companies

- Companies doing business in information technologies

- License and copyrights to books, articles, music, films, etc.

- Users of Franchise operating systems

- Trademark product (e.g. Clothes/Consumer Goods/Accessories etc. Brand) manufacturers and or retailers 

 

In some circumstances the royalties may be subject to withholding tax at source, however, the interposing of a second company in another jurisdiction may reduce the rate of tax withheld at source (a carefully selected jurisdiction can withhold taxes on royalty payments with the commercial application of double tax treaties). 

 

Structuring Options 

 

Another option, whilst you are still in the process of creating a new piece of intellectual property, is to involve or engage an offshore (nil tax) company as a foreign partner or financial sponsor. Participation in development at this early stage would entitle it to register as the owner or co-owner of the property. 

 

If you involve an offshore company later, you have to sell or assign the title to the property to the offshore company, and these kind of transactions requires at the least that a fair market price deal be apparent as if no associated parties were involved (+ the transfer may involve the incurring of some CGT on the part of the inventor/creator of the IP). 

 

Benefits of an Offshore IP Company 

 

There are numerous benefits that an IP holding company can deliver including: 

 

  • By placing your IP in one entity you are able to streamline the internal processes for inter-group licensing Cross-jurisdictional tax issues become simpler as you will be regularly licensing IP between the same jurisdictions
  • You can justify staffing that entity with people who have the skills to manage the same so protecting valuable assets of the company further, simplifying the licensing process
  • Assets can be valued due to the income stream that accrues for the benefit of the IP holding company
  • The value of the shares in the entity can be included into the accounts which will benefit the shareholders of the holding company
  • You can split your income streams in two enabling you to sell one chunk of your business first up (i.e. the operational business) whilst retaining the other (i.e. IP) arm of the business which would entitle you to receive passive income If your business or trading company ever gets sued and the IP is owned by a 2nd (e.g. Offshore) Company the most precious asset of your business can/will not be lost.
  • You get to retain ownership of your IP in a highly private environment where no one knows what you own or how much the IP is worth. (There have been many documented cases of inventors and artists who rise suddenly to fame only to lose their fortune just as quickly via a law suit filed by a disgruntled gold digging ex-lover or confidante… The chances of that happening if your IP is owned by a privacy haven company are GREATLY reduced)
  • You should be able to significantly, if not dramatically, reduce the tax that your operating/trading company would otherwise have to pay

 

Would you like to know more? Then please Contact Us: 

 

www.offshoreincorporate.com 

 

info@offshorecompaniesinternational.com  

 

ocil@protonmail.com  

 

oci@tutanota.com 

 

oci@safe-mail.net  

 

ociceo@hushmail.com

 

 

 

How To Avoid Automatic Exchange of Information by Changing Residency

Much has been speculated about the possible impact on financial privacy of the OECD’s MCAA driven Automatic Exchange of Information program (also known as CRS). Smart pundits are beginning to pick up on the fact that MCAA/CRS is unlikely to have anywhere near the impact of what the OECD claims. We stumbled across this article recently in the Tax Justice Network website which highlights but some of the weaknesses of the High Tax Countries Cartel’s latest faux pas:

 

The OECD’s Common Reporting Standards (CRS) is the big game in town for curbing cross-border financial transparency. As we’ve often noted, it is a good project, with global reach, but with loopholes.

 

One of the biggest of these loopholes, perhaps — after Loophole USA — is the problem of ‘fake residency’, where countries allow wealthy people from elsewhere to “buy” their way into being residents of that jurisdiction, perhaps in exchange for their investing a certain amount there, or paying a flat fee.

 

How does this enable people to escape the CRS?

 

Very simply: the CRS collects information about the beneficial owners of assets, then transmits that information to the owner’s place of residence. If the residence is fake, then the CRS system will require relevant agencies to collect and transmit the relevant beneficial ownership information to Dominica, say, and Dominica will ignore it, and not tax it either. End of story. The information trail goes cold. Banks, which are a core part of the CRS project, willingly collude in this monkey business.

 

For most of these fake residency schemes, there is a requirement to hand over relatively serious cash. Dominica, with only 70,000 residents, charges $100,000 for individual fake residency, and they only need a relatively small number of applicants to receive revenues that are meaningful for its 70,000 odd residents, many of whom are quite poor fisherfolk and so on. (No matter that the scheme may be cheating the citizens of other developing countries out of tens of billions: that’s not their concern.)

 

All sorts of places are jumping on this bandwagon. Following the recent decision of St Lucia to dive in, there are now five such places in the Caribbean alone, including St. Kitts and Nevis, Antigua and Barbuda, Grenada and Dominica.

 

Of course, this is a recipe for a race to the bottom. The next jurisdiction will offer residency for $75,000, and then it’ll be 50,000.

 

Well, in fact, the race already appears to be scraping the bottom. And it’s that fast-growing purveyor of offshore sleaze, Dubai. Take a look at this.

 

In short, you can obtain residence visas through three main avenues.

 

First, buy real estate in one of the United Arab Emirates, worth over a million Dirhams.

Second, get an employment contract there.

Third – and this is the super-sleazy one…

Incorporation of your own company in the United Arab Emirates. This is the most convenient and efficient option for obtaining business visas in the UAE. It takes only a few weeks to obtain visa and the expenses incurred are relatively low. Moreover, it is not necessary for a company to perform real activity – its business may be purely formal.
. . .

 

within a few days you are issued a certificate of incorporation of onshore company. Thereupon you and your family members receive residence permit in the UAE.”

 

The other thing the Article failed to pick up on is that Information Exchange will only effect passive investment Companies. If your company can be characterized as a Trading Operation there will be no information exchange. 

 

The other obvious things you can do to avoid the risk of Information Exchange are:

(a)  Open a bank account for your Company in  a country which has not signed the MCAA (We have solutions in that regard); &

(b)  Set up a Seychelles Foundation to hold the shares of your Offshore Company (Because section 71 of the Seychelles Foundations Act deems a Seychelles Foundation to be both the legal AND beneficial owner of any asset it holds).

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com