Monthly Archives: September 2016

When setting up a tax free Offshore Company/IBC (particularly where a Nominee Director and or Shareholder is deployed) one of the most common questions we get asked is “If someone else is the Director what’s my role in the Company?”

The options here are (a) Have yourself appointed as a Consultant/Authorised Representative of the Company and/or (b) Have the Company issue you with a General Power of Attorney.

As option (b) is problematic from a taxation perspective (ie it points to management and control lying in your hands – any company which is seen to be managed and controlled from “onshore” can be taxed onshore) 90% + of clients choose to be appointed as a Consultant/Authorised representative of their International Business Company.

As an Authorised Representative of the Company you can do anything apart from bind the company legally (ie any legal agreements/contracts have to be signed by the Director).

This can also provide you with an income stream.

Here’s how the more intelligent/savvy clients manage their financial/billing affairs:

• The client (or his onshore/local business/company) is appointed via written agreement as a Consultant to the IBC
• The agreement sets out what fees the Consultant is entitled to claim each month/pay period and what expenses the Consultant is entitled to be reimbursed for
• In the month/period prior to billing the Consultant (or his onshore business/company ie whoever has been appointed as Consultant to the IBC) pays all expenses incurred with respect to supplying the Consulting services (ie/eg including rent, travel, internet, phone, IT costs, stationery supplies, license/govt fees etc as applicable)
• At the end of the month/billing period the client (or his onshore business/company as the case may be) invoices the Offshore Company (a) seeking reimbursement for expenses it/he has paid in connection with supplying the Consulting services) + (b) for Consulting fees as agreed.

Yes you could use the IBC’s Debit/Credit card to cover those expenses but that may not be the wisest choice. With current technology you can’t assume that local tax authorities will not notice if you use an Offshore Bank credit card onshore. Most clients usually only use the Offshore Company’s card when they are outside the country of tax residence (though technically even such withdrawals/payments, unless spent on business expenses, would be classified as “income” declarable in the country where you are resident for tax purposes).

Local laws can have an impact. Hence you should seek local legal/financial/taxation advice prior to forming, and or prior to signing a Consulting contract with, an IBC/Offshore Company

A lot of people these days offer products for sale on Amazon.

Such a business lends itself well to “Offshore” Corporate Structuring.

Let’s look at atypical example…

In this example the client sells Jewelry online via Amazon

How it works Is:

• Any jewelry you want to manufacture/sell should be manufactured by/purchased by the tax free Offshore Company (“IBC”)
• The company would be incorporated in a nil tax jurisdiction and would be managed/controlled from an Offshore (ie nil tax) jurisdiction (which would entail the appointment of an Offshore/Tax Haven based Nominee Director – which is a service OCI would provide)
• Any contracts to buy or sell or market the jewelry would be signed/concluded offshore (eg signed or ratified by the Nominee Director in a nil tax environment)
• In effect any/all profits generated have been generated online
• In the case of an online business typically tax liability lies only in the country from which the Company is managed and controlled
• As the Company has been structured with a (tax haven based) Nominee Director/Shareholder (ie management and control would be “Offshore” ie in a nil tax environment) any profits generated have been earned (and ideally banked) Offshore ie in a nil tax environment

How To Utilize Money Banked by Your IBC 

There are 6 ways to utilize money banked by your IBC:

1. Set yourself up as an arms’ length consultant and have the IBC pay you consulting fees periodically. This means you would only have to pay tax on what you bring into your home country (and even that tax you should be able to minimise as a lot of what otherwise-might-be personal expenses could be written off as business costs, eg home office, utilities, car, phone, electrical/office equipment, stationery, computers travel etc etc etc). The rest of the IBC’s income can remain offshore and be (re)invested offshore potentially tax free. Say your target capital base is 3 million Euro and every year you leave at least half the IBC’s income offshore. Because you’re not paying tax yearly on all the IBCs income instead of taking 20 years to accumulate 3 million Euro, with the power of compounding, you could accumulate 3 million within 5 to 7 years. This is what my/our smarter clients do ie they pay a little bit of tax at home each year on their overseas earnings but most of their income is kept offshore and reinvested offshore.

2. Bring back the money as a loan. Yes this can be done but great attention to detail will be required particularly with respect to lending parties, loan terms and documentation.

3. Use an anonymous debit card and withdraw cash from automated teller machines. This can still work in some places though it should be noted that some of the bigger countries now have the ability to trace and connect one to such withdrawals.

4. Have your IBC buy Bitcoins and then make a transfer of bitcoins to you (you would need to firstly set up a bitcoin account). You can then buy valuable goods and services using bitcoin and none of these purchases would be seen by your local authorities.

5. Have your IBC form and fund a subsidiary ie 2^nd tax free Offshore Company and then have that 2^nd Offshore Company buy any substantial assets you’d like to have onshore (eg cars, real estate, shares, general investments etc). Yes in theory you could have your IBC buy these things but, given most likely there will be a Consultancy Agreement in place between you and the IBC (and payments going from the IBC to you which will be visible to your local tax authorities) the smarter thing to do would be to have a 2^nd (seemingly unrelated) IBC buy these items for you.

6. Another option is to take the long hold view. What this entails is letting your capital base build over a period of years; Then, when you get to the stage where you are ready to close down your Offshore business, (or you are ready to retire) you can do one of two things: Either

(a)   Expatriate your home country and become “non-resident for tax purposes”, shift to a country which has no income tax and/or CGT (eg Panama, Seychelles, Monaco, etc etc etc) and draw down the capital from your offshore entity (and bank the money tax free); or

(b)   Expatriate your home country, become “non-resident for tax purposes”, and become a PT ie a Perpetual Traveller. How this can work is you spend say 4-5 months a years in one country, 4-5 months a year in another country and the rest of your time travelling. This way, assuming you are not seen to have substantial ties with any one country, you should not be considered as tax resident in any one country. Then you simply draw down the capital from your offshore entity (and bank the money tax free).

Generally speaking, provided you have successfully become a non-resident for tax purposes of your home country, there’s nothing stopping you from changing your mind a year or 2 later about the expat life and returning to your home country with a bunch of tax free dollars in your back pocket.

Note unless you (have expatriated or) live in a country that does not have CFC laws (and/or unless or are structured in a tax effective/compliant manner) you may still be required to declare and pay tax at home on your IBC’s earnings.

Local laws can have an impact. Hence you should seek local legal, financial and tax advice before committing to set up an Offshore Company for the purposes as described above.

If you want to change Administrator/Manager of your IBC what must happen is the Director (or Board of Directors as the case may be) must pass a resolution formally authorizing a change of Company Manager + a Change of Director and Shareholder (eg if you wish to change the Nominee Director/Shareholder).

If you wish to change shareholder a share transfer must also be drafted and signed by the outgoing shareholder.

If you are the Director of the Company then it is easy. If your current Manager is providing a Nominee Director but is (or becomes) uncooperative what you may have to do is use documents in your possession to force a change of Director temporarily to yourself just so that the above resolution can be passed.

OCI can do all the work required and or manage the process for you. First you will need to hire us.  The procedures that we must undertake in order to move forward would be as follows:

1.      You will need to email us:

• a fully completed and signed order form
• certified copies of an ID doc (copy passport) and proof of residential address (eg bank/card statement or recent utility/tax bill) for each of the underlying beneficial owners of the company
•  written/dated instructions to change Registered Agent/Corporate Service Provider (“CSP”).

2. Once we have the above we will draft the necessary resolution/s authorizing the change of Registered Agent//Memo and Articles etc and forward that to you/the Company Director for signature and then to the outgoing Registered Agent/Corporate Service Provider.

3. Once we have received the signed meeting resolution we will then email the existing Agent/CSP to advise that we have instructions to change Registered Agent/CSP attaching an undertaking to meet fees, file transfer Resolution/s and provide copies (NOTE: We will file only an extract of the resolution so the Director’s etc name does not appear anywhere on the registry’s records)

4. The outgoing Agents (assuming their fees have been met to date) should then fax us and/or the registry a letter consenting to a change of Registered Agent

5. We will then have our people on the ground attend the registry with meeting extracts (& amended Memo and Articles if required) to settle the change of Registered Agent/Office

6.  The registry will usually fax us within 48 hours to confirm that the change of Agent/Office has been recorded

7. We will then have our people attend the registry within 24 hours to collect the filed change of Registered Agent/Office extract Resolution. Once we have those docs we will email you a letter to advise that change of Agent etc has been formally recorded/finalized

8. We will then airfreight (or courier if you require, please advise) a copy of the filed/sealed Extract and filed/sealed amended Memorandum and Articles (as/if required)

9. We will then contact the outgoing Agent to request the original file and then collect same

10. We will start and keep registers for Directors/Secretary/Shareholders.

The fee we charge for attending to all this is circa $US450 (payable in advance).

Fee/s as quoted includes all of the above + provision of registered agent/office services until the company’s next annual renewal date. If an amended Memo and Articles is required (ie updated by showing the new Registered Agent address/Office address) you would need to advise us.

Kindly note if you require us to supply Nominee Director or Shareholder (or other) services Nominee’s appointment and or etc fees will be additional to the above. (If you’re interested in changing offshore service providers) if you can confirm what you require exactly by way of nominee or other services we will happily forward you a firm quote.

A Nevis LLC allows you to shield your assets from lawsuits, agencies, and financial creditors – 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 a Nevis LLC 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.

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 (ie shareholders) 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 Nevis LLCs may be individuals or business entities of any nationality or domicile.
• Members of Nevis LLCs may amend the Company’s Articles of Organization, merge, or consolidate with other domestic or foreign LLCs or other business entities.
• Members may assign their interests to other parties unless restricted otherwise. Nevis permits single member LLCs.
• Management of a Nevis LLC 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.
• A Nevis LLC 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.
• A Nevis LLC 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 statute 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 an 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 and  each member is responsible for his, her or its own pro-rata share of any overall tax obligation, if any:- The LLC itself has no tax obligations.

An LLC as an alternative to 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 an 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 a Nevis 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 a Nominee as manager (in which case we, as Nominee, perform the minimal corporate duties required under Nevisian law).

Enhanced Confidentiality:

Nevisian LLC laws contain many requirements related to confidentiality including financial secrecy laws. Strict legal requirements, known as fiduciary duties, also govern the behaviour of offshoreincorporate.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 in Nevis 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 onshore (eg in the U.S, UK, Canada or EU etc) 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 favor 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.

For clients (in particular JVs involving partners from different countries) the Nevis LLC offers outstanding asset protection and tax planning possibilities. Hopefully the above summary explains how and why.