Why Transfer Property to a Tax Free Offshore Trust or Private Foundation?

Offshore Trusts & Private Foundations are commonly used as Asset Holding Vehicles.


So why bother transferring ownership of an onshore asset such as Real Property to an Offshore Trust or Private Foundation?


Most Trust & Estate Practitioners would tell you that the benefits of transferring ownership of property to a tax free Offshore Trust or Private Foundation include:


(a)  It will enable your successors to avoid (if you are the owner of the property in your own name) having to pay Inheritance tax in respect of the property when you pass on.

(b)  It will enable you to control ever after (ie even after you’ve passed on) what happens with the property and who gets to benefit financially from the property, when and in what amount

(c)  It will protect the asset from anyone trying to sue you (and or from avaricious governments)

(d) It should enable you to avoid having to pay CGT (Capital Gains Tax) ultimately when the property is finally sold (ie if you set up an Offshore Trust or Foundation and structure it a certain way)

(e) It should enable you to reduce the amount of tax that would otherwise be payable on nett profits generated from renting the property


(and contrary to what you may have heard it doesn’t cost an arm or a leg to set up an Offshore trust or Private Foundation. Such an entity can be set up for as little as $US1,600!)


Note you should consult your local Lawyer and/or Financial Adviser and/or Accountant before transferring ownership of an asset to an Offshore entity as tax may apply on the transfer (eg CGT and/or Stamp Duty)


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How to Transfer of Ownership of an Onshore Company 2 a Private Foundation

Recently I was asked by a client can I transfer ownership of my local Company to an Offshore Tax Free Private Foundation?


The answer is you can but, as ever, you’ll need to be sure that you dot your I’s and cross your Ts!


To legally effect a change of ownership of an Onshore Company to an Offshore Private Foundation you need to effect a Share Transfer.


To achieve this all you should require is a stock transfer form to be signed by the current holder/s of the shares and deposited at the Company’s Registered Office (or at the Company Registrar’s Office ie if the Company you are transferring ownership of is incorporated in a country which has a public register of shareholders).


To minimise the chances of the legality of the transfer ever being questioned:

(a)  You should ensure that the Onshore Company and IBC both sign a contract (ie a sale and purchase agreement)

(b)  Once the contract is signed a Share Transfer (ie a document which effects legal transfer of ownership) will need to be signed, usually by both parties and lodged with the relevant authority/Registrar

(c)   The sale should be seen to be on commercial terms (such as would otherwise exist between a buyer and seller “at arm’s length”). That said the sale contract could be an instalment or vendor finance contract ie where a deposit is paid and ownership is transferred but the seller retains a mortgage until such time as all the instalments have been paid.

(d)  The price paid for the shares should be seen to be fair market value


How do you determine, or buy at, fair market value? Ideally by either:

(a)  Advertising the shares for sale publicly and matching the price of the highest bidder; or

(b)  Have a Licensed Valuer or a Certifier Practising Accountant review the Company’s books of account and place a value on the shares


Capital Gains tax may apply hence you should seek local legal/taxation/financial advice before committing to transfer ownership of an onshore Company to an Offshore Private Foundation.


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Offshore Companies are commonly used to own/operate all kind of online based businesses. Please check out these links for some examples of how certain kinds of businesses can be set up “Offshore”:




If your product involves selling EBooks – or any kind of Information based product – then you’ll be pleased to know that such a business lends itself well to an “Offshore” Corporate Structuring Plan.


In principle here’s how it can work:


  • A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated
  • Copyright in the EBook or Information vests in or is transferred to the IBC
  • The IBC owns/operates the web-based business (eg ownership of the web-domain and the website/artworks or trademark/s or any sole distributor rights are held by or transferred to the IBC)
  • An Offshore account (which received payments via a merchant account) is set up in a nil tax banking centre
  • The Company is set up with a (nil tax jurisdiction based) Nominee Director – that way management and control of the Company is seen to be taking place from Offshore ie a nil tax environment, not your place/country of residence. (Generally speaking a Company serving Online or International customers/clients is liable to pay tax in the country from which it is seen to be managed and controlled)
  • The sale terms and conditions on the website provide that the purchaser’s offer is not accepted until the Company responds ie by sending an invoice or providing payment instructions which means, in so far as revenue protocols are concerned, that a/the contract is formed/the bargain is struck “Offshore” in a nil tax environment (ie the nil tax jurisdiction from where the Company is seen to be managed and controlled)
  • Ideally the server is located in a country which does not tax business on the basis of server location (eg Singapore)
  • Customers contract with and pay the IBC. All such monies are banked free of tax in the first instance
  • You or your local company would be contracted by the IBC to manage sales/delivery of product/website maintenance/whatever.
  • You would invoice the IBC periodically (eg monthly) for this service which income would be assessable income in your home state – though a smart Tax Accountant should be able to assist you to claim a series of expense against this income (eg home office, equipment, travel, phone/internet/utilities etc) to significantly reduce the amount of tax payable on this income.
  • Often there is some kind of intellectual property (“IP”) created or behind a website based business (even if it’s just the website/design). It may be advantageous to you down the track if ownership of the business and the IP were held by 2 different entities. What you can do there is set up a 2nd IBC to own the IP. The first IBC (ie the Trading Company) pays license fees periodically to the 2nd IBC which fees wold be receipted tax free. This could be advantageous if you wanted to bring ownership of the web-business onshore or if you wanted to sell the business but keep a passive (potentially tax free) income stream
  • Ideally once you start to grow, and to add substance, you would be wise to set up your MD/Board and or a sales team onshore to take orders and receive income in a low tax onshore environment (eh Hong Kong, Ireland, Singapore, Cyprus etc as per the Amazon/Google model)


Per above to minimise the chances of the IBC being taxed onshore ideally the IBC should be (and be seen to be) managed and controlled from offshore. How this can be achieved is including a (nil tax jurisdiction based) Nominee Director etc as part of the Corporate structure. See this page for details of how that can work:




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


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Legislative amendments in 2018


Towards the end of 2018, the Government of Belize proposed significant amendments to their laws to comply with the EU and the OECD (BEPS) requirements. We decided at that time not to distribute any official legal update on those amendments because:


1) a detailed and thorough analysis of the amendments introduced showed that the laws had not been finalized and many of their provisions contradicted each other;


2) the legislative amendments also left many “grey areas” making it impossible to guide our clients properly on solutions available within the legislative framework; and


3) it was obvious to us that further legislative amendments were coming in the next 3-4 months, which would somehow set the record straight, and this is exactly what happened just now.


In summary the proposed amendments outlined in December 2018 foreshadowed that for the international businesses, Belize companies that required any form of Special License in Belize would, moving forward, have to show substance in Belize, pay taxes in Belize, and, in short, be subject to all relevant Belize laws. Requirements for substance for companies which are not subject to licensing under IFSC Act, were not put forward and Belize IBCs continued to enjoy their offshore status as before.


The amendments of 2018 have quite heavily affected IP companies, which should have ceased to exist in Belize by July 2021.


It is worth noting that these amendments of 2018 didn’t work for Belize to avoid the “EU black list”.




Within a month of Belize being included into the “EU black list”, the Government of Belize proposed further amendments to the International Business Companies Act (the Act was published on 27 March 2019 and became effective on 1 April 2019).


General amendments include:


  1. Belize IBCs are now allowed to do business with Belize residents, own land in Belize, hold shares in Belize domestic companies and can be owned by Belize residents;
  2. Belize IBCs are now within Belize’s domestic tax regime and will thus be required to file annual tax returns and are subject to the Belize Income and Business Tax Act; the rate of tax under the domestic tax regime is tied to the business activity and type of income;
  3. All Belize IBCs must now comply with physical presence requirements in order to establish economic presence in Belize;
  4. Grandfathering provisions apply up to 30th June, 2021 in regards to tax liability.


Ring Fencing


Belize residents can now hold shares and/or beneficial interests in Belize IBCs, do business with Belize IBCs, and Belize IBCs can now own land and other property in Belize, hold shares in Belize domestic companies and can operate and carry out core income generating activities in and from within Belize.


Income and Business Tax Act


The December 2018 amendment included provisions that effectively subjects the IBC to the Belize Income and Business Tax Act (the Tax Act).  IBCs must now file tax returns and pay the appropriate taxes to the Belize income tax department.  Since Belize IBCs are now required to pay taxes, they must obtain a Tax Identification Number (TIN) from the income tax department.  The process for applying for a TIN includes completing the application form and providing the tax department with information on the structure and activities of the company, its directors and shareholders. Registered Agents will be able to apply for TINs on behalf of their clients and will be allowed to sign the application form as the local representative of the company. It is anticipated that Belize IBCs will only be liable for tax on Belize sourced income. Clarification on this key point is imminent.


Physical Presence Requirements


The December 2018 amendment provided for physical presence mandatory for IBCs holding a licence from the IFSC but optional for all other IBCs. This amendment was not sufficient as EU required substance for all IBCs.  In response, the IBC (Amendment) Act No. 1 of 2019 (March 2019 amendment) was passed and came into force as of 1st April, 2019.


With the passing of the March 2019 amendment, all Belize IBCs must meet physical presence requirements and comply with regulations to be put in place addressing physical presence. The December 2018 amendment together with the March 2019 amendment provides that physical presence include the following aspects which will all need to be complied with:

1.         Sufficient and adequate amount of suitably qualified persons carrying out its core income generating activities from within Belize;

2.         Expenditures consistent with the size of business;

3.         Control and management activities conducted from Belize; and

4.         Keeping of records in Belize;


The March 2019 amendment does provide a carve-out for “pure equity holding” companies, which is defined as a company which:

(a)        is a holding body;

(b)        has as its function the acquisition and holding of shares or equitable interests in other companies;

(c)        holds equity participation and earns only dividends and capital gains; and

(d)        does not carry on any commercial activity;”


IBCs classified as pure equity holding companies will not be required to comply with physical presence requirements.  Instead, these companies will only need to ensure that they comply with corporate filing requirements under the IFSC Act and the Income and Business Tax Act and will need to have adequate personnel in place to manage the equity holding.  Such adequate personnel will be satisfied via the company’s IBC Agent so long as the Agent retains record of the equity participation or holdings of the company.  These companies will still be required to file annual tax returns but will not pay tax if there is no income or if the only income is dividends and capital gains.


Grandfathering Provisions


As it relates to the tax regime, a grandfathering period was allowed for in the December 2018 amendment.  All IBCs incorporated on or before 16th October 2017 will continue to benefit from tax exemption up to 30th June, 2021 and their first annual tax filing will be due on 31st March 2022.


All IBCs incorporated on or after 17th October, 2017 immediately fall within the tax regime and should file their first annual tax return by 31st March, 2020.  These IBCs will also need to obtain a TIN as soon as the income tax department allows for TINs to be issued to IBCs. Please note that grandfathering provisions apply only to tax exemption and not to physical presence requirements.


One last important change to the Belize IBC Regime is the abolishing of the holding of Intellectual Property assets.  The IBC (Intellectual Property Asset Prohibition) Regulations 2019 came into force on 1st January, 2019 and strictly prohibits the holding of IP assets by Belize IBCs.  These regulations, however, also incorporate grandfathering provisions utilizing the same timeline as the grandfathering provisions for taxes on IBCs.


Companies incorporated on or after 17th October, 2017 are strictly prohibited from acquiring, holding, owning or dealing with any IP assets.  Companies incorporated on or before 16th October 2017 that hold IP assets, may apply to the IFSC for a determination on whether they qualify for grandfathering.  If the IBC is approved for grandfathering, this simply means that the company will have until 30th June, 2021 before it must dispose of all IP assets being held.


Physical Presence Regulations are in their final drafting stage and are expected to come into force before or by June.  As soon as these are passed, we will provide a copy of these here on our Blog Site, together with guidance noted that all interested persons can view and reference.


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