Venezuela: First Government To Launch Its Own Cryptocurrency

Caracas, Venezuela: Crisis-ridden Venezuela is launching an oil-backed cryptocurrency on Tuesday that it hopes will help circumvent US financial sanctions and resurrect the country’s moribund economy.

 

The pre-sale of the “petro,” which will represent a barrel of crude from a specific division in the country’s Orinoco oil belt, started on Tuesday morning. Investors were offered US$60 “tokens” at discounted rates that they can exchange for petros during what is being dubbed an “initial coin offering,” or ICO, in March.

 

“The petro is born,” President Nicolas Maduro said in a video he tweeted late Monday. “We’re going with force, and we’ll achieve total success for the benefit of Venezuela and the happiness of our people.”

 

Sceptics have expressed doubts that the currency will thrive, mainly because of lack of trust in a government whose debt is being renegotiated and whose policies have brought skyrocketing inflation. In addition, the country’s once-thriving oil company, Petroleos de Venezuela S.A. (PDVSA), is producing at its lowest levels in decades.

 

Some critics also say the project does not make technical sense because the government will have too much space to manipulate the coin.

But proponents believe buyers may find the currency appealing since it is backed by a commodity and an administration with incentives to see it succeed.

 

Other cryptocurrencies have experienced considerable instability. The value of bitcoin, for instance, soared more than 300 per cent between August and December 2017, then plunged more than 50 per cent to its current level.

 

The first cryptocurrency officially launched by a government, the petro aims to offer a more stable option and may serve as an experiment for countries such as Russia. Moscow also faces US financial sanctions, and Russian officials have recently toyed with the idea of creating a “cryptoruble.”

But many analysts are dubious that the experiment will succeed.

 

“It honestly sounds like they don’t really understand how any of it works,” Alex Van de Sande, a Brazil-based developer for the Ethereum Foundation, said in a phone interview.

 

“Unfortunately, that doesn’t mean it won’t raise money. We’ve seen terrible ideas that don’t make any sense raise a lot of it,” he said. “If I wanted to avoid international sanctions and make money appear out of thin air in my country hiding the origin, I guess this petro would be a useful way.”

Jean Paul Leidenz, an economist at Ecoanalitica, a Venezuelan financial consulting firm, said he sees no chance that the project will inspire enough trust to substitute petros for the crumbling national currency, the bolivar, or even pay impending sovereign and PDVSA debts.

 

In many ways, it is designed to give the government enough space to manoeuver, he said. For instance, it is not clear whether or how buyers will be able to claim rights over the barrels of oil that back the currency, or whether the coins will work as bonds for which holders will be paid once they want to cash their money out.

 

“The government may still get millions of fresh dollars from Russian and Arab investors,” Leidenz said. “But from that to succeeding as a currency? I don’t think so.”

 

Indeed, many issues may erode the petro’s credibility. Venezuela’s opposition-led National Assembly has called the project illegal, arguing that oil assets cannot, by law, be sold, and that the currency is a form of debt that has to be approved by the legislature. Maduro, however, has ignored the institution for years now.

 

The US Treasury Department also recently told Reuters that buying petros could be seen as “an extension of credit to the Venezuelan government,” which could violate sanctions and expose US citizens to “legal risks.”

 

But Mati Greenspan, senior market analyst at social trading network eToro, said in a phone interview that he thinks the petro does have good prospects.

 

“It’s a milestone – an extremely exciting project that has a great chance of working, and is definitely better than continuing with the status quo,” he said.

 

With confidence in the national currency at rock-bottom, the government hopes that backing a currency with a commodity on an open-source platform will engender trust and transparency, Greenspan said. “If Venezuelans adopt it and see it as a force of good, then the crypto community will be there in a flash,” he said.

 

During the initial coin offering in March, the government plans to sell 82.4 million petros to the public at a discount from the official $US60 value. People will then be able to buy petros from those who obtained them during the ICO.

 

Under the plan, Venezuelans would eventually be able to use the petro to make payments to public institutions, including tax payments, according to official documents explaining the initiative. No more than 100 million petros will be created unless the “Superintendency for Cryptocurrency” approves making more after counting holders’ votes, the documents say.

 

The Washington Post

 

How To Use a Tax Free Offshore Company To Invest in an ICO

Investing in an ICO (Initial Coin Offering) is an activity that lends itself well to an Offshore Corporate Structuring Plan.

 

How it works is:

 

(a)    You incorporate a tax free Offshore Company (“OC”)

 

(b)   You structure the Company in such a way as to ensure that the Company is seen to be managed and controlled from Offshore; This can/will be achieved by via deployment of a tax haven based Nominee Director (which is a service that OCI can/will provide)

 

(c)    Your OC either signs a general investment with the Company doing/launching the ICO or subscribes for shares in the said Company

 

(d)   You advance funds to your OC

 

(e)   The OC then advances funds to the ICO Company

 

(f)     The ICO Company utilizes your money to help develop or market its particular/unique Cryptocoin and in return gives you a Token.

 

(g)    Typically the Token will entitle you to receive a quantity of the ICO Company’s Cryptocoins and/or it will entitle you to a share of the Company’s profits (which are typically paid in Cryptocurrency).

 

(h)   At a certain point in time you will probably want to cash in your Coins (or your share of the ICO’s profits) and exchange same for for hard currency (eg USD/Euro etc). This money would be paid to your OC and banked free of tax

 

(i)      For all intents and purposes the OCs profits are generated in a nil tax environment tax free/offshore (ie provided the OC is structured properly)

 

(j)     If you structure the tax free Offshore Company correctly you should only be liable for tax at home once you draw down money from the OC.

 

(k)    This should enable you, via the power of compounding, to grow your nest egg MUCH faster than you would otherwise had your company been liable to account for Corporate/etc tax each year (eg up to 40%, depending on where you live).

 

Note if you need to draw on these returns at home (or send hard currency to your IBC) there are several ways to go about this discreetly.

 

Local laws can have an impact. Hence you should seek local legal/tax/financial advice before committing to set up an Offshore Company for such purposes.

 

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

 

ICOs – What is a Token?

Token is a relatively new term in the business world but a key part of the vocabulary of those actively involved in the Cryptosphere particularly those involved in Cryptocurrency Coin Startups known as ICOs (Initial Coin Offerings).

 

In simple terms a Token can be described as a unit of value issued by a private company/entity.

 

Typically a Token is something that an organization creates to (a) self-govern its business model, and (b) empower its users to interact with its products. A Token also typically facilitates the distribution and sharing of rewards and benefits to all of the organization’s stakeholders.

 

A Token is an intrinsic component in a next-generation cryptocurrency 2.0 application. Like Bitcoin, it isn’t something that you can physically hold. Instead it is an electronic record – a kind of digital poker chip – stored on your computer, or mobile device. It securely records that you’ve made an entry level investment entitling you to certain rights once the business matures – Tokens are designed to let you participate in the project once it comes to market. Depending on what service the project offers, the Token will serve as a kind of access ticket to that service.

 

If the project is a software application for example that lets you find ride sharing partners without the use of a central website, then you might use tokens to pay for your rides.

 

From a Lawyer’s perspective a Token can be used in whichever way the person or organization designing and developing it decides. Ideally, from an investor’s viewpoint, a Token should entitle the investor to part of the Company’s revenue. Moreover a Token can admit several layers of value inside it, so it is the Token’s designer who decides what a specific Token will have inside.

 

Whilst Tokens bear many similarities to Bitcoins (eg they have a value attached to them which is accepted by a community and are blockchain-based), they typically serve a much wider purpose; Tokens are more than a currency because they can be used in a broader range of applications. Also, virtually all tokens rely on Ethereum’s blockchain protocol, which, is viewed by some Industry insiders as being more complete than Bitcoin’s blockchain.

 

From a Computing/IT Perspective Tokens are a representation of a particular asset or utility, that usually resides on top of another blockchain. Tokens can represent basically any assets that are fungible and tradeable, from commodities to loyalty points to even other cryptocurrencies!

 

From a Developer’s perspective the process to create a Token is a much easier than creating a Cryptocoin as you do not have to modify the codes from a particular protocol or create a blockchain from scratch; All you have to do is follow a standard template on the blockchain – such as on the Ethereum or Waves platform – that allows you to create your own Tokens. This functionality of creating your own Tokens is made possible through the use of smart contracts; programmable computer codes that are self-executing and do not need any third-parties to operate.

 

Tokens and ICOs

 

In the case of an ICO instead of a traditional fund-raising round, or even an IPO, companies offer Tokens – not shares – to the market, and investors typically use digital currencies like Bitcoin to pay for these Tokens. (Everything through blockchain.)

 

Unlike an IPO (Initial Public Offering), where investors receive shares in the Start Up Company, in an Initial Coin Offering, the Tokens are usually new digital currency units. These can be traded for other currencies or for the purchase and use of certain products developed by the start-up or licenses to run the software developed. In some cases, some ICOs issue their Tokens on existing digital currencies, where the Tokens represent voting powers in the invested project.

 

During an ICO, the investors buy Tokens at a previously established price which may vary depending on the stage the ICO has reached. Typically Token prices increase progressively as different investment thresholds are achieved, encouraging and rewarding early investors (ie ICO participants).

 

In a professionally run ICO model that raises funds by issuing Tokens, the Developers should:

 

  • Incorporate a Company
  • Publish its/their ICO rules
  • Present the Investor (ie a would be Token Purchaser) with a purchase agreement (and/or terms and conditions presented on the ICO website) drafted by a competent Lawyer which:

(a)    Clearly explains what the Investor is getting for his money ie what the Token can be used for (and/or how it can be used) and (b)

(b)   Makes it clear in the purchase agreement that the Token is not a security

(c)    Contains disclaimers warning the investor that the value of the Token could rise or fall depending on market and legal/regulatory conditions

 

If the ICO is incorporated Offshore (ie in a zero tax jurisdiction), profits realized by the ICO Founders/Promoters could potentially be banked and or reinvested tax free. (Check our Blog Article 5 articles down from this which explains, in detail, how).

 

Likewise anyone investing in an ICO can potentially bank his/her investment income/return and capital gains tax free by setting up a tax free Offshore Company as his/her investment holding 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

 

Netherlands To Expand Its DTA Network

The Netherlands will seek to resume discussions towards establishing Double Taxation Avoidance Treaties (“DTATs”) with several countries in 2018, including the United States, the Netherlands Government has announced.

 

The Dutch Government will attempt to begin tax treaty talks with at least seven countries this year, including Australia, Colombia, Costa Rica, Ecuador, Morocco, Austria, and Portugal, according to an update on the Dutch tax treaty negotiation program, issued by the Ministry of Finance on January 26.

 

In addition, the Netherlands has announced it will continue discussions for new or updated treaties with several other jurisdictions, including, among others, Andorra, Belgium, Brazil, Chile, France, Liechtenstein, Mozambique, Uganda, Pakistan, Senegal, Sri Lanka, and possibly the United States.

 

Recently, the Netherlands has concentrated on agreeing new or updated treaties with developing countries. Treaties have been negotiated or renegotiated with 23 developing countries, the ministry said.

 

However, the tax treaty negotiations with Uganda, Sri Lanka, and Pakistan will mark an end to this developing country strategy, the Ministry added.

 

What is a DTAT?

 

A DTA (Double Taxation Avoidance Treaty) is a bilateral treaty (ie a legal agreement signed by two countries) which is designed to avoid persons being taxed twice ie in 2 countries on the same income. DTA’s usually also set out the taxing rights of each country where there would otherwise be a dispute about who has the taxing rights over certain income/gains.

 

DTAs tend to reduce taxes of one treaty country for residents of the other treaty country in order to reduce double taxation of the same income and to attract inward investment from the country receiving WHT discounts. The provisions and goals vary highly; very few tax treaties are alike. Most treaties:

 

  • define which taxes are covered and who is a resident and eligible for benefits,
  • reduce the amounts of tax withheld from interest, dividends, and royalties paid by a resident of one country to residents of the other country,
  • limit tax of one country on business income of a resident of the other country to that income from a permanent establishment in the first country,
  • define circumstances in which income of individuals resident in one country will be taxed in the other country, including salary, self-employment, pension, and other income,
  • provide for exemption of certain types of organizations or individuals, and
  • provide procedural frameworks for enforcement and dispute resolution.

 

What is a Holding Company and How Are Holding Companies Used?

 

The term holding company is usually used to describe a company which is set up (not to own/operate a business but to) passively hold an asset eg the shares of another company or a piece of real property.

 

Usually all a holding company does is receive passive income eg dividends if it owns shares in other companies or rent eg if it owns real property. The advantage of setting up a Holding Company “Offshore” is if you incorporate it in the right place and structure it properly (a) you might minimize withholding taxes when dividends etc are paid to the Holding Company (see below) and (b) you can potentially receive (and reinvest) your passive income free from tax.

 

The other advantage of setting up a Holding Company “Offshore” is privacy. If you don’t want certain persons to know that you own a particular asset or assets you might choose to set up your holding company in a privacy haven ie somewhere which does not have a public register of directors or shareholders or beneficial owners.

 

A Holding Company is often placed between a Trading company and the Ultimate Holding Entity (which might be a Company or Trust or a Foundation) as a means by which to access a favorable DTAT (ie Double Taxation Avoidance Treaty) such as would enable you to reduce the withholding tax (“WHT”, see below which explains in detail what WHT is) that would otherwise apply on dividends, interest or royalties paid by a Trading Company to your Ultimate Holding Entity.

 

Commonly when dividends, interest or royalties are paid by an onshore company to an offshore shareholder Withholding Tax (WHT) of around 20% is payable in the country from where the payments are being made.

 

However deals are often brokered between countries and written in to a DTAT which afford WHT discounts if the shareholder is a resident of, or incorporated in, a particular country.

 

For example Mauritius Companies are commonly used to hold shares in Indian Companies as Mauritius has a favorable DTAT with India that affords WHT discounts to Mauritius persons or companies.

 

Likewise Seychelles Holding Companies (CSLs) are commonly used to hold shares in Chinese Companies as China has a favorable DTAT with Seychelles that affords WHT discounts to Seychelles persons or companies.

 

The Netherlands is another popular place for the incorporation of Holding Companies as it has an extremely wide (and ever growing, as the above header article shows) network of WHT friendly DTATs.

 

Other popular low tax Holding Company Jurisdictions include Ireland, Malta and Cyprus.

 

The question of where to incorporate your Holding Company depends entirely on where the payments are coming from. Once you’ve decided on that we can advise on choice of Holding Company Jurisdiction.

 

What is Withholding Tax (WHT)?

 

Withholding tax (“WHT”) is tax levied:

 

(a)  When a company incorporated in one country pays dividends to a shareholder of that Company who is resident in a 2nd country

(b)  When interest is paid by a company incorporated in one country to a lender resident in a 2nd country

(c)   When a royalty is paid by a company incorporated in one country to a party resident in a 2nd country

 

The applicable rate of WHT is usually somewhere between 15 and 25%.

 

The rate of WHT applicable may be reduced if the person (or entity) receiving the interest/dividend/royalty payment is tax resident in a country which has a favorable Double Taxation Avoidance Treaty (ie one allowing for a reduced WHT percentage) with the country from which the payment is coming.

 

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 Tax Free Bitcoin Exchange Offshore

A Bitcoin/Cryptocurrency Exchange Business (ie an Enterprise that offers to buy Cryptocurrencies paying for same in either hard currency or some other form of Cryptocurrency in return for a Commission) lends itself well to an “Offshore” Corporate Structuring Plan.

 

In principle here’s how it can/will work:

 

  1. A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated
  2. A website is created and tailor made software developed – the IBC will be the owner of this website and the software and all the hardware required to run it
  3. The IBC owns/operates the business (eg ownership of the web-domain and the website/artworks or trademark/s or any sole distributor rights are held by or transferred to the IBC)
  4. An Offshore account (which received payments via a merchant account) is set up in a nil tax banking centre
  5. Ideally the server is located in a country which does not tax business on the basis of server location (eg Singapore)
  6. Customers contracts with and agreed to pay the IBC a commission on all sales concluded as a consequence of buyer/seller introductions enabled by the site.
  7. All such monies are banked free of tax in the first instance
  8. You or your local company would be contracted by the IBC to manage sales or provide accounting services or do website maintenance/whatever.
  9. You would invoice the IBC periodically (eg monthly) for this service which income would be assessable income in your home state – though a smart Tax Accountant should be able to assist you to claim a series of expense against this income (eg home office, equipment, travel, phone/internet/utilities etc) to significantly reduce the amount of tax payable on this income.
  10. Often there is some kind of intellectual property (“IP”) created or behind such a business (even if it’s just the website/design). It may be advantageous to you down the track if ownership of the business and the IP were held by 2 different entities. What you can do there is set up a 2nd IBC to own the IP. The first IBC (ie the Trading Company) pays license fees periodically to the 2nd IBC which fees wold be receipted tax free. This could be advantageous if you wanted to bring ownership of the web-business onshore or if you wanted to sell the business but keep a passive (potentially tax free) income stream
  11. Ideally once you start to grow you and to add substance you would be wise to set up your MD/Board and or a sales team onshore to take orders and receive income in a low tax onshore environment (eh Hong Kong, Ireland, Singapore, Cyprus etc as per the Amazon/Google model)

 

To minimise the chances of the IBC being taxed onshore ideally the IBC should be (and be seen to be) managed and controlled from offshore. How this can be achieved is including a Nominee Director etc as part of the Corporate structure. See this page for details of how that can work:

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/

 

Additionally if you live in a country which has CFC laws (see below which explains what CFC laws are) and/or if you don’t want your local tax authorities to become aware of your Offshore Company’s Bank Account (and, incidentally, your position as “beneficial owner” of the Company) you’d be wise to include a Foundation as part of the Corporate structure. See below “Why set up a Foundation” which explains how/why.

 

What is a Controlled Foreign Corporation Law?

 

A Controlled Foreign Corporation (or CFC) Law is one which purports to tax onshore income or capital gains made by Companies incorporated Offshore but which are controlled from onshore. Most western countries have them (see below which lists ALL countries with CFC laws presently).

 

Essentially how a CFC law works is if an individual owns or has the capacity to own the overriding majority of shares in an Offshore Company (the percentage of which varies from country to country) the that person is required to declare in his local tax return profits made by the Offshore Company.

 

How CFC laws came about was around 30 years ago the big western countries began to realise that certain of their citizens were using nil tax Offshore companies to avoid having to pay tax at home on their non-local sourced (ie international) income. In particular the CFC laws target the use of Nominee Shareholders and Directors. If you live in a country which has CFC laws (regardless of whether you are the director/shareholder of the Company or not) if you have the capacity to own and control the company by reference to shareholdings then you would be required to declare and pay tax at home on your Offshore Company’s earnings.

 

There are several ways to get around CFC laws. Historically clients used commonly to deploy an Offshore (Discretionary) Trust to own the shares of the Offshore Company. However with more and more “Onshore” tax systems claiming tax from any Trust with an onshore resident beneficiary discerning clients these days choose to establish Private Foundations (in particular Seychelles Foundations) as the ultimate holding entity as such entities should not caught by CFC laws or by CFT (Controlled Foreign Trust) Laws. For more detail click on these links:

 

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

 

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

 

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

 

Why Set Up a Foundation?

 

If an IBC alone is used to own/operate your Bitcoin/Cryptocurrency Exchange Business you will still be liable to declare and pay tax at home on your IBC’s earnings if/when you live in a country which has a Controlled Foreign Corporation (“CFC) law. Failure to do so would most likely constitute tax evasion.

 

What you might do then is set up a Private Interest Foundation to own the shares of the Offshore Company.

 

We used to use Offshore Trusts for such purposes back in the noughties but the problem there is that you have someone (ie a Trustee) holding property for the benefit of 3rd parties who are inarguably beneficial owners of that property and probably/potentially entitled to the income/capital of the Trust (which can have tax consequences onshore).

 

A Foundation is very similar to a Trust in that it’s set up by a Founder (like a Settlor in the case of a Trust) and managed day to day by a Councillor (like a Trustee in the case of a Trust) who manages the Foundation property for the benefit of the beneficiaries of the Foundation. A key advantage of a Foundation is that it’s a separate legal entity in its own right (ie the Foundation actually owns the assets held by the Foundation – unlike a Trustee who holds property for someone else ie the beneficiaries) and generally speaking the beneficiaries are not entitled to the income or capital of the Foundation until it’s actually received.

 

What this means as a beneficiary is that you should be able to defer paying tax at home on the income of investments held by the Foundation enabling you to reinvest 100% of that income not just the after tax component. (One jurisdiction ie Seychelles has even taken this a step further by specifically stating in their law that the legal and beneficial owner of any asset held by the Foundation is the Foundation itself).

 

Seychelles Foundations

 

If you are a resident or citizen of a country which has the ability to track Offshore Bank account beneficiary details and you would like to keep private details of your Offshore earnings (or if you plan to set up a very sensitive business eg one that might illegal if owned/operated from where you live) again a Seychelles Foundation can help:

 

How so?

 

It all comes back to the legal structure/operation of the Seychelles Private Interest Foundation.

 

Bottom line is notwithstanding that individuals (or a class of beneficiary) may be named as beneficiaries in the Regulations:

 

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

 

As such there is no “beneficial owner” of the Foundation. The beneficial owner of any property/asset owned or held by the Foundation is the Foundation itself. Hence when we open a bank account for your Company, if the shareholder of the Company is a Seychelles Foundation, your name shouldn’t be written into the bank’s records as “beneficial owner” of the Company.

 

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 Transfer Ownership of Bitcoin 2 an Offshore Company

If you’re looking to trade or invest in Bitcoin/Cryptocurrency using a tax free Offshore Company chances are:

 

(a)  you’ll already have a stash of Bitcoin/cryptocurrency; and

(b)   you are wondering how you could or should go about transferring ownership of that currency to your tax free Offshore Company, once incorporated.

 

However you go about it you’ll want to ensure that at the point when you realize your gain (eg when you convert the Cryptocurrency into Hard Currency) that, at that point in time, the Cryptocurrency is owned by – and the gain occurs in the name of – your tax free Offshore Company (“IBC”).

 

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

 

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

 

If a deal is struck for the IBC to buy the Cryptocurrency before the Cryptocurrency gains traction in the market, ownership of the Cryptocurrency might even be transferred for nominal consideration enabling you to transfer legal ownership of the Cryptocurrency to the IBC before the Cryptocurrency experiences significant appreciation in value.

 

Alternatively, you might transfer ownership of the Cryptocurrency to your tax free Offshore Company for an agreed price but subject to a deferred or gradual payment basis. How that would work is you would transfer ownership of the Cryptocurrency up front and agree for the IBC to pay you in stages in consideration of a price premium and/or in consideration of the IBC engaging you in an ongoing/consultancy capacity.

 

However you transfer ownership of the Cryptocurrency to your IBC the transaction should be seen to be on commercial terms for fair market value.

 

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

 

Can The Nominee Director Open The Bank Account For Me?

Often we are asked “Can I get a bank account opened for me by the Nominee without my involvement?”.

 

In short we can’t just deliver a Company + an opened bank account without your involvement.

 

In terms of what we need from each client getting the Company set up is easy. We just need via email a completed signed order form, confirmation of payment and proof of the client’s ID and residential address per the requirements.

 

But the bank account is a slightly different story…

 

When we open a bank account we have to supply to the bank as a minimum:

  • Proof, per the bank/s requirements, that the Company is incorporated
  • Proof, per the bank/s requirements, of who the Directors of the Company are
  • Proof, per the bank/s requirements, of who the shareholders of the Company are
  • Proof, per the bank/s requirements, of who the beneficial owners of the Company are
  • Proof of ID and residential address of the beneficial owners of the Company
  • Proof of ID and residential address re the proposed authorized account signatory/s
  • A detailed business plan re the Company

 

Most banks these days also require a professional reference re the beneficial owners of the Company.

 

Many banks these days also want to video interview the beneficial owner/s of the Company.

 

And invariably the bank will put two, often three, sometimes even 4 rounds of questions to us via email back and forth. To answer those questions most times we need to go back to the client to get instructions/info/docs.

 

In short the banks are paranoid (a) about the Company being used to launder money and (b) that the client’s business model might create reputational risk to the bank particularly if the business fails or if it falls foul of onshore regulators.

 

The owners of OCI have been in this line of business for 17 years. When we first got in the business we could get accounts opened in 2 to 3 days. Now, on average, the minimum it takes to get an account opened is 3 weeks post incorporation. Offshore (especially “tax haven”) Companies are considered high risk by the banks; Hence they ask a million questions and want to seemingly conduct a forensic examination of the Company/Enterprise/Owners before even they’ll even consider opening an account for such a Company

 

In short if you don’t want your name to appear in the bank records as “beneficial owner” of the Company what you can do is:

(a)  Include a (nil tax jurisdiction based) Nominee Director as part of the Corporate structure

(b) Set up a Seychelles Private Foundation to act as shareholder of the Company

(c) Set up the Foundation using a (nil tax jurisdiction based) Nominee Founder and Nominee Councillor

(d) Nominate a tax-free charity or a nominee to act as the initial beneficiary of the Foundation

(e)  Have yourself set up as an arms’ length employee or Contractor/Consultant of the Company

 

In the case of (e) the contract could make you responsible for ensuring that suppliers and staff get paid on time. This would necessitate you being appointed as the (sole) signatory on the Company’s Bank Account giving you complete control of the money.

 

Alternatively you could have the Nominee Director act as a “Nominee” Account signatory – in which case, assuming you adopt (a) to (d) above, – your name shouldn’t appear anywhere in the bank’s records.

 

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 Launch an Initial Coin Offering (“ICO”) Offshore Tax Free

With the raging success of Bitcoin and Ethereum new Cryptocurrencies seem to be hitting the market every other day.   This Article examines how you might launch an Initial Coin Offering (“ICO”) Offshore and bank the profits free from tax.

 

There are several ways you could launch an ICO from Offshore. Ideally you would either:

 

(a)   Form a tax free Offshore Company and have that Company enter into an Agreement/Contract with first up investors; or

 

(b)   Set up a tax free Collective Investment Company Offshore (ie a non-licensed Closed End Fund) whereby investors receive shares in the Company in proportion to the amount of money they invest.

 

The first option is the most commonly used. How it usually works is:

 

  • The creators of the new Cryptocurrency form a tax free Offshore Company (“OC”)
  • This Offshore Company develops the new Coin/Cryptocurrency (or holds the rights, under license from a 2nd tax free Offshore IP Holding Company, to promote/market the new Coin/Cryptocurrency)
  • The initial Investors and the OC enter into an Agreement whereby the OC, in consideration of a payment made by the investor to the OC, agrees to issue a certain number of Redeemable Tokens to the Investor
  • Each Token entitles the Token holder to certain rights and can be traded on the open market.
  • In the perfect investor model, the Token would entitle the Investor to a certain number of the ICO’s Cryptocoins when the Coin goes to the open market and/or to receive a share of the Company’s profits
  • When the Coin goes to market the profits can be banked and or reinvested Offshore potentially tax free (and away from the prying eyes of Onshore Regulators)

 

A variation on the above is to set up a Foundation (which owns a/the Coin Issuing Company) and have investors make donations to the Foundation. The Foundation passes on all monies so collected to the Company which develops the coin. In return for a/the donation to the Foundation the Company issues a Token to the investor/donor.

 

Another similar way for a Start Up Cryptocoin Company/Business to raise venture capital is via Crowd Funding (https://www.fundable.com/learn/resources/guides/crowdfunding-guide/what-is-crowdfunding )

 

Closed End Fund

 

In this model a tax free Offshore Company is set up and shares in the Company are issued to the investors in proportion to the amount of monies invested.   Usually how it works is:

 

  • The Promoters/Creators of the new Cryptocurrency form a tax free Offshore Company (“OC”)
  • The Company has a specially tailored Articles of Association which enable it to issue 2 classes of shares ie Class A Shares (also known as management shares) and Class B shares (also known as equity shares)
  • The Promoters/Creators of the new Cryptocurrency decide how much capital they want/need to raise and, how many shares they are prepared to/wish to issue and the price of each such share
  • The Investors sign off on an Information Memorandum (ie in effect a Prospectus) that stipulates, amongst other things, a/the minimum amount of time the investor has to commit his funds before being able to cash in his shares (eg it could be a month, or 3 months, or 6 months or 12 months or 2 years or etc).
  • The investor pays his money to the OC and receives shares in the Company in proportion to the amount of money contributed. These shares entitle the investor to a share of the profit that has been realized by the Company as at the end of the agreed investment period but carry no voting rights.
  • The Promoters/Creators of the new Cryptocurrency receive shares that have both equity rights and voting rights Once the desired amount of Capital is raised the Company goes to market and starts selling the Cryptocurrency to the general market
  • At the end of the agreed investment period the investor has the right to cash in his shares and walk away or reinvest for a further period.

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

How To Avoid Automatic Exchange of Information by Changing Residency

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

 

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

 

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

 

How does this enable people to escape the CRS?

 

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

 

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

 

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

 

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

 

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

 

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

 

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

Second, get an employment contract there.

Third – and this is the super-sleazy one…

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

 

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

 

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

 

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

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

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

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

 

 

Can a Second Residence Assist Me To Avoid Tax At Home?

We’re seeing a lot of interest in this field in particular clients looking for a second residency or a 2nd passport. The UAE is doing a lot of business in this regard as a number of Emirates offer a nil tax Company product that comes with a residency permit.

 

The key question with a second residency is how it would all work from a taxation perspective ie who has the right to tax you and why and which country’s tax laws would/should apply?

 

As we see it there are 2 angles:

 

(a)   Application of tax laws in theory

(b)   Disclosure and practicalities

 

Re (a) most countries (particularly big western countries like the USA, EU, Canada, Australia, UK etc) have a very broad definition of “resident for tax purposes”. Regardless of what passport or residency permit you hold if you’re in that country for more than 6 months and or if you have a substantial connection to that country (even if you’re on the ground there for less than 6 months in any tax year) you can be classified as a “resident for tax purposes” making you liable to declare your worldwide income in and pay tax there.  

 

Substantial Connection

 

So what constitutes “substantial connection”?

 

In considering whether you still have a “substantial connection” to your mother country a number of factors are looked at including:

 

  • Do you retain a residency/home in your mother country?
  • Do you own any personalty in your mother country (eg a car, furniture/home contents/boat/leisure toys etc etc)
  • Do you have a bank account in your mother country?
  • Do you have investments or business interests in your mother country?
  • Do you retain a professional or trade license (eg Lawyer/Plumber/Doctor/Teacher/Nurse/Engineer/Architect/Builder/Dentist etc) license in your mother country?
  • Do you keep current a golf/tennis/leisure club membership in your mother country?
  • Do you regularly renew a driver’s license in your mother country?
  • Do you have children at school in your mother country?
  • Do you have a spouse/partner living full time in your mother country?
  • Etc etc etc

 

Chances are, as a minimum, what you will need to do in order to become non-tax resident in your mother country is:

 

(a)   Sell your home/residence in your mother country (or cancel any lease you might have over residential premises there)

(b)   Sell any business you own on the ground in the mother country

(c)   Sell all personalty owned/held in your mother country

(d)   Hand in (and not renew) any professional/trade license you may have in your mother country

(e)   Close down any bank/investment accounts you might have in your mother country

(f)    Write to your local IRS/Tax Office and advise that you have departed the country permanently and filed your last tax return.

 

Disclosure & Practicalities

 

Re (b) the question here is will a 2nd residence enable you to incorporate an Offshore Company and or open a bank account for your Company wherein your name won’t be recorded as being a resident of your home/birth country. Generally speaking in these instances you’d need to produce photographic proof of ID AND proof of residential address. If you can produce evidence of ID/Residential address from/as being in your country of 2nd residence, in the event of information exchange, your details won’t be given to the tax authorities of your home/birth country.

 

The ideal end game there would be that your mother country’s tax authorities would (hopefully) never find out about the existence of your Offshore Company or your connection to it giving them no chance to apply a potentially extensive tax residency law/definition in their favor.

 

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