September | 2018 | Offshore Companies International

How To Use a Tax Free Offshore Company to Trade Commodities

Commodity Trading is an activity which lends itself well to an Offshore Corporate Structuring Plan.

To summarise how it would work is:

You set up a zero tax International Business Company (“IBC”) with a nil jurisdiction based “Nominee” Director
The IBC opens an account with a Broker
You are appointed by the Company as the IBC’s authorised trader (ie you place the buy and sell orders on behalf of the company)
For all intents and purposes the IBCs trading profits are generated in a nil tax environment tax free/offshore (ie provided the IBC Is structured properly)
When you need some living/spending money the IBC pays you a wage, or consulting fees or a commission (eg a percentage of trading profits generated)
That living/spending money can be paid to your local bank account (which means it would be assessable income wherever you are ordinarily resident for tax purposes though you should also be able to claim a sizeable amount of allowable deductions eg for home office, car, equipment, insurances, travel, stationary etc etc to reduce the amount of your “taxable” income at home)
If you don’t want the authorities to know how much money you are earning by way of wages you could use an anonymous ATM or Debit/VISA card to withdraw your wages from an Auto Tele Machine
The majority of trading profits could be reinvested Offshore potentially tax free.

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

How To Get Around UK Requirement To Correct Rules

If you are UK resident and own assets abroad (eg non-UK real estate), or if you receive (or are entitled to receive), outside the UK, income from a foreign source (eg dividends from non-UK companies), you may be affected by the new UK Requirement to Correct (RTC) rules.

The RTC rules oblige UK taxpayers to correct past non-compliance with their UK tax obligations by 30 September 2018. After this deadline, a new, higher penalty regime will apply.

It’s possible to get around these rules but you’ll need to move fast in order to avoid the 30 September deadline.

Essentially there are 2 things you could do to avoid having to make such a declaration:

(a) Set up nil tax Offshore Company to own (ie take over ownership of) your foreign assets + set up a nil tax Private Foundation to own (ie hold the shares of) this Company; or

(b) Set up a nil tax Private Foundation to own (ie take over ownership of) your foreign assets

Whether to set up (a) or (b) depends on what kind of assets you hold. If you simply own an asset that produces a passive income stream then a Foundation alone should suffice.

The key plank underlying the strategy is how you manage/reconstruct the issue of ownership.

The Private Foundation (which is essentially Europe’s version of a Trust) started life in Liechtenstein and then began to slowly make its way across Europe (eg in Holland a Private Foundation its called a Schtichting) before being embraced by sundry Offshore Jurisdictions (including Panama, Belize, Nevis. Mauritius, Seychelles etc).

Under European Common Law a Foundation (which, unlike a Trust, is a separate legal entity) is presumed to be both the legal and beneficial owner of any asset it holds. What this means, in event of a law suit or tax investigation or regulatory inquiry, is you can swear under oath “I am not the legal or beneficial owner of this Company/Asset”.

Moreover under European Common Law the beneficiaries of a Private Foundation are not entitled to a distribution from a/the Foundation unless or until such time as the Foundation Council actually resolves to pay the beneficiaries a Distribution. So you and your family could be nominated as beneficiaries of the Foundation without needing to make any Declaration under the Requirement To Correct Rules.

One jurisdiction has taken this a step further ie the Seychelles by codifying theses aspect of European Common Law and placing them into Legislation: Section 71 of the Seychelles Foundations Act provides that the legal and beneficial owner of any asset held by a Seychelles Foundation is the Foundation itself.

And section 63 provides in effect that the beneficiary of a Seychelles Foundation is not entitled to a distribution from a/the Foundation unless or until such time as the Foundation Council actually resolves to pay the beneficiary a Distribution.

Conclusion

If you have income producing assets outside of the UK that you’re yet to declare to the UK Authorities you can avoid the new UK Requirement To Correct Rules by setting up a Private Foundation and then transferring ownership of the asset/s in question to the Private Foundation (or to an Offshore Company owned by the Foundation).

Additionally, you should be able to avoid having to pay tax on any income generated by the Private Foundation and or Offshore Company ie you should only be liable to pay tax in the UK when you receive income from the Offshore Company or Private Foundation (assuming the Company/Foundation is structured/managed a certain way).

NB Local laws can have an impact. Hence you should seek local legal/tax/financial advice before committing to set up an Offshore Structure.

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Labuan Offshore Companies

Background

The Federal Territory of Labuan is an island group, 92 sq km in size, with a population of 78,000 situated off the north-west coast of the former British Borneo and Brunei Darussalam. Labuan is part of Malaysia and comprises seven small islands of which Pulau Labuan is the largest. Labuan lies off the north-west coast of Borneo, 8 km from the Malaysian state of Sabah and is strategically located roughly equidistant from Bangkok, Hong Kong, Jakarta, Kuala Lumpur, Manila and Singapore. It is mostly flat with a good harbour and is accessible by air, with daily services from Kuala Lumpur and from most Asian capitals.

Labuan is located on the major shipping and air routes of the Asian Region and is Malaysia’s only deepwater harbour. It has a warm humid tropical climate, with daily temperatures averaging 30°C with two monsoon seasons ie from April to June and from September to December. The main language is Bahasam Melayu but English, Tamil and various Chinese dialects are widely spoken. Many documents and publications are available in English (including the Labuan offshore Legislation).

Political & Economic History

In 1984 the administration of Labuan was taken over by the Federal Government of Malaysia which consists of thirteen states and two federal territories (ie Kuala Lumpur and Labuan). Malaysia has an unusual political system with power held in the hands of nine hereditary sultans, who elect a head of state every five years from among their number. Legislative power is exercised by a bicameral parliament comprising of a House of Representatives (Dewan Rakyat) and a Senate (Dewan Negara), Executive power is held by the Prime Minister who governs with the assistance of a ministerial cabinet. Appointments are for a five year term.

Malaysia is economically strong and considered politically stable. Under the auspice of LOFSA (the Labuan Offshore Financial Services Authority) the Malaysian government has invested heavily in improving the physical infrastructure of Labuan which is now completely modernised and boasts a state of the art telecommunications system including an Internet Gateway which provides an e-commerce platform. More than 50 of the world’s top banks have branches in Labuan.

Advantages of Labuan Companies:

All offshore business transactions attract no stamp duty and capital gains are not subject to any form of tax
Not subject to Malaysian exchange controls
Malaysia enjoys tariff reductions in the ASEAN Free Trade Area (AFTA), and has signed more than 60 Double Taxation Avoidance Treaties (“DTAs”)
Malaysia boats an English style legal system
Labuan IBFC offers a wide range of financial products and services (including both conventional and Islamic)
Corporate documents are written in English
There is no requirement to disclose to the authority the names of the beneficial owners of the Company
Company names can be in a foreign language

Features of Labuan Companies:

Speedy setup: A Labuan Company can be incorporated in as little as 3 days.
It may use “(L)” as part of its name. An offshore company may also have as part of its name the word “Berhad” or “Bhd” but must then add the word “(L)”.
There are no minimum share capital requirements. The share capital may be denominated in any currency except Malaysian Ringgit. Separate classes of shares may be created with differing rights to dividends or otherwise. A minimum of one shareholder is required to establish a company. Shareholder can be individuals or corporations. Shareholders need not be resident.
Companies require a minimum of one director.
Corporate Directors are permitted
Directors may be resident in any country
Only one shareholder minimum is required
A Local secretary is required (which OCI Provides)
Directors meetings can be held anywhere
The standard authorised capital is US$ 10,000; divided in to 10,000 shares of US$ 1. The minimum issued capital is one share, which may be fully or partly paid.
An annual return in the prescribed form made up to a date not earlier than 14 days before the date of lodgment is required to be lodged each year and not later than 30 days prior to the anniversary of the date of incorporation of the company.
Classes of Shares Permitted: Registered shares of par value, preference shares, redeemable shares and shares with no voting rights.
There is no exchange control in Malaysia. The Malaysian currency is the Ringgit (RM). Save for certain exceptions, offshore companies in Labuan are required to carry on business in a foreign currency.

Procedure to Incorporate

To incorporate an Offshore Company in Labuan you must submit to the Registry:

Memorandum and Articles of Association,
Consent form to act as a director,
Statutory Declaration of Compliance with the Companies Act
Certificate of Identity
Statutory declaration by persons before appointments as directors
The incorporation fee.

Company Name Options & Restrictions

Labuan Company names must include one of the following words, or an abbreviation thereof:
Corporation
Incorporated
Limited
Public Limited Company
Societe Anonyme
Sociedad Anonima
Aktiengesellschaft
Naamloze Vennootschap
Perseroan Terbat

Names resembling the name of an existing company or names that in the opinion of the Registrar suggest Royal or government patronage are not permitted. Names, which the Registrar considers undesirable, will be rejected. Certain names/words require consent or a license ie Bank, building society, insurance, assurance, reinsurance, fund management, investment fund, trust, trustees, Chamber of Commerce, university, municipal or their foreign language equivalents. Re Suffixes to Denote Limited Liability any of the following may be used: Limited, Incorporated, Corporation, Sociètè Anonyme, Sociedad Anonima or their relevant abbreviation. If the Malaysian word Berhad is used then it must be preceded by “(L)” to denote that the company is incorporated in Labuan.

Business Restrictions

A Labuan Offshore Company should only carry on business in, from or through Labuan. A Labuan Offshore Company may not:

(a) Do business with a resident of Malaysia (except as permitted by the Offshore Banking Act 1990);

(b) Carry on the business of Banking or Insurance or such similar business unless it is licensed so to do under the Offshore Banking Act 1990 or the Offshore Insurance Act 1990;

(d) Carry on the business of shipping or petroleum operations in Malaysia

(e) Operate as a trust company.

Exceptions to carrying on business with residents of Malaysia:

A Labuan Offshore Company is not treated as carrying on business with residents of Malaysia if:

(i) it makes or maintains deposits with a person carrying on business in Malaysia;

(ii) it makes contact with professional advisers carrying on business in Malaysia;

(iii) it prepares and maintains books and records in Malaysia;

(iv) it acquires or holds any lease or property for operational purposes or accommodation of its employees;

(v) it holds directors’ or members’ meetings within Malaysia;

(vi) it holds shares, debt obligations, or other securities in a company incorporated under the Offshore Companies Act 1990 or in a domestic company, or holds shares, debts obligations or other securities for the purposes of a transaction entered in to in the ordinary course of a money-lending business.

Taxation

Labuan Offshore Trading Companies pay 3% tax on net audited profits or the sum of RM 20,000 (where no audit is required). Non-Trading companies are tax exempt.

The locality of profits from trading in goods and commodities is generally determined by the place where the contracts for purchase and sale is effected. “Effected” means more than where the contract is signed and includes the location of negotiation, conclusion and execution of the terms of the contracts.

If a Labuan Company earns commission by securing buyers for products or by securing suppliers of products required by customers, the activity which gives rise to the commission is the arrangement of the business to be transacted between the principals. The source of the income is the place where the activities of the commission agent are performed.

Double Taxation Agreements

To date Malaysia has signed 74 double taxation treaty agreements (DTAs), making its DTA network the most extensive in the region. Labuan companies can now make an irrevocable election to be taxed under the Malaysian Income Tax Act 1967 (ITA), thereby affording the Company access to all of Malaysia’s DTAs. A Labuan holding company which has a co-located office in Kuala Lumpur must make the election to be taxed under the ITA.

Malaysia’s DTA partners include: Albania, Argentina, Australia, Austria, Bahrain, Bangladesh, Belgium, Brunei, Canada, Chile, China, Croatia, Czech Republic, Denmark, Egypt, Fiji, Finland, France, Germany, Hungary, India, Indonesia, Iran, Ireland, Italy, Japan, Jordan, Kyrgyzstan, Kuwait, Kyrgyz, Laos, Lebanon, Luxembourg, Malta, Mauritius, Mongolia, Morocco, Myanmar, Namibia, Netherlands, New Zealand, Norway, Pakistan, Papua New Guinea, Philippines, Poland, Romania, Russia, San Marino, Saudi Arabia, Seychelles, Singapore, South Africa, South Korea, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syria, Taiwan (Income Tax Exemption Order), Thailand, Turkey, UAE, UK, USA, Uzbekistan, Venezuela and Vietnam.

Financial Records

A set of accounting records must be kept in Labuan.

A trading company, which pays 3% of audited net profits, is required to appoint an auditor and file audited financial statements. However trading companies which elect to pay tax of RM 20,000 p.a. are not required to file financial statements. Such companies are exempt from appointing an auditor if they have not carried out licensed activities and the members of the company have resolved that no auditor be appointed.

There is a filing fee for “adoption of accounts” and if the accounts of the Labuan Company have been audited, and for the “lodgement of the said audited accounts”.

A non-trading Labuan Company is not required to appoint an auditor nor file audited financial statements.

OCI Labuan Company Formation Services

At OCI we believe in giving you more for your money than would the average IBC formation service. Hence included in the incorporation package for your Labuan Offshore Company is the following:

Services:

Unlimited name availability inquiries
Advice from an experienced International Corporate Lawyer on how to structure your company
Preparation (overseen by a lawyer) of application to incorporate the company
Preparation (overseen by a lawyer) of the company’s memorandum of association
Preparation (overseen by a lawyer) of the company’s articles of association
Attending to filing incorporation request with the company registry
Attending to payment of government filing fees
One year’s Registered Agent service in the country of incorporation
One year’s Registered Office service in the country of incorporation
Mailing address in the country of incorporation
Delivery of Incorp pack by international courier (ie DHL/Fedex/TNT etc)
Unlimited free legal consultations for 12 months

Documents included in your Incorp pack:

Certificate of incorporation
2 sealed/stamped copies of the company’s Memorandum of Association
2 sealed/stamped copies of the company’s Articles of Association
Resolution appointing first director/s
Resolution appointing first shareholder/s
Up to 5 share certificates
Resolution to open a bank account
Resolution to rent an office
Resolution/s to engage a Phone, Internet & Website service provider
Resolution to hire a staff member/s
Resolution to appoint a company lawyer
Resolution to appoint a company accountant
Resolution appointing you as the company’s authorised representative in commercial negotiations
Resolution issuing a Power of Attorney in your favour
Agreement authorising you to represent the company in commercial negotiations
Power of attorney authorising you to sign documents on behalf of the company
Register of directors
Register of shareholders
Expression of wishes (ie an “Offshore” Will)
Lawyer authored User Guide (“How to Use Your Offshore Company”)

Price (all inclusive): $US 2,750

With tax effective offshore company management (ie including Professional Corporate “Nominee” Director, Shareholder & Company Secretary): $ 3,150

From 2^nd year: $1,850 (+ Nominees as/if required)

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Switzerland Companies

Centrally located at the Alpine crossroads of Western Europe, and renowned for its International Banking/Fund Management Industry, Switzerland, despite a relatively small population (circa 8 million) stands at or near the top of the peak in terms of Internationally focused Company Formation jurisdictions.

Boasting a stable, progressive economy Switzerland holds the 2nd highest rating in Europe (behind only Ireland) in the Index of Economic Freedom and the World Economic Forum’s Global Competitiveness Report currently ranks Switzerland’s economy as the second most competitive in the world.

With a pro-business regulatory environment, outstanding infrastructure and the ability to deliver one of the lowest Corporate Tax Rates in Europe (as little as 9%, potentially) it’s no surprise that many start-ups (especially since the beginning of the tech boom) have chosen to make Switzerland their Corporate Headquarters.

Swiss Company Features

Company Type: S.A. or S.A.R.L.

Time To form: Min 10 days

Paid up Capital: CHF (ie Swiss Francs) 50,000 for an S.A. and CHF 20,000 for an S.A.R.L.

Privacy: Switzerland offers a high level of confidentiality. For an S.A. the names of shareholders remain anonymous. S.A. Companies can have Bearer shares

Accounting: Swiss Companies must generate a set of accounts annually but there is no Audit requirement.

Taxation: Tax can be as little as 9% if the majority of turnover comes from outside Switzerland

Number of Directors: Minimum of 1 director is required (at least 1 director must be resident in Switzerland). Nominee Directors are permitted

Number of Shareholders: Minimum of 1 shareholder. Can be Corporate or natural person

Differences Between a Swiss S.A. and S.A.R.L. Company

	S.A. (Public Limited liability Company)	S.A.R.L. (Company with Limited Liability)
Number of shareholders:	1 (Can be a natural person or a Corporation)	1 (Can be a natural person or a Corporation)
Company name	Company name must end with “SA.”	Company name must end with: SARL.
Minimum share capital	100,000 CHF with a minimum of 50% subscribed (50 000)	20 000 CHF must be fully subscribed. No maximum.
Contribution in kind towards share capital	Is Possible	Is Possible
Nominal value of shares	A minimum of 1 cent.	A minimum of 100 francs.
Local (ie Swiss Resident) director?	Required	Required
Accounting/Auditing	Must keep accounts, but auditing is not compulsory.	Must keep accounts, but auditing is not compulsory.
Liability of the shareholders.	Limited to the share capital.	Limited to the shares.
Privacy	Shareholders names do NOT appear on the public record.	The names of the members DO appear in the local commercial register.
Convertability	Can be converted into a SARL company at any time.	Can be converted into a SA company at any time.
Transfer of shares	Simple cession.	Signature of the share sale/purchase contract must be made before a notary.

Prices and Inclusions

Set up price for a Swiss company: $US5,500 (From 2^nd year $3,750)

Set up price inclusions:

The Certificate of Incorporation issued by the local registrar.
Company secretarial maintenance.
The Memorandum and Articles of Association.
Registered Office in Switzerland
Registered Agent in Switzerland.
Share certificate(s).
Board resolution authorizing appointment of director and the issuance of of shares.
Unlimited free consultations with our In-House Lawyer for 12 months

Renewal fee inclusions: