Company- Management | Offshore Companies International

BVI ANNUAL RETURNS GUIDANCE NOTES

Effective January 1st, 2023, the BVI Business Companies Act was amended to introduce a requirement for business companies to file annual returns/financial statements annually.

The following companies are exempt from the requirement to file annual return:

Publicly listed companies;
Entities that are regulated by BVI FSC and are required to provide financial statements;
Entities that already submit annual return to BVI Inland Revenue; and
Entities that commence liquidation before the annual returns filing date becomes due.

The standard financial year in the BC Act is January to December, but the company can select a different financial year (which will run into 2025 in some cases). It is our recommendation that if the company intends to change its financial year, that it be changed to the renewal year of the company i.e. May to April with filing coming due from May the following year or November to October, with filing coming due

from November the following year. This will allow the Registry renewal and the annual returns filing to become due at the same time each year and reduce the multiple interactions with the end client. If the company decides to change the financial period a resolution will be required to approve the change.

The filing window for Annual Returns is within 9 months after the end of the financial year/financial period. There are hefty fines associated with non-filing both for the company and for us as the Registered Agent.

AUDITED FINANCIALS

Audited financial statement is not a requirement. The Annual Return form can be completed by the company.

ANNUAL RETURN FORM AND FEES

Fillable Annual return forms will be supplied in PDF and Excel for your use.

Effective January 1st, 2024, the annual returns filing must be up to date before we can issue a Certificate of Incumbency. The Certificate of Incumbency will be issued once the 9 months filing window has not closed.

Annual Return fees should be paid with the renewal invoice to avoid any delays in filing, but if the invoice is requested separately, the payment is required at the time of submitting the Annual Return form for filing.

There is no requirement for the Annual Return to be signed but we recommend that it be signed by one of the directors for record purposes.

PENALTIES

Where a company fails to file its annual return within the 9 months after the financial period has ended, the Registered Agent is required to inform the Registry and the following penalties will apply:

(a) For the first month or part thereof that the annual return is overdue a penalty of $300 will apply; and

(b) For each month or part thereof after the first annual return is overdue a penalty of $200 shall apply up to a maximum of $5,000.

If the Registered Agent fails to inform the Registry that a companies has exceeded its filing period, a penalty of $3,000 per company will be imposed on the Registered Agent.

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

BVI ECONOMIC SUBSTANCE GUIDANCE NOTES

Do you own or do you plan to incorporate a BVI Company?

On January 1st, 2019 The Economic Substance (Companies and Limited Partnership) Act 2018 (“ES Act”) came into force in the British Virgin Islands (“BVI”) to address tax system concerns of the European Union and the OECD. The BVI International Tax Authority (“ITA”) has been tasked with enforcing the ES Act in the BVI.

The ITA published an updated version of its rules and explanatory notes on Economic Substance in the BVI on 24 February 2023.

All ES filings with the ITA are submitted by the Registered Agents only via the Beneficial Owner Secure Search System (“BOSSS)”, which is the existing portal used by the ITA for private filing of ultimate beneficial owners.

TARGETTED ACTIVITIES

The ES Act simply requires that Business Companies and Limited Partnerships (“Entities”) conducting or carrying on specifically targeted relevant activities (as listed below) should show substance/presence in the British Virgin Islands unless they are tax resident in another jurisdiction. However, there is an exception to the rule with respect to two of the relevant activities, namely, intellectual property business and pure equity holding business in that once these entities do not earn any income during their financial period, they are not considered to be conducting a relevant activity.

Below are the targeted relevant activities, which are more broadly defined in the ES Act and Rules, (it is important to note that an entity can fall under more than one relevant activity at any given time, except for holding business, which will not apply as a relevant activity if the entity is conducting any other type of business activities besides holding business):

 Banking business

 Insurance business

 Fund management business

 Finance and leasing business (eg. earning interest from offering of credit)

 Headquarters business (which relates to groups)

 Shipping business (by sea only and excludes fishing vessels, pleasure vessels and small ships less than 24 meters in length)

 Holding business, i.e. pure equity holding of shares in other entities and earning dividend or in receipt of capital gains. (Please take note that an entity holding shares and not earning any dividend or in receipt of capital gains during the financial period, does not qualify as pure equity holding business).

 Intellectual property business. (Please take note that if no income is earned from the intellectual property during the financial period, it does not qualify as intellectual property business).

Distribution and service center business (which relates to groups). In cases where a company is found to be conducting distribution and service center business in addition to another relevant activity, the other relevant activity will cancel out distribution and service center business, except in cases of holding

business, where holding business is cancelled out if the entity is conducting any other form of business in general.

NOTE: Investment fund business has been expressly excluded from the list of relevant activities under the ES Act. For an Entity that is an investment fund to be identified as conducting a relevant activity, it shall be conducting a separate and distinct business activity in its own right. Otherwise, an investment fund will be reporting that it is not conducting a relevant activity for the related financial period.

FILING/REPORTING

The ES Act requires that all Entities incorporated in the BVI must inform the ITA of their Economic Substance status, within six months after the end of their financial period, by submitting a declaration for filing through their Registered Agent in the BOSSS.

The ITA’s filing system now allows for early filing in cases where the company has been liquidated, discontinued or merged before the financial period has ended.

If the entity was conducting a relevant activity in the first half of the financial period and the entity changes its activities in the last half of the financial period to something other than one of the relevant activities, then the entity must file as out of scope at the end of that financial period.

Entities that were struck off of the Registry of Corporate Affairs before January 1st, 2016 are not subject to the ES filings. All other struck off Entities are obligated to file their declaration with the ITA.

FINANCIAL PERIOD

The financial period for companies and limited partnerships with legal personality incorporated from January 1st, 2019 is one year from the date of their incorporation.

Reporting via BOSSS commences at the end of each financial period. Filings must be done within 6 months after the end of the financial period.

The financial period for companies and limited partnerships with legal personality incorporated prior to January 1st, 2019 is one year commencing no later than June 30th, 2019. Reporting via BOSSS commences at the end of each financial period.

Filings should be done within 6 months after the end of each financial period.

The financial period for limited partnerships without legal personality incorporated from July 1st, 2021 is one year from the date of their incorporation. Reporting via BOSSS commences at the end of each financial period. Filings must be done within 6 months after the end of the financial period.

The financial period for limited partnerships without legal personality incorporated prior to July 1st, 2021 commences from January 1st, 2022. Reporting via BOSSS commences at the end of each financial period. Filings should be done within 6 months after the end of each financial period.

There are also provisions available for changing the standard financial periods mentioned above, please inquire if necessary.

The filing/reporting requirement is an annual requirement to assist the regulators with their monitoring obligations.

ASSESSMENT REQUIREMENTS

The ITA has recommended that Entities obtain independent (legal) assessment of their status to ensure that they adequately comply before the filing deadline, especially if they are required to show substance, which should ideally start at the beginning of the financial period. However, entities can opt to self-assess and

proceed with filing without the legal assessment. It is important to note, that Registered Agents are not required to make assessments. Such assessment should be done by the directors or general partners of the entities or other persons within the entity that are aware of the internal affairs of the entity, eg company lawyer or accountant.

For better understanding of the assessment process, we have created an (internal) category system below. There are three assessment categories that an entity can fall within, as follows, (please pay close attention to the special instructions for pure equity holding Entities):

Category A: Entities that do not fall within the scope of the ES Act. These Entities are only required to file their declaration with the ITA to confirm that they do not fall under the scope of the ES Act, by submitting (i) a resolution of the directors or general partners (in the case of a limited partnership) or a declaration of a related third party, eg. liquidator; and (ii) any independent legal assessment or self-assessment.

Category B: Entities that fall within the scope of the ES Act and are tax resident in the BVI Entities that cannot prove that they are tax resident OUTSIDE of the BVI are automatically tax resident in the BVI and are required to show substance in the BVI as follows:

(a) the entity must be managed and directed from the BVI by;

(i) having a BVI qualified director (or alternate director) or general partner (in the case of limited partnership) or

(ii) the foreign director or general partner must travel to the BVI for meetings. It is important to note that the directors or general partners do not have to reside in the BVI, but an adequate number of meetings of the directors and general partners must be held in the BVI. Therefore, it is necessary for a quorum of directors to be established in the BVI when having meetings, whether by BVI alternate director(s) or by directors present in the BVI;

(b) the entity must have an adequate number of qualified employees (which can include the use of outsourcing);

(d) the entity must have adequate office facilities in the BVI (which can include the use of outsourcing); and

(e) the entity must have adequate expenditure in the BVI.

These entities will need to restructure to move the core income generating activities of their operations to the BVI in order to show adequate substance. It is important to note that an entity is not required to move the physical operations to the BVI, but to move functions of the operations that relates to the core income generating activities, (e.g. if a shipping company operates in India it is not required to move the shipping services to the BVI but it can move the billing aspect of the operations to the BVI.

We recommend that Category B Entities seek legal assistance with their restructuring plans, but it is not mandatory, the Entity can decide on its own restructuring.

PURE EQUITY HOLDING BUSINESS – CATEGORY B

Pure equity holding Entities are given more relaxed substance requirements. They are only required to adhere to the BVI Business Companies Act and have adequate employees and premises for holding equity participation.

Entities conducting pure equity holding business that are receiving only dividends are considered passive in nature, therefore, having a registered agent in the BVI is considered enough substance.

Entities conducting pure equity holding business that are actively managing their participation such as re-investment of dividends, converting shares, selling shares, etc., the ITA will require evidence of more adequate substance to support such activities, such as qualified staff and office in the BVI. Pure equity holding business Entities are not required to have BVI directors but can do so if they wish.

OUTSOURCING FOR CATEGORY B ENTITIES

Outsourcing services can be used for all Category B Entities to establish substance or a trade license can be obtained to establish an independent office in the BVI. If an entity decides to establish an independent office, it will be required to obtain a (trade) license from the appropriate authorities and subsequently register with Inland Revenue, Social Security and National Health Insurance.

FILING REQUIREMENTS

Filings for Entities under Category B with the ITA should be supported by (i) a resolution of the directors or general partners (in the case of a limited partnership) or a declaration of a related third party, eg a liquidator, (ii) any independent legal assessment or self-assessment and (iii) the financial information of the entity to show that the entity has adequate expenditure in the BVI in comparison with its foreign expenditure, (a form is available).

CATEGORY C: Entities that fall within the scope of the ES Act but are tax

resident in another jurisdiction.

These Entities are required to provide (i) a resolution of the directors or general partners (in the case of limited partnership) or a declaration of a related third party, e.g. liquidator, (ii) any independent legal assessment or self-assessment; and (iii) any of the below as evidence of their tax residency outside of the BVI:

(i) Tax assessments, demands, or evidence of payment (which should cover the entire ES financial period), issued by the tax authority of the foreign jurisdiction.

(ii) Tax returns (which should cover the entire ES financial period) submitted to the competent tax authority of the foreign jurisdiction.

(iii) Confirmation that the Entity is required to submit a corporate income tax return (which should cover the entire ES financial period), to the competent tax authority of the foreign jurisdictions, such as Guernsey, Jersey or the Isle of Man (the Crown Dependencies); and

(iv) Letter from the tax authority in an EU approved foreign jurisdiction, (which should cover the entire ES financial period).

Please take note that the ITA will be informing the tax authority in the foreign jurisdiction that the entity has indicated that it is tax resident in that jurisdiction.

SUPPORT SERVICES

We can assist with legal assessments, application for change of financial periods, outsourcing services, setting up of independent office, recruitment of qualified staff, applications for licenses, and registration with Inland Revenue, Social Security and National Health Insurance. Our fee sheet is provided upon request.

(The above was last amended in the BVI as of April 21st, 2023)

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

NEVIS LLCs Reviewed

A Nevis LLC allows you to shield your assets from lawsuits, agencies, and financial creditors and to bank Corporate income inside a tax free shell.

Owners are shielded from legal liability and can manage the company without becoming liable for company financial obligations or legal liabilities.

One major benefit is that it has members rather than shareholders. Therefore, there are not any shares that can be seized by a court of law. Moreover, members are not legally responsible for company obligations.

In terms of taxation, an LLC (like a Partnership) is classified as a pass-through entity ie an LLC is designed to receive income and to pass through nett profits (ie after payment of expenses) to its members. As such an LLC should not be liable for any Corporate or Profits tax in the country/state of incorporation/domicile.

ADDITIONAL NEVIS LLC ADVANTAGES:

A manager can have 100% control of the company.
The manager of the LLC does not need to have any ownership and yet can control the entire company and all of its assets.
The company can have as many members as one desires.
Any person or company can own the entity.
Nevis does not impose corporate tax, income tax, withholding tax, stamp tax, asset tax, exchange controls or other fees or taxes on assets or income originating outside of Nevis.
Members of LLCs may be individuals or business entities of any nationality or domicile.
Members may amend their Articles of Organization, merge, or consolidate with other domestic or foreign LLCs or other business entities.
Members of the offshore company may assign their interests to other parties unless restricted otherwise. Nevis permits single member LLCs.
Management of the companies may be by the members or by managers designated by the members.
There are no stock limitations – a Nevis LLC can issue preferred interests analogous to preferred stock of corporations.
It is an excellent vehicle if used by a group of investors for a joint venture investment. In this respect it functions as if it was a Limited Partnership, but with all the added liability protection features and advantages of a corporation.
It can be set up within 24 hours and has low initial cost and low annual fees.
Any law suit attacking the transfer of assets to a Nevis LLC must be brought within 2 years otherwise it is stature barred
If you are a member of Nevis LLC and somebody (ie a Creditor) is wanting to attack your membership units before the Vulture can proceed with a law suit he/she/it must first post a security bond of $100,000 with a Financial Institution in Nevis.

LLC vs. Corporation

The primary distinction between an LLC and a “normal” company such as a “C” corporation (USA) or a PLC (United Kingdom), is that the LLC is a tax-neutral vehicle because it is taxed as a partnership, rather than as a corporation. Thus, using an LLC can eliminate tax at the corporate level. In this regard, it is somewhat like a U.S. “S” corporation or a German GmbH

but without all the restrictions and disadvantages. So if the LLC itself has no tax payment obligation – then who does? The obligation for any taxes that would otherwise be owed by the company bypasses the company itself and attaches directly to the members. Members are to LLCs what shareholders are to corporations. Other companies, as well as individuals and trusts, can be members of an LLC. There are no limits on the number of members or the classes of members that an LLC may have. The important issue is that each member is responsible for his, her or its own pro-rata share of any overall tax obligation, if any, and that the LLC itself has no tax obligations.

LLC as an alternative or in addition to a Trust

Because of the flexibility available in LLC management structuring and because of the favorable way in which the laws of Nevis are drafted, this type of entity can also be used as alternatives to or in addition to an asset protection trust. The manager of the LLC is somewhat akin to the trustee of a trust and the members are akin to the beneficiaries of a trust. OffshoreCorporation.com can act as a nominee manager of an LLC on behalf of a client who desires to take advantage of our corporate management services.

Substituting an LLC for a trust can change the reporting requirements of taxpayers in onshore jurisdictions. The income or capital gain of an LLC is not reportable as trust income or gain or as corporate income or gain but is treated as personal income (as in the US or UK) or gain or is non-taxable, depending upon the jurisdiction in which the owners reside.

Multi-National Joint Ventures:

LLCs are excellent vehicles for structuring joint venture arrangements between project participants from different countries. This is so because the venture can enjoy all of the benefits of incorporation, but each member is liable for his own taxation in his own country. Moreover, the membership flexibility allows different joint ventures to have different levels of ownership and reward based upon the value that each constituent member brings to the project.

Tax Free:

All Nevis LLCs are free from all forms of Nevisian taxation. There are no Nevisian taxes on dividends, income, capital distribution, or wages whatsoever. Moreover, unlike many onshore jurisdictions, Nevis does not tax an LLC for accumulated (but undistributed) earnings.

Privacy:

All of the affairs of the LLC are private and cannot be disclosed except under truly exceptional circumstances such as links to international terrorism. The only document that needs to be filed with the government is the annual corporate license and this contains minimal information. There is no annual report or annual financial return that needs to be made to the government. There is no public inspection of your LLCs’ records. Confidentiality is further enhanced if the LLC appoints our company as manager and we perform the minimal corporate duties required under Nevisian law.

Enhanced Confidentiality:

Nevisian LLC laws contain many requirements related to confidentiality including strict financial secrecy laws. Strict legal requirements, known as fiduciary duties, would also govern the behaviour of Offshorecorporation.com as a manager of an LLC. These fiduciary duties are imposed on managers by both the equivalent of the LLCs bylaws and by the proper law of the LLC (usually the law of the country where the manager is located).

Many of these fiduciary requirements relate to secrecy and accounting obligations by which the manager must abide. Nevisian LLC law prevents us from discussing your business with anyone to which you have not instructed us to speak.

Others cannot force us to discuss your business with anyone unless they obtain a court order against you or us or both ordering a disclosure to be made. But a court order from their respective jurisdiction is useless in Nevis. In accordance with strong Nevisian law, a judgement from outside of Nevis will not be recognized by Nevisian courts. This means an onshore judgement creditor who won a lawsuit against you or your LLC in, for example, the U.S., UK, Canada or Germany cannot take that foreign judgement and require a Nevisian court to enforce it.

In addition to not recognizing the judgements of other countries, Nevisian law and Nevisian courts do not favour the granting of court orders against LLCs except under truly exceptional circumstances. Nevisian law favors upholding the independence and application of its own law over the enforcement of foreign, onshore laws.

If you’d like to know more about the differences between an LLC and an IBC you might want to check this article: https://offshoreincorporate.com/what-is-the-difference-between-an-llc-an-ibc/

Set up cost for a Nevis LLC: $US1,400

From 2nd year: $1,350

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Nevis Foundations Reviewed

Like most “Offshore” nil tax jurisdictions, local legislation enables the registration of Private Foundations in Nevis via the Nevis Multiform Foundation Ordinance.

The Nevis Multiform Foundations Ordinance provides that each Nevis Foundation must have a stated ‘multiform’. This means that the Constitution of the Foundation must state how it is to be treated. Initially a Nevis Multiform can be registered as:

(a) A Multiform Trust; or as

(b) A Multiform Company; or as

(d) A Multiform Partnership; or as

(e) A Multiform Private Foundation.

Through the ‘multiform’ concept the stated identity of the Foundation can be changed during its lifetime, thus allowing for there to be greater flexibility in its use and application. Generally, the Nevis Multiform Foundation product can be used for estate planning, charity, tax deferral, financing and special investment holding arrangements.

There are five basic requirements for establishing a Nevis Multiform Foundation:

- It must have a Nevis based registered agent (which OCI supplies)

- It must have a Nevis registered office (which OCI supplies)

- It must have an acceptable name

- It must have a management board and secretary (which OCI can supply via Nominees); and

- It must have a memorandum of establishment

Like the formation of a company, you must first engage the services of a registered agent who is authorized to act as agent of the entity, and that registered agent must have an office to which all communications and notices may be addressed (OCI provides this service). The Promoter of the Foundation, through its registered agent, may reserve a name prior to establishment of the Foundation. If the Foundation is a Trust Foundation, then the name must accord with that multiform so that the Trust Foundation has the word “trust” in it. The name must not be prohibited by law: Irrespective of the prohibited word list the Registrar of Foundations will not reserve a name that is misleading, undesirable, confusing or similar to another name of an entity registered in Nevis.

Once the Registrar confirms that a name is available and valid for use, that name can be reserved for a period of one month. The Registrar has discretion to permit a name to be reserved for a longer period. Once a name has been reserved, the following establishment documents must be submitted to the Registrar in order to establish the Multiform Foundation:

- Application Form

- Consent Schedule

- Memorandum of establishment

- By laws (if standard by-laws are not adopted)

- Evidence that the existing entity has been dissolved or discontinued or an undertaking that an application for dissolution or discontinuance has been submitted in the existing jurisdiction (where applicable)

The relevant fees must accompany the documentation for establishment of a Nevis Multiform Foundation.

Key Players

A Nevis Foundation requires:

A Founder; https://offshoreincorporate.com/faq/what-is-a-founder/
A Board Member/Councillor (minimum one): https://offshoreincorporate.com/faq/what-is-a-council/
A Secretary: https://www.dropbox.com/scl/fi/0s0kwf9uyymddl1g9zbev/WHAT-IS-A-COMPANY-SECRETARY.pdf?rlkey=hmp77ipdvopvoqnkjr5hyo77b&st=vpjycr6n&dl=0
A Beneficiary or Beneficiaries: https://offshoreincorporate.com/faq/what-is-a-beneficiary/

Rather than having/naming Beneficiaries, potentially, a Nevis Foundation could, alternatively, set up as a Purpose Foundation. To learn what a Purpose Foundation is check this Link: https://offshoreincorporate.com/what-is-a-purpose-foundation/#:~:text=A%20Purpose%20Foundation%20is%20a,benefit%20on%20any%20specific%20person. ): https://offshoreincorporate.com/faq/what-is-a-beneficiary/

It should be noted that one person cannot serve as Secretary and sole Board Member, though it is in order for the Secretary to be a Board Member, so long as there is at least one additional Board Member.

A Management Board and a Secretary are required for a Foundation – a supervisory board is something that is optional, and the constitutional documents should indicate whether a supervisory board is to be put in place. Nominees can be deployed to act as Founder, Secretary and as Councillor enabling the true Founder/Controller’s identity to be hidden from public view.

Unlike an IBC or LLC, renewal of a Foundation requires the submission of an annual return (and we can provide the draft return form in due course) Multiform Foundations Ordinance – Ch-07.08N-Multi-form-Foundations-Ord.pdf

Asset Protection Benefits

If you have a look at Section 83(1) of the Foundation Ordinance, you will see that there is a requirement to post a bond of US$50,000 prior to commencing any action against a Nevis Foundation. In practice, this is something that would be difficult and time consuming for a creditor, as local banks would typically not issue such a bond without the creditor being a customer, and account opening can take a while. The intent of this requirement is to deter frivolous lawsuits, while allowing a legitimate creditor a clear path to follow.

Redomiciliation & Conversion

The Nevis Multiform Foundation Ordinance also provides for entities to be converted or transformed, continued or consolidated and merged into a Nevis Multiform Foundation.

Through the process of Continuance, a Foundation in another jurisdiction can be continued in Nevis as a Multiform Foundation.

Through the process of Transformation, any entity outside of Nevis can be transformed into a Foundation in Nevis. (For example, a Trust in Jersey can become a multiform Foundation in Nevis).

Through the process of Conversion, an existing Nevis entity (eg an IBC) can be converted to a multiform Foundation.

Through the process of Consolidation or Merger, any two or more entities can merge into a multiform Foundation;

Through the process of Discontinuance, a multiform Foundation can move to another jurisdiction.

These provisions allow for the mobility of a Foundation as an entity into and out of Nevis and give the Founder an extremely valuable asset protection tool.

Cost:

Setup (Including 1 year’s basic admin government fees and disbursements) $3,500 (2^nd and subsequent years $1,450)

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

HOW TO APPLY FOR AN APPROVED MANAGER LICENSE IN THE BVI

The British Virgin Islands (the “BVI”) is one of the most popular and established jurisdictions for the formation and operation of offshore investment managers and advisors. BVI investment fund structures are globally known for their flexibility allowing investment managers and advisors to tailor their offering to the needs of their investors.

The management of investment funds in, or from within the BVI (whether by way of providing discretionary, or non-discretionary investment advice), is a regulated activity, which requires regulatory approval from the BVI Financial Services Commission (the “Commission”).

The requisite regulatory approval by the Commission may be obtained under either the Securities and Investment Business Act, 2010 (“SIBA”) or the Investment Business (Approved Managers) Regulations, 2012 (the “Approved Manager Regulations”). Importantly, compliance with the Approved Manager Regulations is substantially simpler than compliance with SIBA.

The Approved Manager

The Approved Manager Regulations were implemented with a view to offering investment fund managers and advisors a simple and cost-efficient approval process in obtaining a licence for the provision of management or advisory services to BVI and certain foreign funds (including for example Jersey and Cayman Islands funds) or entities bearing similar characteristics to a fund.

The Approved Manager licence has become very popular in the industry since its introduction in 2012. It is widely perceived as being superior to the Cayman Exempt Manager, both on cost (formation and on-going) and also because it has the label of being a regulated product, which the Cayman equivalent does not have. In addition, the BVI model of Approved Manager offers greater flexibility, since the Cayman Exempted Manager is limited to only acting for investment funds whose investors fall within the definitions of a “sophisticated investor” or “high net worth person”, whilst the Approved Manager has no such limitation.

Type of Management Services

The Approved Manager may act as an investment manager by way of providing discretionary advice or as an investment advisor by way of providing non-discretionary advice to certain BVI and foreign funds, notably:

Incubator Funds;
Approved Funds;
Private Funds;
Professional Funds;
Foreign funds registered under the laws of a recognised jurisdiction (*) with the characteristics of a private or a professional fund;
Closed-ended funds, whether registered under the laws of the BVI or the laws of a recognised jurisdiction with the characteristics of a private or professional fund; and
Certain foreign funds registered in a non-recognised jurisdiction.

Managed Accounts

The Approved Manager may also be licenced to provide its clients with customised managed accounts services. The conditions under which a licence for such services is granted will be subject to the Commission’s discretion.

Vehicle

An Approved Manager may be set up as a company or as a limited partnership. Individuals cannot hold an Approved Manager licence.

Assets Under Management

The Approved Manager may not manage aggregate assets worth over USD400 million if managing an open-ended fund or USD1 billion if managing a closed-ended fund. The assets of feeder funds will be disregarded for the purposes of calculating the aggregate value of the assets.

If the Approved Manager exceeds, or is likely to exceed, the relevant asset threshold, he/she/it must notify the Commission of that fact within seven days. The Approved Manager may then apply for a licence under SIBA, which carries no restriction in relation to the value of assets under management.

Application

An applicant for an Approved Manager licence may commence management business seven days after the submission of a complete application to the Commission, unless the Commission agrees to a shorter period in writing.

Ongoing Requirements

An Approved Manager Company is subject to the following ongoing requirements:

To have two directors appointed at all times, one of whom must be an individual;
To have an authorised representative, who is certified by the Commission, appointed at all times;
To notify the Commission within 14 days of any change to the information submitted with the initial application form;
To notify the Commission of any matter which has, or is likely to have, a material impact or significant regulatory impact on the Approved Manager or its “relevant business”;
To submit financial statements, which need not be audited, to the Commission within six months after the end of the financial year; and
To submit the annual return in the approved form and the annual renewal fee each by 31 January of each year.

Application Procedure

To apply for an Approved Manager’s License in the BVI first up you will need to form a stand alone BVI Company which will apply for the Approved Manager License.

The Approved Manager company needs two directors and at least one director should be and individual with some investment business expertise. The directors of the approved manager can be the same individuals as directors or shareholder of any BVI Fund Company that you might want to form at the same time.

We would need to see the CVs of each director of the approved manager. If you have an investment management agreement, you would like to use then we would need to see a copy of it. Otherwise we would draft one.

Our fees and outlays for applying for an Investment manager license would be as follows:

Consulting fee re advising on options and procedures re applying for an Approved Fund Manager License $1,600
Legal costs $8,300
Incorporation of the Approved Manager Company (assuming max authorized share capital of $US50,000): $1,250
Supplying BVI based authorized representative for the Approved Manager Company (year 1): $2,000
Professional fees for application to FSC: $1,600
Supplying certificate of recognition: $250

TOTAL: $US15,000

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

How To Renew or Shut Down a Panama Foundation

The annual operating license for all Foundations in Panama falls due for renewal on or by the 12 month anniversary of the Foundation’s registration date.

First up you will need to advise us as to whether you need to or want to renew your Foundation’s annual operating license.

If you advise that you DO want to renew we will tell you what docs/info we will need from you/your client and we will send you an invoice.

Once the renewal invoice is paid we will then attend to collating all the docs/info required, and we will attend to doing all that is needed, to renew the Foundation. Usually we will require, as a minimum, fresh/updated certified copies of the KYC (ID) docs as regards the beneficial owner/s.

If you decide that you do NOT want to renew then be aware that dissolving a Panama Foundation involves specific legal steps as outlined in the Panama Foundation Law (Law 25 of 1995). Key aspects include determining if the Foundation is dissolved based on the Charter’s terms, fulfilling any outstanding obligations, and formally registering the dissolution with the Panama Public Registry.

The process to dissolve a Panama Foundation is as follows:

1. Review the Foundation Charter:

The Charter should specify any conditions under which the Foundation dissolves, such as a fixed duration or the achievement of its objectives.

2. Ensure Compliance with Law:

The Foundation must adhere to the provisions of Law 25 of 1995, which details circumstances leading to dissolution, such as insolvency, bankruptcy, or revocation.

3. Comply with Legal Obligations:

Before dissolution, all outstanding debts and obligations must be settled, including any fiscal responsibilities.

4. Decision by Council:

If the Charter doesn’t specify dissolution terms, the Foundation Council will make the decision to dissolve the Foundation.

5. Formal Notification:

The decision to dissolve must be officially registered with the Panama Public Registry.

6. Notification to Government:

The Foundation must notify the Panama Ministry of Commerce and Industries (MICI) of the cessation of operations, particularly if it had an operation notice.

7. Tax Clearance:

The Foundation must settle any outstanding tax obligations with the DGI (Panama Revenue Office) and request the closure of its account.

8. Public Announcement:

Once the dissolution is registered, it must be publicly announced in a local newspaper or government Gazette.

To summarize to dissolve a Panama Foundation requires careful adherence to the legal framework established by Law 25 of 1995 and the terms outlined in the Foundation’s charter. Moreover, it’s crucial to ensure all debts and obligations are settled and the dissolution is properly registered and notified to relevant authorities.

Practicalities

To summarize the initial steps are as follows:

If you wish to renew the annual operating license of this Foundation for the oncoming year we must have the complete due diligence of the Foundation on file. Please find the annual form at this Link: https://www.dropbox.com/scl/fi/wnhcuojjl4r9x8se79qkh/ANNUAL-RETURN-DECLARATION.docx?rlkey=gncxmuu8omvbht2wqnx69t976&st=pxydkrpp&dl=0 You will be required to complete this form as part of the renewal requirements. Therefore, we will need to confirm if there is any pending or outdated documentation with our compliance team. We will proceed to check with them and get back to you as soon as possible in a follow-up message with their comments.

If you decide you no longer require your Foundation the applicable process would be to proceed with its dissolution. If you click on this link ( https://www.dropbox.com/scl/fi/uygqkqy0j5ct51kgjp9yl/DECLARATION-dis-fip-TYPICAL-FOUNDATION.docx?rlkey=p39j0dru2fennsu25v1nln9xo&st=fit6ybg5&dl=0 ) you will find the Beneficial Owner’s declaration, required to initiate the dissolution process. As established in the Foundation Charter, usually the dissolution must be carried out either by the Founder or unanimously by the Foundation Council. Therefore, we will need to prepare a resolution authorizing the dissolution, which must be signed by either the Founder or the Foundation Council, depending on how you wish to proceed. This resolution must be received duly signed and apostilled.

In order to proceed, we will also require the accounting records for the current fiscal year (and previous fiscal years ie if you have not provided them as yet) as per the requirements (which can be viewed at/via this Link: https://www.dropbox.com/scl/fi/moue9nhqnf68ciipsq3ix/Panama-Entities-Account-Keeping-Requirements.docx?rlkey=6vxcvzmsh7hy3uoe96pv4cjz7&st=znnroh59&dl=0 )

Please find the applicable prices below (ie current at 10.6.25 – please contact us for a current quote):

Dissolution (incl. certified translation + apostilled translation and apostilled public deed + apostilled certificate of dissolution + apostilled translation of certificate)	$US1,300
Dissolution (basic cost no apostille, no translations)	$1,200

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Offshore Company Jurisdictions With No Accounting Requirements

Are you wanting to set up a tax-free Offshore Company without having to meet onerous Account Keeping requirements?

Just about every Offshore jurisdiction these days has Account keeping requirements of some description. It’s been one of the biggest changes to the Offshore Incorporations world since I first stated working in this Industry almost 25 years ago.

Most jurisdictions require, as a minimum, that soft copies of each Company’s “Financial records” be stored at the Company’s registered office (and in most jurisdictions the definition of “Accounting records” includes, bank statements, suppliers bills, invoices sent to clients along with Books of Account). Indeed, many jurisdictions now require full financial reports to be prepared and or for annual returns to be filed!

The good news is there are still several jurisdictions that either have zero Accounting keeping or very minimal Account keeping requirements. They include:

The Marshall Islands: https://offshoreincorporate.com/marshall-islands-ibcs/

Samoa: https://offshoreincorporate.com/samoa-international-business-companies/ &

Nevis: https://offshoreincorporate.com/st-kitts-and-nevis-offshore-companies/

https://www.dropbox.com/scl/fi/pchjstic0zo8qtwx7z2ee/NEVIS-LLC-Fact-Sheet.pdf?rlkey=j20aarm4v70azy3qt0o0m8a1m&st=3za3drkz&dl=0

Let’s examine the features of each in terms of Account Keeping requirements…

THE MARSHALL ISLANDS

The relevant law in the Republic of the Marshall Islands (“RMI”) provides as follows:

Every domestic corporation shall keep reliable and complete accounting records, to include correct and complete books and records of account.

Accounting records must be sufficient to correctly explain all transactions, enable the financial position of the corporation to be determined with reasonable accuracy at any time, and allow financial statements to be prepared. Additionally, every domestic corporation shall keep underlying documentation for accounting records maintained pursuant to this sub- section, such as, but not limited to, invoices and contracts, which shall reflect all sums of money received and expended and the matters in respect of which the receipt and expenditure takes place; all sales, purchases, and other transactions; and the assets and liabilities of the corporation.

A resident domestic corporation shall keep all accounting records and underlying documentation as described in this subsection in the Republic. Upon demand of the registered agent for non-resident domestic entities in connection with the performance of its audit functions or pursuant to a valid governmental request made to the registered agent for non-resident domestic entities, every non-resident domestic corporation shall produce all accounting records and underlying documentation required to be maintained pursuant to this subsection to the registered agent for non-resident domestic entities in the Republic.

Simply put the latter provision of the legislation, ie as highlighted above, would appear to exempts Marshalls Islands IBCs from keeping to keep any financial/accounting records in the Marshall Islands!

NEVIS

Accounting requirements in Nevis are thankfully not as onerous as elsewhere.

Every Nevis entity is required to maintain sufficient and accurate records from which accounts might be prepared should the Directors or Shareholders choose to do so. In other words, there is no absolute requirement to do so.

Unlike places such as BVI, there is no requirement to file any accounting information with the Registered agent, and there is no public filing of accounts, schedules of assets/liabilities etc.

That being said, each Nevis entity is required to file a (simple one page) annual return in St. Kitts & Nevis. Where the management of the entity is conducted outside of St. Kitts & Nevis, the required return is informational only, and need not include any financial or transactional information. A sample of the current return can be viewed here: https://offshoreincorporate.sharepoint.com/:b:/s/OffshoreCompaniesInternational/EY9qhVbBnDxPqIoqK7hclxgBGxN7pKymMzwgImGS_utnCg?e=PQhIqK

To summarize each Nevis Company is required by law to keep sufficient financial records such as would enable Books of Account to be drawn up. If you do keep Books of Account, you are not required to store copies in Nevis. That said the Nevis Regulator from time to time asks us to provide financial records for various entities. If this occurs we would relay this request to you and would ask that you provide the information as requested in a reasonable timeframe. You will also need to sign and submit to our office a Financial Declaration Form once yearly. You can view a copy of the form via this Link: https://www.dropbox.com/scl/fi/tfl8w0owzoyvy7sshynim/ATSL-Financial-Records-and-Documents-Declaration-Form.pdf?rlkey=q58kcurf7s5krc8fzim806otu&st=e9jhlbdc&dl=0

SAMOA

Every company incorporated in Samoa is required to keep and maintain accounting records:

(a) to disclose the current financial position of the Company;

(b) to enable the directors to check that any accounts prepared by the Company

comply with the laws of Samoa;

(d) to detail the following;

(i) all sums of money received and expended and the matters in respect of

which the receipt and expenditure takes place;

(ii) all sales and purchase and other transactions; and

(iii) the Company’s assets and liabilities, or other arrangements; and

(e) for a period of at least 7 years from the completing of the transactions or

operations to which they relate.

Additionally, the Company must inform OCI in writing of the location where the accounting records are to be kept.

Should there be any changes to the location, the Company must inform OCI in writing of the physical address of the new location of the records within 14 days of the change of the location.

Accounting records may required by the Samoa Financial Services Authority and upon request they must be made available to comply.

SUMMARY

So that’s a wrap then! It’s surely refreshing to know if you’re looking to set up a tax free Offshore Company but don’t want to have to deal with time consuming Account Keeping requirements that there are still some options available to you!

That said, there are lots of other factors that come into play when considering where’s the best place to set up your tax free Offshore Company. The good news is that, at OCI, we provide free guidance (from our expert In-House Lawyer!) on where to set up (and how to structure) your Offshore Company!

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Where To Set Up an Asset Holding Company Tax Free Offshore

Many Offshore nil tax jurisdictions now have prohibitive/extensive Economic Substance (“ES”) requirements in regards to Holding Companies and in particular IP Holding Companies requiring such Companies to show “Economic Substance” on the ground in that jurisdiction (eg staff and or an office and or income producing activities etc)

But what if you’re looking to set up a passive asset holding Company ie a Company that is being set up purely to hold your interests (eg as an investor) in another Company?

If you are looking to set up a pure equity Holding Company (ie to hold shares in another Company) where is the best nil tax “Offshore” jurisdiction in which to incorporate such a Company ie without having to meet prohibitive ES requirements.

This article considers the current options in that regard…

Panama for Holding Companies

Panama does not currently impose formal economic substance requirements on standard holding companies, nor does it tax foreign-sourced income.

Panama does not impose Economic Substance reqs.

All companies must maintain accounting records and supporting documentation, even if they do not earn Panama-source income.
By April 30 each year, the company must submit an annual accounting declaration through its Registered Agent. If the company has foreign-source income derived from operations conducted abroad, it must submit a copy of the accounting records as part of this declaration.
Failure to comply may result in fines and administrative penalties. I enclose a guide re accounting records.

To incorporate a Company in Panama with OCI usually costs $US1,500 and from 2^nd year $890.For details of what’s included in the set-up price and annual fee from 2^nd year, check these links:

https://www.dropbox.com/scl/fi/r43bsah70rebkudj3khpk/Incorp-Package-Standard-Inclusions.docx?rlkey=fhkty35sfxd00g7ox7jgk60fs&st=7fwasq7x&dl=0

https://www.dropbox.com/scl/fi/v0duexaw0pyz1qbkt8xlv/What-do-you-get-for-your-annual-renewal-fee-COMPANY.doc?rlkey=z36pru1r8my2trvmfdhycnrdj&st=jjba8jlq&dl=0

For details in regards to the features and benefits of a Panama Company check this Link: https://www.dropbox.com/scl/fi/6v1lcouehe3fiemrp5xv8/PANAMA-COMPANIES-DETAILED-FACT-SHEET.pdf?rlkey=ydh1ehbl31o6cw52dmb1olunw&st=gzdngyto&dl=0

Samoa for Holding Companies

Samoa remains a suitable offshore financial centre for holding and managing IP, offering a flexible and confidential framework under its International Companies Act 1988.

1. Setup Requirements – Samoa International Company (IC):
To incorporate an international company in Samoa, we would require:

Proposed company name (with a few alternatives in case of name conflict)
Details of directors and shareholders (corporate or individual permitted)
Beneficial ownership information (not publicly filed)
Registered office and licensed trustee/agent in Samoa (which we provide)
Standard or bespoke Constitution (we have a standard memo)

2. Ongoing Compliance Obligations:

Annual government renewal fee
Annual trustee/registered agent service fee
Maintenance of company records at the registered office
No requirement to file financial statements or returns with the Registrar
No local tax on foreign-sourced income (tax exempt)

There is no public register of directors, shareholders, or beneficial owners, maintaining confidentiality.

3. Economic Substance Requirements:

As of now, Samoa does not impose Economic Substance requirements on international companies that are passive IP holding entities (e.g., where the company merely holds IP without commercial exploitation from Samoa).

However, if the Samoa IC actively exploits the IP (e.g., licenses IP and earns royalties), this may attract scrutiny under OECD BEPS standards. While Samoa is currently a “nil-tax” jurisdiction, the global trend is toward substance-based regulation, so we recommend:

Ensuring operational activities (licensing, IP development, etc.) are conducted outside Samoa
Clearly documenting the passive holding function of the Samoa IC
Considering a trust structure if additional layers of protection or control are desired

To incorporate a Company in Samoa with OCI usually costs $US1,500 and from 2^nd year $890.For details of what’s included in the set-up price and annual fee from 2^nd year, check these links:

https://www.dropbox.com/scl/fi/r43bsah70rebkudj3khpk/Incorp-Package-Standard-Inclusions.docx?rlkey=fhkty35sfxd00g7ox7jgk60fs&st=7fwasq7x&dl=0

https://www.dropbox.com/scl/fi/v0duexaw0pyz1qbkt8xlv/What-do-you-get-for-your-annual-renewal-fee-COMPANY.doc?rlkey=z36pru1r8my2trvmfdhycnrdj&st=jjba8jlq&dl=0

For details in regards to the features and benefits of a Samoa Company check this Link: https://www.dropbox.com/scl/fi/v7tztj8a1lkr9bvn60anz/Samoan-Companies-Page.pdf?rlkey=quov4wimgr7uqopq4lomuymnm&st=qv1otboe&dl=0

Hong Kong For Holding Companies

There are no restrictions for a HK company to hold shares of other entities.

Are there are any special compliance or ES requirements a Holding Company in HK will need to meet???

In terms of registration and ongoing renewal, there’s nothing special.

However, in terms of profits tax, the company being a multi-national enterprise structure (MNE) should check whether receiving foreign-sourced passive income (ie dividend income & disposal gain) can be exempted from HK profits tax under the Foreign Source Income Exemption (FSIE) regime.

Only income received in Hong Kong is subject to the FSIE regime. “Received” includes:

Remittance into a Hong Kong bank account;
Used to settle a Hong Kong business debt;
Used to purchase movable property brought into Hong Kong.

Exemption Conditions for Dividend Income

To qualify for exemption from profits tax on foreign-sourced dividends, the Hong Kong company must meet one of the following:

1. Economic Substance Requirement (ESR)

Applicable to non-IP income (e.g., dividends, interest, disposal gains).

The Hong Kong company must:

Conduct substantial economic activities in Hong Kong.
Have adequate number of qualified employees.
Incur adequate operating expenditures in Hong Kong.
Outsourcing is allowed if properly monitored.

For pure equity-holding companies, the ESR is less stringent—mainly requiring compliance with corporate law obligations and adequate oversight.

2. Participation Exemption

Applies to dividends and share disposal gains.

Conditions:

The HK company must be a Hong Kong tax resident or have a permanent establishment in Hong Kong.
Must hold at least 5% equity in the investee company for at least 12 months.
The investee must be subject to at least 15% corporate tax in its jurisdiction.
Must pass anti-abuse rules:
Main purpose test (not for tax avoidance)

For more information about FSIE, please refer to IRD website at: IRD : Foreign-sourced Income Exemption

To incorporate a Company in HK with OCI usually costs $US2,500 and from 2^nd year $1,800.For details of what’s included in the set-up price and annual fee from 2^nd year, check these links:

https://www.dropbox.com/scl/fi/y2a23l707hgrtli8v2mif/Hong-Kong-Company-Package-Inclusions.docx?rlkey=tjzqtxwckoyi32c5rblt20lhk&st=4v9hbqc4&dl=0

https://www.dropbox.com/scl/fi/j3h0dch2plgm5xmlic05g/What-do-you-get-for-your-annual-renewal-fee-HK-COMPANY.doc?rlkey=44ttqf86oy59jmy0tifchvgmx&st=9iopawnl&dl=0

For details in regards to the features and benefits of a Hong Kong Company check these Links: https://www.dropbox.com/scl/fi/lux40de53b7hdtxycetir/Why-Incorporate-in-Hong-Kong.docx?rlkey=fwn22c1h0mwb5l1zgo03i1rge&st=0lpfdycz&dl=0

BVI for Holding Companies

There are no special requirements for a passive asset holding company to be set up in the BVI.

The company will fall under ES as pure equity, if it will only be holding shares. Substance for pure equity will need to be set up – the fee is $1350 per annum ie on top of the usual incorporation/annual renewal fee. If the company holds something else such as bonds it will not fall within scope as a pure equity.

Pure equity companies are only required to have a BVI Agent in the BVI if it is passive. If it is an active pure equity company, eg. buying, selling, etc substance will be required.

To incorporate a Company in the BVI with OCI usually costs $US1,250 and from 2^nd year $1050.For details of what’s included in the set-up price and annual fee from 2^nd year, check these links:

https://www.dropbox.com/scl/fi/r43bsah70rebkudj3khpk/Incorp-Package-Standard-Inclusions.docx?rlkey=fhkty35sfxd00g7ox7jgk60fs&st=7fwasq7x&dl=0

https://www.dropbox.com/scl/fi/v0duexaw0pyz1qbkt8xlv/What-do-you-get-for-your-annual-renewal-fee-COMPANY.doc?rlkey=z36pru1r8my2trvmfdhycnrdj&st=jjba8jlq&dl=0

For details in regards to the features and benefits of a BVI Company check this Link: https://www.dropbox.com/scl/fi/6t1l4cefqfruzhij73kg8/BVI-IBC-FACT-SHEET-ECONOMIC-SUBSTANCE-GUIDANCE-NOTES-CURRENT.pdf?rlkey=jtwj4vxjs80q1ra2aab67z72l&st=pzi8u0ck&dl=0

Cayman Islands for Holding Companies

Along with its fellow Overseas Territories, Crown Dependencies and other international financial centres, the Cayman Islands has comprehensive legislation and regulations requiring legal entities domiciled or registered in the Islands and carrying on certain activities to have demonstrable substance in Cayman.
The International Tax Co-operation (Economic Substance) Act (Act) reflects Cayman’s commitment to its obligations as a member of the OECD / G20 global Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and corresponding EU requirements for no or nominal tax jurisdictions.
This briefing summarises the key elements of the Act, which has been subject to various updates since its introduction, and draws upon guidance (Guidance) and enforcement guidelines (Enforcement Guidelines) issued by the Cayman Islands Department for International Tax Co-Operation (DITC) which has responsibility for the supervision and implementation of the Act.

Overview

Before 31 January each year all entities must submit an Economic Substance Notification to the Cayman Islands Registrar

Within 12 months after financial year end all Relevant Entities that carried on one or more Relevant Activities must submit an Economic Substance Return to the DITC

Within 12 months after financial year end all entities that claimed to be tax resident outside of the Cayman Islands and that carried on one or more Relevant Activities must submit an Economic substance return – tax resident in another jurisdiction form (TRO Form) to the DITC

The Act requires that each legal entity domiciled or registered in the Cayman Islands must make an annual notification (referred to as an Economic Substance Notification or ESN) as to whether or not it was carrying on one or more of a defined list of activities (Relevant Activities) in the prior year and if it was, the date of its financial year end, whether it is tax resident in a jurisdiction outside of the Cayman Islands and certain identification and contact information. Entities which are in scope (Relevant Entities) and which were conducting any Relevant Activity are required to meet an economic substance test (ES Test) in respect of such Relevant Activity.
The requirements of the ES Test vary depending on the Relevant Activities conducted, and each Relevant Entity conducting one or more Relevant Activities must make an annual report (referred to as an Economic Substance Return) in order to enable their compliance with the requirements of the ES Test to be assessed or submit a TRO Form where the Relevant Entity is tax resident outside of Cayman. The DITC is responsible for determining whether a Relevant Entity has satisfied the ES Test.

Relevant Entities

Relevant Entities include all Cayman companies (including foundation companies), LLCs, LLPs, registered foreign companies and partnerships (including exempted limited partnerships, general partnerships, limited partnerships and foreign limited partnerships), except:

(a) investment funds or entities through which investment funds directly or indirectly invest or operate

(b) entities which are tax resident outside of the Cayman Islands (including, subject to certain conditions, entities which are disregarded entities for US income tax purposes)

(c) entities which are authorised to carry on business locally in the Cayman Islands as a domestic company or local partnership

An entity which carried on a Relevant Activity in the reporting year and which claims tax residency outside the Cayman Islands must submit an annual return declaring the jurisdiction in which it is tax resident and providing documentary evidence of its tax residency outside the Islands. This return also includes information on the entity’s immediate parent, ultimate parent and ultimate beneficial owner. All information submitted by such an entity to the DITC will be shared with tax authorities in the jurisdiction in which they are claiming residence and the jurisdictions of their immediate parent, ultimate parent and ultimate beneficial owner.
An entity which meets the definition of an investment fund in the Act, which may be the investment fund itself or an entity through which an investment fund directly or indirectly invests or operates (which would also generally include the general partner of an investment fund), is not a Relevant Entity and is not subject to an ES Test. It is, however, required to file an annual Economic Substance Notification to notify the DITC of its classification as an investment fund and to provide fund registration details (where relevant).

Relevant Activities
The Relevant Activities are:

fund management business
banking business
insurance business
financing and leasing business
shipping business
distribution and service centre business
headquarters business
intellectual property business; and
holding company business.

The Guidance issued by the DITC provides detailed information and sector-specific examples regarding the scope of each of these Relevant Activities and, other than investment funds, all entities will need to consider their operational activities carefully in order to determine whether they may be conducting a Relevant Activity.

The ES Test

Relevant Entities that carry on a Relevant Activity must satisfy the ES Test and, where a Relevant Entity carries on more than one Relevant Activity, it must satisfy, and report on its compliance with, the ES Test in respect of each such Relevant Activity. To satisfy the ES Test in relation to a particular Relevant Activity, a Relevant Entity must:

carry on its “core income generating activities” in relation to that Relevant Activity in the Cayman Islands
be “directed and managed” in an appropriate manner in the Cayman Islands in relation to that Relevant Activity
having regard to the level of relevant income derived from the Relevant Activity carried out in Cayman:

(a) have an adequate amount of operating expenditure incurred in Cayman

(b) have adequate physical presence (which may include maintaining a place of business or plant, property and equipment) in the Cayman Islands

(c) have an adequate number of full-time employees or other personnel with appropriate qualifications in Cayman (note that these may include outsourced personnel provided they are located in Cayman)

A Relevant Entity may satisfy the requirement that its core income generating activities be carried out in Cayman if those activities are conducted by any person and the Relevant Entity is able to monitor and control the carrying out of the core income generating activities by that other person, meaning it is permissible for Relevant Entities to implement appropriate outsourcing arrangements with service providers in Cayman. Core income generating activities should not be outsourced to service providers outside Cayman. Wherever an entity outsources core income generating activities, the outsourced service provider will be required to verify certain information regarding the outsourcing arrangement to the DITC.
The concept of holding company business (which is one of the nine Relevant Activities) is limited to Relevant Entities that only hold equity participations in other entities and only earn dividends and capital gains (known as Pure Equity Holding Companies). A Pure Equity Holding Company is subject to a reduced ES Test which is satisfied if it confirms that it has complied with all applicable filing requirements under relevant Cayman Islands legislation and has adequate human resources and premises in Cayman for holding and managing equity participations in other entities. In practice a Pure Equity Holding Company will commonly be able to satisfy the reduced ES Test by appointing a reputable registered office in Cayman.
Relevant Entities conducting “high risk intellectual property business” are subject to a higher burden of proof in demonstrating that they maintain adequate economic substance in Cayman. High risk intellectual property business generally includes scenarios where an entity did not create the IP which it holds and now generates income from that IP either by licensing it to other group entities or as a consequence of the activities of other group entities.
In order to meet the ES Test, an entity conducting high risk IP business must provide the DITC with materials which demonstrate that there is, and historically has been, a high degree of control over the development, exploitation, maintenance, protection and enhancement of relevant IP assets, exercised by an adequate number of full-time employees with the necessary qualifications that permanently reside and / or perform their activities within Cayman.
The Guidance issued by the DITC provides further information as to the meaning of “adequate” and “appropriate” for the purposes of the ES Test. Notably, such Guidance accepts that what is adequate or appropriate for each Relevant Entity will be dependent on the particular facts of the Relevant Entity and its business activity and requires that the directors (or equivalent) of each Relevant Entity make a determination on these matters in good faith.

Core income generating activities
The Act defines “core income generating activities” (CIGA) as activities that are of central importance to a Relevant Entity in terms of generating relevant income (meaning income derived from the Relevant Activity) and requires that these be carried on in Cayman. The Act provides examples of core income generating activities for each Relevant Activity. For example, for financing and leasing business, CIGA include:

negotiating or agreeing funding terms
identifying and acquiring assets to be leased
setting the terms and duration of financing and leasing
monitoring and revising financing or leasing agreements and managing risks associated with such financing or leasing agreements

These lists of CIGA are not prescriptive and it is not the case that a Relevant Entity which conducts the Relevant Activity must conduct all of the listed CIGA. However, to the extent the Relevant entity does conduct the relevant CIGA, that CIGA must be conducted in the Cayman Islands. It should also be noted that where a Relevant Entity contracts to conduct a CIGA, it will be considered to be doing such an activity notwithstanding any delegation arrangement.

Directed and managed
To be considered to be “directed and managed” in an appropriate manner in Cayman generally requires that:

the Relevant Entity’s board of directors, as a whole, has the appropriate knowledge and expertise to discharge its duties as a board of directors in relation to the Relevant Activity
meetings of the board of directors are held in Cayman at adequate frequencies given the level of decision making required in relation to the Relevant Activity
there is a quorum of directors present in Cayman during the meetings described in the second bullet point above
the minutes of the board of directors record the making of strategic decisions of the Relevant Entity at the board meetings held in Cayman
the minutes of all meetings of the board of directors, together with other appropriate records of the Relevant Entity, are kept in Cayman

A meeting will be considered to be validly held in Cayman for these purposes only if:

the situation of that meeting would be deemed to be in Cayman under the constitutional documents of the Relevant Entity (this is commonly decided by the location of the chairman of the relevant meeting)
at least that number of directors of the Relevant Entity constituting a quorum are physically present in Cayman for the meeting

Key dates
The Act and accompanying regulations provide a timetable for compliance, notification and reporting.

Compliance
The ES Test must be satisfied from the date on which the Relevant Entity commences the Relevant Activity until the date that the Relevant Entity ceases carrying on the Relevant Activity (or ceases to be a Relevant Entity).

Notification
By 31 January in each calendar year, all legal entities domiciled or registered in the Cayman Islands must file an Economic Substance Notification to notify the DITC as to whether they conducted any Relevant Activities and whether they were a Relevant Entity during their financial year which commenced in the prior calendar year (that is the notification in 2025 would relate to financial years commenced in 2024, whether that be 1 January 2024 or 1 September 2024, for example).
This notification is made via the entity’s registered office to the Cayman Islands Registrar. Notwithstanding the 31 January deadline, no penalties accrue unless the notification has not been submitted by 31 March. Any legal entity which intends to terminate, migrate to another jurisdiction, deregister as a foreign company or be merged or consolidated with one or more other entities, is required to submit a notification for the current year before it becomes deactivated by the Cayman Islands Registrar.

Reporting for Relevant Entities

Each Relevant Entity conducting a Relevant Activity must submit an Economic Substance Return to the DITC within 12 months of the end of its financial year regarding its compliance with the ES Test during that financial year. This return includes various financial, ownership and other data and any Relevant Entity conducting a Relevant Activity must also provide its books of account or financial statements for the relevant financial year.

Reporting for entities claiming tax residency outside of the Cayman Islands

Each entity that carried on a Relevant Activity but which is not a Relevant Entity by reason of its tax residency in a jurisdiction other than the Cayman Islands must submit a TRO Form to the DITC within 12 months of the end of its financial year. As noted above, this includes providing documentary evidence of its tax residency outside Cayman and providing information on the entity’s immediate parent, ultimate parent and ultimate beneficial owner.

Record keeping
A Relevant Entity that is required to satisfy the ES Test in relation to a Relevant Activity must retain for six years after the end of its financial year records that relate to the information required to be provided to the DITC.

To incorporate a Company in the Caymans with OCI usually costs $US $US 3,271.50 and from 2^nd year $$2,721.50. For details of what’s included in the set-up price and annual fee from 2^nd year, check these links:

https://www.dropbox.com/scl/fi/r43bsah70rebkudj3khpk/Incorp-Package-Standard-Inclusions.docx?rlkey=fhkty35sfxd00g7ox7jgk60fs&st=7fwasq7x&dl=0

https://www.dropbox.com/scl/fi/v0duexaw0pyz1qbkt8xlv/What-do-you-get-for-your-annual-renewal-fee-COMPANY.doc?rlkey=z36pru1r8my2trvmfdhycnrdj&st=jjba8jlq&dl=0

For details in regards to the features and benefits of a Caymans Exempt Company check this Link: https://www.dropbox.com/scl/fi/unchix11ik987n9x3gl9y/Caymans-Exempt-Companies-Fact-Sheet.docx?rlkey=oezdaxq7s2gh4h5shx5z3y5hh&st=mekwvb8r&dl=0

BVI Incubator Funds & BVI Approved Funds Compared

For some years now the British Virgin Islands has the been the jurisdiction of choice for Start Up Fund Managers and Established Fund Managers alike.

If you’re looking to launch a Fund then you’ll be pleased to know that the BVI offers multiple alternatives including:

The BVI Incubator Fund
The BVI Approved Fund
The BVI Private Fund
The BVI Professional Fund &
The BVI Public Fund

For a detailed summation of all the above options check this Link: https://offshoreincorporate.com/bvi-investment-funds/

For most Start Up Funds the choice will come down to setting up either a BVI Incubator Fund or a BVI Approved Fund. The purpose of this article is to take a detailed look at the features of, and the differences as between, the two options.

The BVI Incubator Fund

The BVI Incubator fund (the “Incubator Fund”) is geared towards start up investment managers who wish to offer investments into a regulated investment fund at a reasonable cost to build up their track record. The key characteristics of an Incubator Fund are:

The total number of investors is restricted to 20,
An investor must initially invest at least USD20,000,
The net assets of the Incubator Fund must not exceed USD20,000,000 (or its equivalent in any other currency),
No requirement to have an offering document in place,
No requirement to have third party service providers appointed,
No requirement to file audited financial statements, and
The life span is limited to 2 years (or 3 if an extension is granted) after which an Incubator Fund may be converted into a Professional Fund, a Private Fund or an Approved Fund. Alternatively, an Incubator Fund can also be converted into an unregulated closed-ended fund.

An Incubator Fund must:

Have two directors, one of which must be an individual
Have a BVI based authorised representative (which is a service that OCI can/will provide). The authorised representative will serve as a conduit between the fund and the BVI Financial Services Commission (the “FSC”),
Submit financial statements annually (which need not be audited),
Submit returns to the FSC regarding its status, i.e. the number of investors, total investments, aggregate subscriptions and redemptions, net asset value of the fund and details of any significant investor complaints; and
Notify the FSC within 14 days of any changes to the information provided in the application or in relation to any matter which is likely to have a material impact on the fund.

The BVI Approved Fund

The approved fund (the “Approved Fund”) is geared towards ‘family and friends’ funds managers. Its key characteristics are:

The total number of investors is restricted to 20
Net assets of the Approved Fund must not exceed USD100,000,000 (or its equivalent in any other currency)
No minimum investment
No requirement to have an offering document in place
No requirement to have third party service providers appointed, except for appointment of a fund administrator which will, in short, provide the Approved Fund with registrar and transfer agent and net asset value calculation services, and
No requirement to file audited financial statements

Although not required by law, in practice the Approved Fund will often have a third-party investment manager appointed.

An Approved Fund must:

Have two directors, one of which must be an individual
Have an authorised representative
Submit financial statements annually (which need not be audited),
Submit returns to the FSC regarding its status, i.e. the number of investors, total investments, aggregate subscriptions and redemptions, net asset value of the fund and details of any significant investor complaints; and
Notify the FSC within 14 days of any changes to the information provided in the application or in relation to any matter which is likely to have a material impact on the fund.

If you want to keep Fund Admin in-house you could potentially apply for an Approved Manager’s License. This license/qualification offers investment fund managers and advisors a simple and cost-efficient approval process in obtaining a licence for the provision of management or advisory services to BVI and certain foreign funds (including for example Jersey and Cayman Islands funds) or entities bearing similar characteristics to a fund.

Incubator Fund Requirements

A BVI Incubator Fund has a minimum investment requirement of US$20,000, a cap on net assets of US$20M and can take in no more than of 20 investors. An Incubator Fund does not need to appoint an Administrator or a Custodian or an Investment Manager or an Auditor.

An Approved Fund has a net asset cap of US$100 Million and no minimum investment requirement but is limited to no more than 20 investors. An approved fund is required to appoint an Administrator but does not need to appoint a Custodian or an Investment Manager or an Auditor.

Application Process

An applications for approval as an Incubator Fund or an Approved Fund must be lodged with the Commission and be accompanied by:

the constitutional documents;
details of the investment strategy;
a prescribed form of investor warning; and
an application fee (US$1,500).

An Incubator Fund or Approved Fund can commence business 2 days from the date of receipt of a completed application by the Commission.

Duration & Conversion of Incubator Fund

An Incubator Fund has a limited life span of two years which can be extended for up to 12 months. An Approved Fund has no such limits. An Incubator Fund can convert to an Approved Fund, a Private Fund or a Professional fund, or may be wound up at the end of its term. An Incubator Fund can convert to a Private Fund or a Professional Fund or to an Approved Fund by lodging the required/prescribed application with the Commission.

Ongoing Obligations

Part of what keeps the set up and admin costs low is that service provider requirements are minimal:- Each fund is only required to appoint an Authorized Representative in the BVI and an Approved Fund is required to have an Administrator at all times. Pleasingly, there are no mandatory custody requirements and there is no requirement for the issuance of an Offering Document. If/where the fund decides to not issue an Offering Document, the required investor warnings can be set forth in a separate Term Sheet.

The key regulatory requirements for an Incubator Fund and Approved Fund are:

An annual fee of US$1,000 is payable to the Commission on or before 31 March of each year
Must have a minimum of two directors at all times, one of whom must be an individual
The Fund Entity must notify the Commission of any change to any of the information submitted to the Commission in the set-up application; (eg you’d need to advise of any conduct which has, or is likely to have, a material impact or significant regulatory impact, changes to directors, etc changes to ownership/promoter structure etc).
Prepare and file annual financial statements with the Commission (note there is no requirement for an independent audit)
Twice a year you must file a return with the Commission

The main advantage of the BVI is that is attractive to investors – it has a proven name/track record in the International Financial Services world in that its perceived to be a safe and well-regulated jurisdiction. Setting up in the BVI should also assist you to get access to the widest range of Banks/Brokers/Crypto Exchanges etc. (Along with the more expensive/more heavily regulated Cayman Islands), over the course of the past 20 years, the BVI has grown to become THE GO TO jurisdiction for Fund Managers/promoters.

The BVI Government advertising claims that you can get a BVI Incubator fund approved within 6 weeks. That is grossly misleading. The process of creating an Incubator or Approved Fund and getting it licensed is like building a house. When building a house you need to engage a qualified Builder to find/hire/manage the various tradesmen and to help you navigate your way through the approvals/registration/licensing process. It’s the same with setting up a first time Fund. Like building a house, the entire process to get a BVI Incubator Fund or Approved Fund to the licensed/operational stage can take 6 months. To make the process happen as quickly as possible (and to ensure you get the right advice/guidance and don’t run aground on unseen reefs!) you need to hire a Corporate Services Provider that knows (or can find) and can bring together all the various players for you (including Lawyers, Specialist Company Incorporators, local Authorized Representatives, BVI Registered Agents/Registered Office providers, Fund administrators, nominees, banks etc). OCI can perform that role for you. We have set up multiple versions of both Incubator Funds and Approved Funds in the past 12 months and are well versed with the current regulatory landscape in the BVI.

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Are Belize LLCs liable for tax in Belize?

Recently Belize took steps to make Belize IBCs liable for tax in Belize. (Check this article which explains: https://www.dropbox.com/scl/fi/o7395wjgx6ilmle8dcpah/Belize-IBCs-Tax-Position-at-16.10.24.docx?rlkey=0xd4m3sjrmyhu0a5u7isxdrur&st=8eeite23&dl=0 )

But what about Belize LLCs??? Are they liable for tax in Belize?

A Belize LLC must apply for a Tax Identification Number (TIN) using Form 100, selecting the sole proprietorship option assuming it has a single member – which most (smart) Belize LLC owners have ie most clients choose to deploy a Private Foundation to act as shareholder ie to try and avoid CFC rules. (You can view the Form 100 via this Link: https://www.dropbox.com/scl/fi/1spa28x6ain98632wxv13/BTS100-Form-1-3.xlsx?rlkey=nizl6lhq9l0hi9021fuwe6t8p&st=6kgemos9&dl=0 )

LLCs are pass through entities ie they are akin to partnerships and in the case of Partnerships the income is attributed ie “passed through” to the partners/members (ie shareholders) who are liable to declare that income at home ie if they live in a taxable jurisdiction.

At present, where the sole member (ie shareholder) of a Belize LLC is a non-resident and the LLC has no Belize-sourced income, BTSD (the Belize Tax Service Department) has not issued any formal mechanism to attribute or collect tax from the foreign member. Accordingly, while TIN registration is required, there is no current indication that tax would be payable in Belize based on the information provided.

But what does the legislation say?

Section 94 of the recently amended Belizean International Limited Liability Companies Act states:

94.–(1) A limited liability company shall be subject to income tax, business tax, withholding tax, asset tax, gift tax, profits tax, capital gains tax, distributions tax, inheritance tax, estate duty or any other like tax based upon or measured by assets or income originating outside of Belize or in connection with matters of administration that may occur in Belize and the payment of stamp duties.

(2) For the purposes of income and business tax under the Income and Business Tax Act, a limited liability company–

(a) with only a single member, shall be deemed a disregarded entity whose income and receipts shall be deemed the income and receipts of the single member;

(b) with at least two members, shall be taxed as a partnership, unless such limited liability company elects, in the manner prescribed, to be taxed as a company.

If a Belize LLC is deemed a disregarded entity, doesn’t that mean that the income is attributed to the foreign member directly who is not a Belizean tax resident and consequently, should not be liable to pay any tax in Belize?”

This section of the Legislation seems to confirm that Belize LLCs are NOT liable for tax in Belize…

(This guidance is based on current BTSD practice and our understanding as of today’s date ie 3.8.25. We cannot rule out the possibility that BTSD may issue new guidance or take a different position in the future).

UPDATE

On 7 October the Belize tax Authorities advised that Belize LLCs are in fact now liable to pay tax in Belize on worldwide income.

Business tax in Belize is based on gross receipts (not net income).

General trade and business, the rate is 1.75%

Professional Services (like accounting, law, consulting etc) 6%.

Holding companies, 0%.

There are other categories (mostly affecting local businesses) but these are the general rates.

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

ocil@protonmail.com

oci@tutanota.com