Monthly Archives: January 2016

UK companies can be used to act on behalf of offshore companies in a variety of transactions. Typically in such arrangements the UK Company operates as a “nominee” or “agent” or “bare trustee” for the offshore company. Whatever legal term is used to describe this sort of arrangement, the outcome will be that: 

a)             the offshore company’s existence is not normally disclosed to the third parties who deal with or contract with the UK nominee company. 

b)            it is the UK company that raises invoices, and enters into contracts, and receives trading income on behalf of the undisclosed offshore company. 

c)             the UK company receives a commission from the offshore company for its agency services. The amount of the commission will be quite small – typically 1% or 2% – bearing in mind that the business activities are managed and controlled by the undisclosed offshore company which carries on the trade or business in the name of the UK Company. Because all the UK company is doing is granting the offshore company the right to use its name, and because the UK company takes no other part in the business activities and receives a full indemnity from the offshore company, it cannot justify receiving more than 1% or 2% of gross fees or gross profits on arm’s length or commercial principles. Obviously each case needs to be considered on an individual basis. 

d)            the UK nominee company only declares for UK tax purposes and statutory accounting purposes its commission. This is the correct approach assuming an appropriately drafted Agency agreement is in place between the UK Company and its offshore principal. It is also assumed that the offshore principal’s trading activities do not take place in the UK; that the offshore company’s management and control is located outside the UK; and that the beneficial ownership of the offshore company is non-UK resident. Offshore Companies International Limited can advise on these points. 

e)             the UK company can register for VAT in the UK. In this regard it is normally essential that trading activities take place in at least two non-UK but EU countries, or that the UK nominee company is involved in “triangular” trading. 

Comment

• As/if the UK Company is involved in a triangular trade it is entitled to apply for a UK VAT number which eliminates VAT for all parties in this transaction.

• The UK Company receives a commission of 2% on the gross margin.

• The UK Company would receive the gross sales revenue in its bank account. On instructions from the offshore principal the revenue is then paid from the UK bank account to the offshore company’s bank account less the 2% commission.

• The UK nominee company’s statutory accounts and UK tax returns disclose only the commission fee of 2%. The reason for this is that the UK Company is not entitled to the gross sales revenue/profit. It receives this in a fiduciary capacity, and is contractually obliged to pay the revenue to the offshore company.

Can a UK Agency Company Do Business in the UK?

Technically yes a UK Agency Company can do business in the UK. However ideally the UK agency company should not trade with other UK companies as this would be regarded as generating UK source income, which would be subject to UK tax assessment in full. If activities are anticipated with UK companies, these should be concluded directly with the offshore principal company rather than via the UK agency company; this would not create any concerns or issues from a UK perspective as this would not trigger undue inspections or unallowable deductions like in many other countries.

Local laws can have an impact hence you should seek local legal/tax/financial advice before committing to use such a structure.

Following ever increasing pressure from its Colonial Master Great Britain to dilute its privacy features the British Virgin Islands (“BVI”) Legislature has passed amendments to its International Business Companies (and related) Legislation.

The amendments give rise to a significant number of regulatory changes which all take affect through 2016. These changes include, as regards each International Business Company registered (or to be registered) in the BVI:

1. Introduction of a (publicly accessible) register of directors for all BVI International Business Companies (“IBCs’) including comprehensive director information;
2. Full identifying details as regards the underlying beneficial owner/s of each BVI IBC  must be held at the office of the IBC’s BVI registered agent;
3. The location of each BVI IBC’s accounting records must be disclosed to, and held on file at the office of, the Company’s BVI Registered Agent;
4. The name and address of the person responsible for keeping the accounting records must be disclosed to, and held on file at the office of, the Company’s BVI Registered Agent; &
5. All BVI Companies must maintain records sufficient to show their financial status at any time

Failure to comply with requirement number 4 will attract a fine of US$50,000.00 applicable to the company and the Registered Agent as opposed to just the company itself.

The changes continue a trend which we have seen happening consistently in hitherto British Protectorate/Territory Tax/Privacy Havens. Changes forced from above have seen countless such Tax Havens’ privacy laws emasculated including in The Channel Islands, The Bahamas, The Turks & Caicos Islands, Anguilla and more.

The good news is the majority of Offshore Financial Centre Privacy Havens have declined or refused to reduce (or dilute) their privacy features and still boast no public register of directors, shareholders or owners.

Consequently it is anticipated that we will see a wholesale migration of BVI Companies to these remaining Offshore Privacy Havens over the coming months/years.

That said, if you are the owner of a BVI Company and are keen to ensure that details of who directs and or owns your company remain private, feel free to contact us for FREE advice on (a) where to migrate your Company to and (b) how to structure your IBC to minimize the chances of your IBC’s earnings being discovered or attacked onshore.

Nearly 200 experts, companies and civil society groups from more than 40 countries are asking governments around the world to support strong encryption and reject proposals that would undermine the digital security it provides.

“The internet belongs to the world’s people, not its governments. We refuse to let this precious resource become nationalised and broken by any nation,” Brett Solomon, executive director of Access Now, the online advocacy group that organised the open letter, said in a news release.

The letter, released online in 10 languages at SecureTheInternet.org, marks an escalation of a debate over encryption — a process that scrambles data so that only those authorised can decode it. The fight has been brewing for more than a year and whilst prominent in Australia and the United States is also spreading everywhere from the United Kingdom to China.

Encryption is widely relied upon to keep e-commerce and many of the websites people use every day safe from the prying eyes of cybercriminals. But the spread of the strongest forms of encryption, those which companies themselves cannot unlock, into products from major tech companies has drawn criticism from some law enforcement officials who argue that it may allow criminals and terrorists to “go dark.”

Tech companies, the officials have argued, should make sure that they are able to provide access to encrypted content for law enforcement when faced with a court order. However, technical experts say building ways for that access into products — commonly called a “backdoor” — would undermine digital security as a whole by giving hackers a new target. And civil liberties experts worry that there’s nothing to stop repressive governments from pushing for the same access.

“Encryption and anonymity, and the security concepts behind them, provide the privacy and security necessary for the exercise of the right to freedom of opinion and expression in the digital age,” said David Kaye, a law professor at the University of California Irvine and United Nations Special Rapporteur for Freedom of Opinion and Expression, who released a report on the issue last year.

Access Now began organising for the letter last year after putting together a White House petition asking the Obama administration to come out against encryption backdoors. The administration requested further public input and sat down with Access Now and other advocates last month, but it has not yet released a final response.

The White House declined to comment on the letter or the status of its response to the earlier petition. The US president has previously stated his support for “strong encryption,” but it’s unclear whether the administration’s definition of the term lines up with that of civil liberties advocates.

Many countries are considering — or have even already passed — legislation that experts say could undermine the protection provided by encryption, and civil society groups are spread thin trying to fight them, he said.

The United Kingdom is considering a proposal that would require tech companies to build ways to intercept encrypted communications into their products. The plan has drawn formal complaints from tech companies including Apple, Google, Facebook, Microsoft, Twitter and Yahoo. And in December, China passed an anti-terrorism law that requires companies to provide ”technical interfaces” and assist with decryption if the country’s security forces say it’s necessary.

But thanks to the global nature of the internet, advocates argue that such national laws can have global implications because it leaves tech companies with a only a few options: Pull out of the country, provide a less-secure version of their services to users there, or roll out a less secure version around the world.

“A threat anywhere is devastating everywhere,” White said

Source:The Washington Post

I am sometimes asked “Do you offer Offshore re-invoicing services?”

What has become apparent to me over the years however is that very people truly understand how Offshore Re-Invoicing actually works.

How it works is:

1. You set up a Tax Haven Offshore Company (IBC).

2. Invoices for products purchased by the (tax free) Offshore Company would be sent to your Offshore Company. These invoices could be sent to your Offshore Company:

(a) by email to a special “Offshore” email address set up for the Tax Haven Company; or

(b) to a fax number in the country where your Tax Free Offshore Company is incorporated; or

(c) in hard format (eg via airmail or via courier) to your Private Offshore Company’s Registered/Business Office

3. Payment of these invoices would be made from Offshore via your Offshore Company’s Private Offshore Bank Account

4. If/when your Tax Free Offshore Company needs to issue an invoice your Offshore Company Formation Agent (in the name of the/a Tax Haven based Nominee Director) would arrange for the Company to send the invoice from “Offshore” (ie from the location where the Company is incorporated):

(a) by email from a special “Offshore” email address set up for your International Business Company; or

(b) from a fax number in the country where your IBC is incorporated; or

(c) in hard format from your Privacy Haven Offshore Company’s Registered/Business Office

For each invoice received and re-invoiced a set fee is usually charged +out of pocket costs (ie +courier, fax or airmail charges). If you’d like more information on how this can work for you please Contact Us.

Note local laws can have an impact. Hence I/we would recommend you seek local legal/tax/financial advice before committing to setup such an invoicing system as is described above.