Why Use Nominees for Offshore ICOs?

Are you looking to launch an ICO via Incorporation of an Offshore Company?

 

If so there are at least two reasons why you would want to consider deploying a Nominee Shareholder and or Nominee Director as part of your Corporate Structure:

 

1. Tax Planning Considerations

 

Generally speaking an Offshore Company which is seen to be managed and controlled from Onshore can be taxed onshore.

 

Hence when setting up an Offshore Company, if you want to minimise the chances of the Company being taxed “onshore”, Management and Control of the Company will need to be, and be seen to be, taking place from Offshore. How that can be achieved is by deploying a Nominee Shareholder and or Nominee Director as part of the Corporate structure.

 

If you are also setting up a Foundation as part of the Corporate structure you will want to have the Foundation founded by a Nominee Founder (which service we provide)  which then assign its rights confidentially to you. Again for tax planning purposes you will want the Foundation to be managed day to day by a nil tax jurisdiction resident Nominee Councillor (which service we also provide).

 

There are a number of features we can and will include to protect your ownership rights (which will prevent the Nominees from running away with your property or money). For more information on that and how the Nominee Services can work for you see our FAQs section and also please click on these links:

 

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 works practically speaking is the company would do the buying and selling, ie it would generate the income. Ideally, you would be appointed as Consultant or as an arms’ length adviser to the Director of the Company with certain areas of responsibility. You might then be paid a commission (e.g. a percentage of business or sales introduced) or a retainer or a combination of the two.

 

As part of your brief you might 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 ie/eg onshore company which, I imagine, would then pay a dividend to you), which would be assessable income at home for you (although a smart Tax Accountant should be able to find a heap of tax deductions/writeoffs to reduce the amount of tax payable on that income eg rent, home office, car, travel, utilities, electricity, phone, internet, furniture, computers/plant & equipment, stationery, professional library, subscriptions etc etc). The remainder of the profit could be held (and/or reinvested) offshore potentially tax free.

 

You could alternatively be given a Power of Attorney. For guidance on which option to choose please click on this link: http://offshoreincorporate.com/faq/should-i-select-a-general-power-of-attorney-or-a-consultancy-agreement/

 

2. Nominees and ICOs

 

In the case of an ICO there are different and additional reasons why you would set up the Company using at least a Nominee Director.

 

The main risk for an ICO promoter is regulatory risk. Simply put if you are offering a Token to investors it could be classified under certain countries laws as a Security.

 

Generally speaking it is illegal to offer a Security to the general public unless (a) it is a registered security and (b) you are a licensed securities dealer.

 

If your Company comes under the Regulator’s microscope and you are the Director of that Company you could be charged with unlawfully offering a security. In certain countries the penalty for this, if you’re found guilty, can be imprisonment.

 

If you want to minimise the chances of this happening, you would be wise to deploy a Nominee Director (and ideally also a Nominee Shareholder) as part of your Corporate Structure (even if you have every intention of paying tax at home on the Company’s entire worldwide income)

 

If you’re concerned about appearance what you could also do (ie where a Nominee Director is deployed) is have yourself appointed by the Company via a Consultancy Agreement and choose your title. Eg In emails or texts or letters etc you could call yourself CEO or Founder or GM or CFO or Client Liaison Manager or whatever sounds best to you (anything but Director)!

 

Local laws can also have an impact. Hence you should seek local legal financial and tax advice before committing to incorporate an Offshore Company as your ICO Launch vehicle.

 

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 Use an Offshore Company To Act As a Commission Agent

Acting as a Commission Agent or Deal Broker is a line of business which lends itself well to an Offshore Corporate Structuring Plan.

 

In this model structure (ie as set out below) it’s assumed that you will be acting as a middleman between a buyer and seller and if the buyer and seller do business you get paid a commission ie typically a percentage of the sale/deal proceeds.

 

To summarise how it would work is:

 

  • You set up a zero tax Offshore Company eg an International Business Company (“IBC”) with a tax haven based Nominee Director
  • You are appointed as the IBC’s Authorised Representative
  • On behalf of the IBC you negotiate terms with the Seller and or Buyer to pay your IBC a Commission if/when the Buyer and Seller do business
  • The Commission Agent/Broker agreement/contract is signed Offshore by the Nominee Director
  • The source of the income is the contract.
  • Because the contract was signed offshore in a nil tax environment there should be no tax payable on income generated by the contract (a) where the Company is incorporated and (b) where you live (assuming you structure and administer the Company in the right way).
  • When you need some living/spending money the IBC pays you a wage, or consulting fees or a commission (eg a percentage of trading profits generated)
  • That living/spending money can be paid to your local bank account (which means it would be assessable income wherever you are tax resident though you should also be able to claim a sizeable amount of allowable deductions eg for home office, car, equipment, insurances, travel, stationary etc etc to reduce the amount of your “taxable” income at home). More sizeable amounts could be accessed by way of loan or a 2nd Offshore Company could be formed to buy your onshore investments
  • If you don’t want the authorities to know how much money you are earning eg by way of wages you could convert your hard currency into Bitcoin and/ or you could use an anonymous ATM or Debit/VISA card to withdraw $ from an Auto Tele Machine (though technically that receipt would be assessable income for local tax purposes)
  • The majority of trading profits would be banked and or reinvested Offshore potentially tax free.

 

Launching an ICO in Malta

The picturesque EU island state of Malta is on the brink of becoming one of the first, if not the first, jurisdiction to offer a clear registration and incorporation scheme for ICO Startups.

 

Back in the noughties Malta showed a penchant for supporting disruptive technology by becoming one of the first jurisdictions to regulate the growing Internet Gaming industry. As things now stand it has grown to become one of the largest and most respected online gambling regulators in the world.

 

Of late it has taken an active interest in recent development in the digital world, and in particular as regards the advent of blockchain technology, ICOs and cryptocurrencies and is becoming a target jurisdiction for startups and businesses working within the crypto-sphere.

 

Most saliently the government of Malta is now making moves to regulate these new industries proposing a legislative framework that will both support the organic growth and development of the sector and protect investors looking to point their hard-earned towards the Cryptospace.

 

The Malta Financial Services Authority (“MFSA) has also released a feedback statement proposing an upcoming array of regulations for collective investment schemes looking to invest in virtual currencies, designed to protect the interests of investors as well as the integrity of the virtual currency market.

 

The Three Acts

 

In February this year, the Maltese Government revealed its intentions to table three draft Acts that would aim to deliver extensive regulation for ICOs, Virtual Currencies (“VCs”), and blockchain technology.

 

At the core of the program the Maltese government’ has announced its intention to create a new Authority which will be known as the Malta Digital Innovation Authority (MDIA). The MDIA will manage the certification of blockchain platforms and cryptocurrencies, and will oversee the operation of ICOs.

 

It is proposed that the MDIA:

 

(a) will function as both a regulator and a watchdog over ICOs and will also operate as a consultative organization in that it will be saddled with promoting government policy and protecting the reputation of the jurisdiction.

(b) will be solely responsible for the registration and certification of Technology Service Providers with respect to the proposed TAS Act

(c) will operate as the National Competent Authority.

(d) will hire inspectors and have the capacity to hand down administrative penalties

 

Regulation of Initial Coin Offerings Act

 

The second Act will cover virtual currencies and will include stringent guidance and regulation guidelines for Initial Coin Offerings and other services related to VCs.

 

The Act is also likely to effect brokers, Cryptocurrency exchanges, wallet providers, investment advisors, market makers, and asset managers that deal with cryptocurrency/s.

 

Certain ICOs will be able to come within the ambit of investment services regulations; consequently the MFSA proposes to roll out a proposed Financial Instruments Test which will determine whether the ICO or cryptocurrency could be considered as a financial instrument as covered by the investment services regulations or whether it will fall under the ambit of the VC Bill.

 

The Financial Instruments Test will apply to persons or companies which are offering ICOs conducted in Malta to determine whether same should fall under the ambit of the relevant Maltese Authority. The test will also impact on individuals who provide services or activities regarding non-classified VCs. It is anticipated that the analysis will provide a badly -needed modicum of legal certainty and clarification regarding the asset in question.

 

The Act will give rise to the first legal framework of its type (in any international jurisdiction) to govern ICOs and will deliver a regulatory framework applicable to service providers.

 

ICOs introducing VCs which do not currently qualify as financial instrument will under the proposed new regime be set transparency requirements including a standardized list of disclosures which must be provided in the whitepaper.

 

Individuals providing such services will be required to meet licensing requirements in addition to complying with ongoing obligations. The MFSA will also have the power to investigate and if necessary, suspend an ICO or the trading of a VC on any exchange or platform.

 

Technology Service Providers Act

 

The second proposed Act in the new raft of legislation will be the Technology Service Providers Act (“TAS Act”).

 

This statute will regulate Technology Service Providers, and will also certify and verify Technology Arrangements provided they feature an administrator which has been registered with the MIDA.

 

Virtual Currencies Act

 

In February 2018 the Maltese Government announced that “The MFSA is proposing that, in order to achieve the objectives of financial regulation, certain VCs and activities pertaining to them would be licensed and regulated under a new legislative framework to be drafted by the MFSA and adopted by the Maltese Parliament, the Malta ‘Virtual Currencies Act’.”

 

Securitized tokens will be regulated under the new regime, and utility tokens will be given more autonomy to conduct business without having to obtain a financial services license from the FMSA. The definitions of both under the proposed Malta law are as follows:

 

“‘Securitised tokens’ are defined as those embedding either underlying assets (akin to commodities) or rights (e.g. quasi-equity rights) and effectively refer to those tokens that qualify as financial instruments.

 

‘Utility tokens’ are further defined as those providing either platform/application utility rights or protocol access rights, without any underlying.”

 

There is no statement as to whether the product must be working prior to the ICO, rather focusing on just the intention of the product itself. This is vitally important, as many ICOs would find it very difficult to create a working prototype without funding.

 

There is also no mention of a token losing its utility status if the company receives funding before the ICO, which is also a serious plus for VC backed tokens.

 

Bi Finance Move to Malta

 

In March 2018 Japanese regulators took issue with giant cryptocurrency exchange Binance for failing to register with their regulators, the FSA. That registration would have caused regulatory scrutiny such as would seriously affect the exchange’s able to offer non-identity verified trading accounts in the international marketplace.

 

By this time Binance had evolved to become the biggest cryptocurrency exchange by volume handling billions of dollars of daily transactions and holding Cryptocurrency for millions in a business that stakeholders did not wish to change. Its popularity hitherto had been dependent on its ease of doing business, which registration in Japan would have seriously curtailed.

 

This led Binance to decide to abandon Japan and relocate…. to Malta! With some pundits predicting that they will employ as many as 200 people in Malta, the news of their planned move was welcomed by none other than the Maltese Prime Minister who publicly welcomed Bifnance to Malta via Twitter.

 

Latest News Out of Malta

 

In a consultation paper published on 13 April (which you can read here: file:///C:/Users/Pat/Downloads/20180413_FITest.pdf ) the Malta Financial Services Authority (FSA) has laid out a proposal for a so-called Financial Instrument Test, which will ultimately become part of the proposed Virtual Financial Asset Act (VFAA).

 

The FSA says the methodology of the test has been arrived at based on feedback from its previous discussion paper, released in November 2017, which for the first time announced the concept.

 

Per the latest release, the test will comprise a three-stage process that will first verify whether a distributed ledger technology (DLT) asset falls under the category of “virtual tokens” – (ie Utility Tokens).The paper states:

 

“Virtual token is a DLT asset which has no utility, value or application outside of the DLT platform on which it was issued and that cannot be exchanged for funds on such platform or with the issuer of such DLT asset.”

 

Tokens falling within this definition will be exempted from the VFAA, according to the FSA.

 

Assets capable of being traded in a secondary market will fall within the scrutiny of the second phase of the test, where various securities definitions set by European financial regulators will be applied, including transferable securities, money market instruments or financial derivatives.

 

Should a token sit within the definition of any of those assets, it would then fall within the reach of the regulatory oversight of the existing Markets in Financial Instruments Directive (MiFID) that is enforced within the European Union financial markets.

 

That said, a negative result in stage two will lead to the third stage of the test, which would see ICO tokens regulated under the proposed VFAA. The FSA said this method will embrace a hybrid framework that adopts both existing EU regulations, as well as a Maltese regs.

 

The Future?

 

The proposed legislative Crypto framework in Malta arrives at a time when the island’s government is looking to embrace blockchain innovation with a well-established legal environment aimed to attract blockchain businesses to the country.

 

The vision is starting to bear fruit:

•          Several notable cryptocurrency exchanges – including now OKEx as well as Binance – have already set up business operations in the country; &

•          Malta’s first digital asset hedge fund has grown into a multi-million dollar exchange; &

•          ICOs are starting to consult with Maltese law firms, and the largest cryptocurrency exchange with the aim of total decentralization has been welcomed with open arms.

 

Moreover the process to license and launch an ICO via Malta is anticipated to be months quicker than it would be if you were trying to launch out of a larger, more bureaucratic jurisdiction (eg Switzerland).

 

Hopefully the legislation will be enacted before years end. Watch this space for developments.

 

Why Incorporate in Malta?

 

In addition to its looking to embrace Crypto related business Malta is also a very attractive jurisdiction in which to incorporate. Key features include:

 

• Low corporate tax (maximum of 5% or lower effective tax rate for trading companies)

•          A highly educated, reasonably-priced English-speaking workforce (88% per cent of the population speaks English), particularly in the legal, accounting, insurance, banking and maritime professions

•          A strong stable economy

•          A high (and ever improving) standard of living

•          Political stability

•          Certainty of the rule of Law (much of Malta’s laws were derived from its former ruler Great Britain)

•          Reliable telecommunication systems

•          Access to European markets (Malta is an EU member)

•          An extensive double-taxation treaty network (with over 50 countries)

•          Low operating costs relative to the rest of Europe

•          Strategic location at the crossroads of three continents, serving also as Europe’s Middle Eastern outpost

•          Liberal foreign direct investment regime

 

Taxation Benefits

 

Malta has a full-imputation system of corporate taxation and hence any income tax that is paid by a Maltese company is fully imputed or credited to the shareholder who receives dividends from the company, enabling the same to benefit from the full relief of economic double taxation of corporate profits.

 

Although the standard rate of taxation in Malta is 35% of the chargeable income of the company, a shareholder of such company is entitled to a refund of any tax paid by the company of 5/7ths, 6/7ths or 7/7ths depending on the source of income of the company. This typically results in an effective net tax rate of approximately 10%, 5% or 0% respectively

 

Low Incorporation and Maintenance Costs

 

A company can be set up in Malta with a minimum share capital of Euro 1,165, 20% of which should be paid up. This means that the minimum amount that you need to commit by way of Capital to incorporate a company in Malta is only 245 Euros. The minimum Registry fee required to be paid is Euro 240 with minimum annual payments of Euro 100!

 

Exemption from Duty on Documents

 

Malta companies carrying out international activities are exempt from stamp duty on documents meaning that the transfer of shares in and increases of share capital of a Maltese company are exempt from duty.

 

Double Taxation Treaties Signed

 

Malta has signed over fifty double taxation treaties, with the latest being the Malta – Russian Double Taxation Treaty which should come into force at the beginning of next year.

 

Capital Gains Tax

 

Capital gains realised by non-residents on transfers of shares and increases of share capital are not subject to tax in Malta if the assets of the company do not include immovable property situated in Malta.

 

Other Benefits of Incorporating a Company in Malta:

•          No withholding tax on the payment of dividends, interest or royalties;

•          No controlled foreign company legislation or transfer of pricing rules;

•          No thin capitalization rules;

•          No exit taxes, wealth taxes, payroll based tax or trade tax.

 

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

 

 

Setting up an ICO in Mauritius

Since its independence in 1968, the former French and British colony of Mauritius has become one of the most successful economies in the region by focusing its resources on making the country a regional technology and financial services hub. Now, Mauritius is looking at blockchain as the vehicle by which to:

 

(a) solidify its competitive jurisdictional advantage; and

 

(b) drive continued innovation on the island.

 

Currently the Mauritius Financial Services Sector is seeking to brand itself as a regional haven for blockchain innovation and in doing so has the full support of the key government department (ie the Board of Investment Mauritius or “BOIM”) who can see that such technologies have the potential to take the Mauritian Economy to another level.

 

Publicly the BIOM have stated “Blockchain is an area where we will be focussing, building competencies, and ensuring that it permeates other sectors of the economy and government. Blockchain is one of these technologies we want to drive. We see a window of opportunity here to be able to leapfrog others”.

 

This a far cry from many, if not most, Financial Services Based Economies who are looking to limit the ability of locally registered International Business Companies and etc to undertake Crypto related activities.

 

Given Mauritius has a well-established financial services sector, a vibrant banking Industry and highly developed IT/communications technology industries, positioning itself as the preferred regional choice for investors in blockchain and financial technology makes good sense from a nation building perspective.

 

The Mauritius Regulatory Sandbox License

 

In a bid to become the Indian Ocean blockchain hub, Mauritius is reaching out to Cryptocurrency Developers and Entrepreneurs (in particular new ICOs) to take advantage of the country’s new Regulatory Sandbox License (RSL).

 

The sandbox allows businesses operating in areas including financial, medical and communications technology to begin operations notwithstanding the absence of a formal legislative or licensing framework.

 

It’s a clever move by the Mauritian Government because, prior to the Regulatory Sandbox License Project, the Mauritian Financial Services Authority had been unable to approve or incorporate innovative projects due to gaps in the regulatory framework.

 

The RSL has its seed in similar regimes employed in Singapore, the UK and Australia and is open to all innovators, with a particular focus on attracting blockchain innovators across all spheres.

 

The Mauritian Government hopes that by assisting to progress such projects the direct and indirect revenues raised will be the engine that drives local and international business enabling it to foster a smart city concept with links to other hub cities.

 

To be considered for approval for an RSL in Mauritius you must show:

 

(a)    that the project is innovative

(b)   that the project is beneficial to the Mauritian economy

(c)    that the project cannot be accommodated in your home jurisdiction because of legal or regulatory gaps.

 

Assuming you provide the Regulator with all the necessary information they require (and that the application is successful) such a license can be obtained within as little as 30 days.

 

Securities Framework

 

As things currently stand the securities laws in Mauritius are favorable in that a Utility Token doesn’t fall under the definition of a Security.

 

As such the Regulatory Sandbox License provides companies and startups with the opportunity to test innovative products, services, business models and delivery mechanisms in the real market, with real consumers, but with regulatory supervision.

 

In fact the Mauritius board of investment has publicly announced their desire to attract blockchain startups to Mauritius; Unlike other jurisdictions such as Switzerland, the UK and Singapore (where their sandboxes are aimed at companies in the financial services field), the Mauritius RS License is available not only to businesses innovating in the financial technology fields but also to businesses focused on digital identities, digital currency, online healthcare, blockchain and the decentralization systems of information (amongst others).

 

There is a selection criterion for an RSL as well as several conditions relating to the activity such as safeguards, terms and conditions, compliance with existing regulations, referring to general business operation and monitoring mechanisms (amongst others).

 

In summary its regulatory sandbox framework makes Mauritius one of the most attractive jurisdictions for entities in the blockchain space which are seeking or looking to be regulated.

 

Why Set Up In Mauritius

 

Why should blockchain investors/entrepreneurs consider setting up in Mauritius? Because:

 

  • Mauritius has a pro-business and healthy governance environment (its internationally recognized as the strongest in sub-Saharan Africa)
  • Taking into account factors including ease of starting a business, enforcing contracts, obtaining credit, protecting investors and paying taxes Mauritius is considered to have the best business climate of any country in the region and ranks 49th out of 190 countries worldwide. (Source: The World Bank’s annual “Doing Business” survey)
  •  Mauritius is committed to ongoing development of the country’s communications infrastructure – including projects to roll out free Wi-Fi across the island and install fiber optic connections in every home (a key attraction for technology investors)
  • Mauritius is the ideal doorway for investment into Africa and India (See below)

 

Access to Substantial Markets 

 

Its political/economic stability and geographic location have enabled Mauritius to develop into a popular venue for financial services companies looking to make the jump into new markets on the African continent (where many of the world’s largest untapped Banking/Retail Investment customer populations exist).

 

Simply put Mauritius is a country that many of the governments of African states would like to emulate; if you have systems that have been tested properly in Mauritius – it gives a kind of assurance and credibility to that solution when you market it in Africa. (As the BIOM itself puts it “Having done it in Mauritius gives it lots of mileage for you to expand into Africa.”)

 

Other advantages to using Mauritius as the springboard for investment into Africa include:

  • Mauritius possesses a bilingual workforce speaking both English and French (two of the African continent’s most spoken languages)
  • Mauritius has tax treaties with more than 20 African nations including South Africa, Zambia, Uganda and Rwanda.

 

Mauritius also boasts very close cultural and economic ties with India – whose economy is projected to surpass China if/when it becomes, as predicted, the world’s most populous nation in the next ten years (approximately two-thirds of Mauritians are of Indian descent)

 

Mauritius has also been the largest single source of foreign direct investment into India in recent years on account of its having a (very) favorable double taxation avoidance treaty with India (which can be accessed via incorporation and deployment of a Mauritius GBC 1 Company – contact us for details).

 

ICOs in Mauritius are commonly registered/licensed under the umbrella of a Mauritius Foundation.

 

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

 

Where To Setup an ICO – Gibraltar?

Gibraltar has positioned itself as one of the first, “crypto friendly” jurisdictions.

 

In late 2017 Gibraltar released a regulatory framework for blockchain businesses that shored up legal status of the technology as a means of transmitting payments.

 

Now, in possibly a world first, it has conceived a set of regulations that provide for the registration and regulation of ICOs (Initial Coin Offerings).

 

This combined with its tax efficient company structures has seen many new start-ups flocking to Gibraltar to host their ICOs & ITOs.

 

With DLT regulations now in force, and Gibraltar seen as a new hub for crypto related businesses, there is also a small window of opportunity available for these currently unregulated ICO & ITO companies of Gibraltar.

 

The Gibraltar Regulator is planning a complementary regulatory framework covering the promotion and sale of tokens, aligned with the DLT framework.” The proposed regulations, which are reported to be implemented in the latter stage of 2018 are set to cover any person related to Gibraltar and carrying out activities related to:

 

  • The sale, promotion or distribution of Tokens by persons connected with Gibraltar;
  • Secondary Market activities relating to tokens, carried out in or from Gibraltar; and
  • Providing, by way of business in or from Gibraltar, advice relating to investment in tokens.

 

Authorised Persons

 

One of the key aspects of the token regulations is the regulation of “authorized sponsors” who will be responsible for assuring compliance with disclosure and financial crime rules.

 

Gibraltar is also reportedly considering regulation relating to investment funds associated with cryptocurrencies and tokens.

 

This is a wide and general scope, meaning it is likely that the new regulations will cover most if not all aspects of ICO & ITO Gibraltar companies, or individuals. 

 

In effect they have decided that a one-size-fits-all regulatory approach would be inappropriate for the blockchain funding model. Consequently, Gibraltar is instead developing a set of principles for best practice. With these principles, each authorized sponsor will be able to “come up with its own methodology” to apply to the ICOs or tokens that they sponsor.

 

The new legislation is the logical next step after Gibraltar’s launch in January of a license for companies working with distributed ledger technology (which has made it an appealing destination for blockchain startups).

 

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

 

 

Estonian Cryptocurrency Exchange & Wallet Service Provider Licenses

Estonia has a favorable tax and legal environment for cryptocurrency exchange companies. It also offers registration for businesses looking to offer Cryptocurrency Wallets.

 

This small European Union country of just 1.3m people is regarded as one of the world’s most advanced digital nations and is fast becoming a viable alternative to the behemoth Financial Services Jurisdictions such as Singapore and Switzerland – its competitive advantage being it offers less red tape and lower establishment/operating costs.

 

Companies aiming to do business in the Cryptosphere can apply for 2 different activity licenses in Estonia:

(a)   A Cryptocurrency Exchange License

(b)   A Virtual Currency Wallet Service License

 

Both of these licenses are issued by the Estonian Financial Intelligence Unit (FIU) and can be applied for separately or together (in fact it’s cheaper to apply for both at the same time). The full procedure to set up the company and obtain the licenses can be carried out remotely with no visit required (at the time of writing, on average, it takes 30 days from receiving all necessary documentation).

 

General

 

The operating license are issued by the Estonian Financial Intelligence Unit (FIU) which is a government body that operates as an independent cell of the Estonian Police and Board Guard Dpt. (Check this link for details: https://www2.politsei.ee/en/teenused/majandustegevuse-luba.dot )

 

The licenses can be applied for at the same time (albeit via separate applications) and at the conclusion of the application process 2 separate Licenses are issued; one enabling you to offer a Cryptocurrency Exchange Services, the other enabling you to offer a Cryptowallet service. For details of the main Acts regulating the activity check this link: https://www2.politsei.ee/en/

 

The Company is classified as a Financial Institution but has no special reporting requirements (other than those which normally apply to an Estonian Company)

 

Estonian Company Requirement

 

To successfully apply for a cryptocurrency exchange and/or wallet service license you will firstly need to incorporate an Estonian Company.

 

This process can be carried out remotely with no visit required and it usually takes about 5 business days for the full procedure. The key features of the Estonian Model of Company are as follows:

 

•          A minimum of 1 shareholder only is required

•          The shareholder/s can be a natural person or a legal entity

•          There is no local shareholder requirement (ie the shareholder/s can come from any country)

•          A minimum of 1 Director only is required

•          There is no local Director requirement (ie the Director/s can come from any country).

•          No secretary is required

•          No stand-alone office is required (only a local registered office and registered agent which service OCI will provide).

•          Beneficial owners’ details must be disclosed to the authorities starting from September 1st 2018 though a Seychelles Foundation can be deployed to act as the beneficial owner/shareholder (Contact us for details of how/why that will work)

 

Tax on Cryptos

 

Estonia also offers a competitive tax environment for such businesses. Features include:

•          Virtual currencies are not subject to VAT

•          Corporate profits are not taxed unless or until dividends are paid

•          Income tax of 20% is charged on gross dividends (calculated as 20/80 of the net dividend).

•          Special conditions apply enabling a Company to apply for a 14% rate beginning September 1st 2018.

 

Set Up Procedure and Documentation

 

Our Legal Team can/will attend to all that needs to be done in order to comply with Estonia’s Anti Money Laundering (“AML”) Regulations including:

 

Internal Security Measures

•          assessment and management of the risk of terrorist financing and money laundering;

•          collection and maintenance of statutory records;

•          performance of the notification obligations;

•          notification of the management as/when required;

•          internal control rules for checking adherence thereto.

 

Rules of Procedure

•          identify low risk transactions and establish the appropriate requirements/procedures to enable the execution of such transactions;

•          identify higher risk transactions, (including risks arising from means of communication, computer systems and other technological developments) and establish the appropriate requirements and procedure for the execution and monitoring of such transactions;

•          establish the rules that ensure that Due Diligence/KYC requirements are met;

•          set out the requirements and procedures for keeping the necessary documents and records;

•          set out the requirements and procedures for an application including instructions to staff etc for how to effectively identify whether or not a person is:

 

(a) a politically exposed person;

(b) a person whose place of residence or seat is in a country where insufficient measures

for prevention of money laundering and terrorist financing have been laid out;

(c) a person with regard to whose activities there is previous suspicion that the person may

be involved in money laundering or terrorist financing;

(d) a person against whom international sanctions have been imposed;

(e) a person with whom a transaction is carried out using telecommunications.

 

Legal Framework & Requirements

 

The legal framework for Crypto Companies in Estonia is governed by the Money Laundering and Terrorist Financing Prevention Act which passed into law in November 2017.

 

We can/will prepare all policy documents and manage the process as regards the FIU acting under a Power of Attorney (PoA). For a remote setup we will require the following documentation:

•          Valid copy of passport *

•          Certificate of non-criminal record from the registry of convictions (not older than 3 months) for shareholder(s), board member(s), ultimate beneficial owner(s) and authorized person/s *

•          Power of Attorney *

•          Brief description of planned business model and CV’s of all participants

 

* Notarized and confirmed with an apostille, in English (or notarized English translation)

 

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

 

Company Formation in Estonia

Estonia is a Nordic country of 1.3 million people nestled on the shores of the Baltic Sea in Northern Europe.

 

Since regaining its independence with the collapse of the Soviet Union in 1991, Estonia has become one of the most economically successful of the European Union’s newer eastern European members.

 

Estonia has a highly educated population (English speaking proficiency is amongst the world’s highest) low corruption and sits at the forefront at the development and delivery of both private and, in particular public, services by digital means. Of late it has stolen a jump on rival jurisdictions by offering a specific licensing regime for Cryptocurrency related businesses (see below for details).

 

Limited Liability Companies in Estonia

 

The Estonian private limited liability company (Osaühing or ) is the most common form of business as its shareholders have no personal proprietary liability for the company’s obligations.

 

Key benefits of incorporation in Estonia include:

Tax Efficiency: Zero tax is payable in Estonia if profits are reinvested

Clean Name: Estonia isn’t known as a tax haven yet can deliver the same results

Stability: Estonia is very stable economically and ranks as highly as the US for non-corruption

Easy 2 set up: To set up you just need 1 Director/shareholder + a legal address/rep in Estonia

Speedy set up available: You can own an Estonian Company within as little as 24 hours

Easy to administer: Estonian Companies only require 1 Director and 1 Shareholder

Access to Europe: A Euro VAT number can be obtained enabling you to trade on the Continent

VAT Free: No VAT is payable on transactions within Europe (outside Estonia)

Cryptofriendly: Cryptocurrency related businesses are welcome to incorporate in Estonia

Bank Friendly: Incorporating in an EU country gives you wide access to EU/1st World banks

Language Friendly: (Per its Nordic kin) Estonia ranks VERY highly 4 English Language proficiency

E-Residency available: Estonia offers a Digital ID enabling one to securely access government services in and sign docs/do business in Estonia remotely. 98% of government services can be accessed electronically in Estonia. Check here for details:

https://www2.politsei.ee/en/teenused/isikut-toendavad-dokumendid/e-residendi-digi-id/index.dot

 

Estonia is also one of the most (probably THE most) Efriendly/developed countries in Europe:

  • Tax filing, tax payment, banking and business registration can all be done electronically
  • Public services inc Voting, Government services and Ministries are all accessable electronically
  • Law Courts and Police Services can all be accessed electronically
  • Estonia has deployed Blockchain technology to secure Health Care Data including as regards health records and medicine prescriptions

 

For more details click on this Article: http://www.wired.co.uk/article/digital-estonia

 

Other Features Include:

  • Low Minimum Share Capital Requirement (just 2,500 Euros)
  • Payment of the share capital can be delayed indefinitely (if the Share Cap is under E25K)
  • Low Cost: Incorporation, Legal, Accounting, Banking and other support services are very competitively priced by comparison with the global norms
  • No withholding tax is levied on profit distribution
  • Pre-incorporated shelf Companies are available (including some with current VAT registration
  • You can take up ownership of a new Estonian Company vie the net without needing to leave home

 

Taxation in Estonia

 

Estonia has one of the most progressive tax regimes in the world in that:

  • The tax rate on reinvested profit is 0%
  • Income tax is charged only at a rate of 20% on gross dividends.
  • The general VAT rate is 20%.

 

Corporate profits are not taxed ie (tax rate 0%) unless or until the profits are distributed as dividends; In short, all undistributed corporate profits are tax-exempt. This 100% exemption covers both active income (e.g. trading) and passive income (e.g. dividends, interest, royalties etc) as well as capital gains from sales of all types of assets, including shares, securities, and immovable property.

 

Estonia levies a corporate withholding tax only on profits that are distributed as dividends, share buybacks, capital reductions, liquidation proceeds or deemed profit distributions. Income tax at a rate of 20% is charged on gross dividends (calculated as 20/80 of the net dividend).

 

The standard VAT rate (in Estonian käibemaks, KM) is 20% and applies to all supplies of goods and services inside Estonia. The 9% reduced rate applies to accommodation, books, listed pharmaceutical products and medical devices. The VAT rate on the export of goods, intra-Community supply of goods and certain services is 0% (i.e. exemption with credit). If the annual taxable turnover exceeds 40 000 EUR you will need to register with the Tax and Customs Board as a VAT payer.

 

Employers registered in Estonia (including permanent establishments of foreign entities) must pay social tax on all payments made to employees. The rate of social tax is 33% (20% for social security and 13% for health insurance). Minimum wage in Estonia is 500 EUR/month as of 2018.

 

Crypto Business Licenses in Estonia

 

Estonia has a favorable tax and legal environment for cryptocurrency exchange companies. This small European Union country of just 1.3m people is regarded as one of the world’s most advanced digital nations and is fast becoming a viable alternative to the behemoth Financial Services Jurisdictions such as Singapore and Switzerland – its competitive advantage being it offers less red tape and lower establishment/operating costs.

 

Companies aiming to do business in the Cryptosphere can apply for 2 different activity licenses in Estonia:

(a)   A Cryptocurrency Exchange License

(b)   A Virtual Currency Wallet Service License

 

Both of these licenses are issued by the Estonian Financial Intelligence Unit (FIU) and can be applied for separately or together (in fact it’s cheaper to apply for both at the same time). The full procedure to set up the company and obtain the licenses is straight forward and can be carried out remotely with no visit required (at the time of writing, on average, it takes 30 days from receiving all necessary documentation).

 

Eligibility for such a license is liberally applied (you don’t need be ex Merril Lynch or hold any form of Fund Manager License to be eligible to apply for such a license) and the cost is very reasonable especially compared with the cost of applying for comparable special licenses elsewhere (eg Fund Licenses, Broker’s Licenses etc).

 

Corporate Services in Estonia

 

We provide a full range of corporate services in Estonia including, as required:

  • Company Formation & Administration
  • Legal and tax advisory
  • Virtual office
  • Accounting
  • Bank account opening support
  • Company Secretary
  • Nominee Director
  • Nominee Shareholder
  • Registered Office/Agent
  • E-Residency
  • Applying for Cryptolicenses

 

Prices start from as little as 1,000 Euros.

 

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

 

Why Set Up An Initial Coin Offering (“ICO”) Offshore

In an earlier Article we talked about how you might go about launching an ICO Offshore.

 

To recap your options are:

 

(a)    Incorporate a nil tax International Business Company (“IBC”) which enters into an agreement with investors whereby, in consideration of the investor paying some money to the Company, the IBC agrees to issue the Investor with a Redeemable (Digital) Token

(b)   Incorporate a nil tax Private Fund Company (ie a non-licensed Closed End Fund) whereby investors agree to invest for a minimum/fixed period in return for which they receive shares in the Company in proportion to the amount of money they invest. These shares would entitle the investor to share in the profits made when the Cryptocurrency hits the open market and to cash out or reinvest at the end of the agreed minimum investment period.

(c)    Register a Private Foundation (which owns a/the Company issuing the Cryptocurrency) Investors pay donations to the Foundation in fiat currency. The Foundation uses that money to fund a/the tax free Offshore Company which develops/owns the Cryptocurrency. In consideration of the donation made to the Foundation the Company issues a Redeemable Digital Token to the donor/investor.

 

Twin Company Structure

 

The greatest concern you would have launching such a business is the risk of local regulators deciding you’re running an illegal Fund or offering an unregistered/unlicensed Financial Product and then (a) freezing the Investment Company’s Bank/etc Accounts and/or (b) prosecuting you for breaches of local Managed Investments Legislation or Corporations Law.

 

Worst case scenario is the investment doesn’t live up to expectations and the investor complains to local Managed Investment or etc Authorities. The Authorities would trace the money and see it left wherever and landed in the account of The Fund/Token Company. Depending on where that country is the Authorities could take legal action to freeze funds held in that bank account etc.

 

But imagine if, once funds hit the Fund/Token Company’s account, they are transferred to the Offshore account of a 2nd Company (let’s call it “Offshore Company B”)? Local Authorities would not be able to see where those funds went making it practically impossible to freeze those funds.

 

Company A could either invest with Company B via a general investment agreement or Company A could hold shares in Company B or Company B could be appointed as Company A’s Fund Manager.

 

Company A would in effect be the Investors Company. Company B could/would in effect be your Company.

 

The situation would be analogous to a Non Licensed Close End Fund save that the investors don’t get shares in the Company they instead receive a Token.

 

Hence ideally you’d want to place moneys received from investors into a separate/2nd vessel.

 

Where To Incorporate

 

Certainly you would not want to incorporate such a venture where you live. Ideally the Fund Company (+ Company B should you decide to go down the twin Company structure road) should be incorporated Offshore in a low regulation jurisdiction ie somewhere which hasn’t passed legislation making the manufacture and or marketing of Cryptocurrency or Tokens a Prohibited or Licenseable Activity. Ideally that jurisdiction should be somewhere where it is extremely difficult (ideally impossible) for local Regulators to find out who’s behind the Fund/ICO Company.

 

If you want to minimize the chance of regulatory interference/prosecution there are in essence 3 boxes you will want/need to tick ie:

 

1.         You will want to ensure that the Offshore Company/s (“OC”) is/are incorporated in a country which does NOT have a Tax Information Exchange Agreement with your home country. This will eliminate the risk of local authorities using the façade of a tax investigation to try and find out who actually set up (or is behind) the Company.

2.         You will want to ensure that management and control of the company/s is seen to be taking place from “Offshore”. This will entail deploying a (tax haven based) Nominee Director to act as Director of the Offshore Company/s.

3.         If you live in a country which has a Controlled Foreign Corporation law, and/or so that in the case of an investigation you can swear under oath I am not the director or owner or beneficial owner of the Company, you will want to set up a Private Foundation to own your shares in/of Company B ultimately (because a Private Foundation is presumed to be both the legal and beneficial owner of any asset it holds)

 

This strategy can also deliver tax deferral opportunities.

 

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 Open an Anonymous Offshore Forex Broker Account

If you’re wanting to open a Brokerage Account (eg to trade Forex) for your Offshore Company and you don’t want your name to appear anywhere in the Broker’s Records that can be facilitated. Here’s how:

 

  1. You should incorporate a tax free Offshore Company (IBC) with a (tax haven based) Nominee Director (which is a service that OCI Provides). Ideally that Company (IBC) should be incorporated in a country which does NOT have a Tax Information Exchange Agreement with your home country
  2. You should set up a Seychelles Foundation to hold the shares of your Company (because Seychelles law uniquely provides that that the legal AND beneficial owner of any Asset/Company owned by a Seychelles Foundation is the Foundation itself).
  3. You will be appointed in writing (via a Consultancy Agreement which we will provide) as the Company’s Authorised Trader or Trading Manager
  4. The Brokerage Account application will be signed by the Company Director and submitted to the Broker by your Offshore Corporate Service Provider (ie in the name of the Nominee Director) noting the shareholder of the Company (ie a/the Seychelles Foundation) as the beneficial owner of the Company
  5. The Director will be nominated as the authorised signatory/trader on the Company’s Brokerage Account
  6. Immediately the Brokerage Account is opened the Nominee Director will email you the log in codes enabling you to place the trades and authorise withdrawal of money.

 

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 SET UP A FREIGHT FORWARDING BUSINESS OFFSHORE

A Freight Forwarding (ie International Goods Transportation) Business lends itself well to an Offshore Corporate Structuring Plan.

 

Here’s how it can/will work:

 

  1. You set up a nil tax/tax free Offshore Company (“IBC”)
  2. The customers place orders online and they contract with/pay the tax-free IBC to forward freight/transport goods for them
  3. Payments from customers would be banked and held offshore free from tax
  4. The IBC should be seen to be managed and controlled from Offshore (ie a nil tax jurisdiction) and owned by a tax haven resident party/shareholder
  5. The tax-free IBC would subcontract the actual job of forwarding/transporting the freight to an onshore operation (which could be your local/current business)
  6. The difference between what you receive from the customer and what you pay the actual transporter (ie your gross profit) is earned/held by a tax free Offshore Company and (if you structure/administer things correctly – see below) should not be taxable onshore ie where you live

 

For such a plan to work there are in essence 4 boxes you will want/need to tick ie:

 

1.        You will want to ensure that the Offshore Company (“IBC”) is incorporated in a country which does NOT have a Tax Information Exchange Agreement (TIEA) with your home country.

2.        You will want to ensure that management and control of the IBC is seen to be taking place from “Offshore”. This will entail having a (tax haven based) Nominee Director to act as Director of the IBC (which is a service that OCI provides) plus you will need to ensure that all key decision making and document signing actually takes place Offshore.

3.        If you live in a country which has a Controlled Foreign Corporation (“CFC”) law you will want to set up a Private Foundation to own the Company ultimately

4.        To prevent the existence of the IBC’s Bank Account coming to the attention of local authorities (a) you will want to open the company’s bank account in a country which is NOT a signatory to the MCAA  and/or (b) you will want to set up a Seychelles Foundation to hold the shares of the IBC (because Seychelles Law uniquely provides that the legal AND beneficial owner of any asset held by a Seychelles Foundation is the Foundation itself).

 

Local laws can have an impact. Hence you should seek local legal and financial advice before committing to set up a Corporate Structure such as that described above.

 

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