Monthly Archives: March 2014

With the US having recently taken steps to restrict the ability of its citizens to trade forex we have noticed more and more US residents looking to incorporate Offshore.

If you fall into that category you may be interested to know that a combination of a tax free Offshore Company and a tax free Offshore Foundation can gift you the ability to trade more freely.

In terms of how that can work structurally and practically:
• The shares of the Company would be held by the Foundation; and
• The beneficiaries of the Foundation would be whoever you nominate.

And if you choose a Seychelles Foundation when the bank or brokers asks who is the beneficial owner of the company/account you can lawfully answer “the Foundation” as section 71 of the Seychelles Foundation Law clearly states that the legal AND beneficial owner of any asset transferred to a Seychelles Foundation is the Foundation itself. That can get you access to brokerages/trading platforms that won’t accept US residents as customers.

How does it work from a practical perspective?

In terms of structure the Offshore Company would be set up with a Nominee  Director and with the Private Foundation as shareholder. Commercially, the company would do the buying and selling, ie it would generate the income. Ideally, you would be appointed as Consultant or as an arms’ length adviser to the Director of the Company with certain areas of responsibility (eg you could be an authorized Trader or Trading Manager) for which you would be paid a commission (eg a percentage of profits) or Consulting fees.

As part of your brief you might also be given signing power on a bank account reporting/answerable to the Director. However that relationship is structured for legal reasons, it would need to be seen to be commercially realistic. The income you generate from this would be paid to you or your local i.e. US company which, I imagine, would then pay a dividend to you, which would be assessable income at home for you.

And as a Foundation arguably is not caught by Controlled Foreign Corporation (or Controlled Foreign Trust) Rules the remainder of the profit could be held (and/or reinvested) offshore potentially tax free.  (Though that’s something you should speak to your tax adviser about).

What is clear however is that a combination of a Tax Haven Company and an Offshore Foundation can gift you more freedom to trade (and give you a wider choice of brokers).

Austrian Vice Chancellor Michael Spindelegger has stated that  Austria will support the proposed (as revised) European Union Savings Tax Directive, provided that third states such as Switzerland and Liechtenstein also agree to must participate in the Directive.

The aim of the new Directive is to close loopholes and prevent individuals from evading taxation on interest income by enhancing the existing automatic information exchange system for EU tax authorities.

Austria made its adoption of the text conditional. The Government said from the outset that it would not relinquish its banking secrecy for Austrian nationals, but will agree to exchange information automatically concerning EU residents with accounts held in Austria.

It also said that third states such as Switzerland and Liechtenstein must participate in the Directive, and warned against a European and a global standard operating in tandem.

The EU Council of Economic and Finance Ministers agreed at a recent meeting in Brussels that banking secrecy could remain in place for Austrian nationals.

So the game of cat and mouse between the EU and the EU tax (and Banking Privacy) Havens continues as it has since 2003.

One doubts the EU will get their way. Countries like Austria Switzerland and Liechtenstein (with their lucrative banking and financial services sectors) have too much to lose…  If I was a betting man my money would be on them agreeing to apply a 20% Witholding tax on interest earned in local accounts by non-nationals rather than hand over account owner info…

Foundations & Absolute Privacy

Recently the question was put to my firm as whether it would be possible to set up an Offshore Company with a Nominee Director and open an account for the Company without having to declare the client to the bank as the “beneficiary” of the account (or as the  “beneficial owner” of the Company applying for the account).

Interestingly (as the client lived in a country with Controlled Foreign Corporation ie“CFC” laws) the fellow in question (an Ebusiness owner) had already opted for the option of first registering a Seychelles Private Interest Foundation to hold the shares of the Offshore Company. (The Foundation was set up via a Nominee Founder and was managed by a Nominee Councillor).

We’d reached the stage where the Company was applying for a bank account and the client was unsure who/what should be entered in the Corporate Account application where “beneficial owners” details were supposed to be inserted.

My opinion was sought. Here’s the conclusion I came to after pouring over the Seychelles Foundations Act for many hours…

Bottom line is notwithstanding that an individual or individuals (or a class of beneficiary) may be named as beneficiaries in a Seychelles Foundation’s 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 the them – refer section 71 of the Seychelles Foundations Act 2009-2011 as amended).
2. The Foundation is deemed to be the legal AND beneficial owner of any property held by it (again section 71)
3. The Foundation is a legal entity in its own right not a mere Trustee (See section 23)
4. The Councillor of the Foundation owes no Fiduciary duty to the beneficiaries (see section 63)
5. As such there is no “beneficial owner” of a Seychelles Foundation. The beneficial owner of any property/asset owned or held by the Foundation is the Foundation itself.

The net result?

We didn’t have to provide the names of (or DD to the bank as regards) the Foundation’s beneficiaries.

A victory for financial privacy!