I’m sometimes asked how can I retain control of my tax free Offshore Foundation without anybody knowing?
The Seychelles model of Private Foundation provides an interesting option in this regard.
When you register an Offshore Foundation the name of the person authorising the registration of the Foundation (ie “the Founder”) appears in a publicly filed/accessible document called a/the Charter.
However Seychelles law allows the Founder’s rights to be privately/secretly assigned to a third party.
What this means is you can deploy a “Nominee” Founder to create the Foundation and reserve the Founder’s rights/powers to yourself without anybody apart from you and your Offshore Foundation Service Provider knowing.
The following powers can be reserved to the Founder of a Seychelles Foundation (which rights you would secretly inherit ie if/when the Founder’s rights are assigned to you post registration):
- The right to appoint or remove Protectors
- The power to direct the dissolution of the Foundation and to direct the amendment of the Charter
- The Power to direct or approve the appointment or removal of a Councillor
- The Power to direct or approve the addition or exclusion of a Beneficiary
- The Power to direct or approve the continuation of the Foundation as a Foundation registered under the laws of a jurisdiction outside Seychelles
- The Power to direct or approve the Council to effect the forfeiture by a Beneficiary of his/her benefit, right and interest under the Foundation if the Beneficiary challenges in writing: (i) the establishment of the Foundation; or (ii) the transfer of any assets to or by the Foundation; or (iii) the Charter or any provision of the Charter; or (iv) the Regulations or any provision of the Regulations; or (v) any decision of a Councillor, the Protector or the Founder
- The Power to direct or approve the amendment of the Charter and/or the Regulations by the Council
- The Power to direct or approve investment activities of the Foundation, including the acquisition and disposal of investments by the Foundation
- The Power to direct or approve the rights, entitlements and restrictions relating to each Beneficiary, including the power to direct or approve the making of any distribution of Foundation Assets (or any part thereof) to a Beneficiary.
Note – The Offshore Foundation Council’s role is to manage the Foundation and carry out its objects. If a Founder is given very wide powers in respect of a Foundation (e.g. the power to direct or approve Foundation investment activities or distributions and the power to direct the dissolution of the Foundation or amendment of its constitutional documents) this may cause the Foundation to be viewed as a mere nominee of the Founder or may constitute ‘management or control’ so as to make the Foundation ‘tax resident’ where the Founder is resident or domiciled.
This could have adverse onshore tax consequences for the Offshore Foundation or Founder, especially if the Founder is resident or domiciled in a high tax country with a worldwide tax system. Hence if you’re looking to establish a tax free Offshore Foundation it would be wise to seek local legal and tax advice before deciding what powers might be reserved to the Founder (or to you as assignee Founder).