February | 2025 | Offshore Companies International

Offshore Asset Protection Options 101

If it’s pure asset protection you’re looking for what you might want to do is set up an Offshore Trust or Private Foundation at the base of the tree as the ultimate holding vehicle.

Commonly the Trust or Foundation owns a tax advantaged or tax free Offshore Company or Companies. The Offshore Company is typically deployed to own/operate a business ie particularly if your business fits one of these categories (as all such businesses lend themselves well to an “Offshore” Corporate Structuring Plan)

Import/export
Online trading (eg forex/commodities/shares/derivatives/precious metals etc trading)
Software development
Buying and selling Petroleum products
Working abroad as an expat (eg in a Profession or the Oil/Gas Industry etc)
Ecommerce
Online marketing
Cryptocurrency Trading/Investment etc
ICOs
Bitcoin/Cryptocurrency Exchange
General consulting/contracting to an international clientele
And more

Depending on your business model, what we sometimes do ie where the client has a current business which is owned by an Onshore Company (and it’s impractical to shift ownership of that Company/business to a tax free Offshore Company) is we interpose a low tax Holding Company between the Onshore Company and the nil tax Offshore Company/Holding vehicle. (Check this link which explains in detail what a Holding Company is: https://www.dropbox.com/scl/fi/27x81ebqsn2huxxx4ks58/What-is-a-LOW-TAX-Holding-Company-and-How-Are-Holding-Companies-Used.docx?rlkey=qmy29g1zbazubxf8fpzujrhkg&st=6vrjr1up&dl=0 ).

For clients looking for supercharged Asset Protection Options we commonly deploy a triple Structure ie a nil tax Offshore Company + a nil tax Offshore Asset Protection Trust + a Private Foundation. Here’s one such example: http://offshoreincorporate.com/how-to-create-the-ultimate-tax-effective-offshore-corp/

Also check this article “Why set up a Triple structure”: https://www.dropbox.com/scl/fi/p2n5zzmu8wiw4jy28jcvr/Why-Set-up-a-Triple-Structure.docx?rlkey=718dl6gp1xfr3rmqzu0cfyzsy&st=v5pkyhxe&dl=0

In essence we can build as many layers into the structure as you like and bury ownership details so far from view that no one should ever be able to discover who set up or who is behind the Company/structure. The only limit is your imagination (and your budget!).

Offshore Asset Protection Trusts

For information on what an Offshore Trust is, how a Trust can be used and the different kinds of Trusts you might/could form please click on these links: http://offshoreincorporate.com/offshore-trusts/

https://www.dropbox.com/scl/fi/43iuf0ds890d4gq87mb1f/What-is-a-Discretionary-Trust.docx?rlkey=yu02jg6yc4knsyamnenuah15v&st=lg90b52y&dl=0

https://www.dropbox.com/scl/fi/62lqjm9ue85hgic2v07u7/What-is-a-Purpose-Trust.docx?rlkey=2c9t5dlhngyyltp528y90w3h5&st=h82ypres&dl=0

https://www.dropbox.com/scl/fi/z6gfi7k7cbnxjth0gt4eu/What-is-a-Unit-Trust.docx?rlkey=dw95wil2whjmodmnj1jjheryr&st=9alf4t8y&dl=0

We can assist you to set up an Offshore Trust in Belize, Seychelles, Nevis, the BVI, Mauritius and The Cook Islands.

For detailed information on the features and benefits of the Belize Trust click on this link: http://offshoreincorporate.com/international-trusts/belize-tax-free-trusts/

For detailed information on the features and benefits of the Seychelles Trust please click on these links: http://offshoreincorporate.com/seychelles-international-trusts/ & http://offshoreincorporate.com/seychelles-international-trusts-fact-sheet-2/

For detailed information on the features and benefits of the Nevis Trust please click on this Link: https://www.dropbox.com/scl/fi/vzzui9kxzd571lduoxs65/Nevis-Trusts-Overview.pdf?rlkey=d4ei03ox3kqkagjyi4vol4qah&st=12cawey4&dl=0

For detailed information on the features and benefits of the BVI Trust please click on this Link: https://www.dropbox.com/scl/fi/klfs8v2ovjy4iqlc6vimq/BVI-REGULAR-TRUSTS.docx?rlkey=c7lzemcl49g1bdlutknsmbsxn&st=kem8goqm&dl=0

For detailed information on the features and benefits of the Mauritius Trust please click on this Link: https://www.dropbox.com/scl/fi/dlyoxsi1m40di6box7cth/Mauritius-Trusts.pdf?rlkey=gn3otgnd7zauurwtxeuv9yvlv&st=3k4ufeza&dl=0

For detailed information on the features and benefits of the Cook Islands Trust please click on this Link: https://www.dropbox.com/scl/fi/8tfclpp49xofuwiphmjxo/Cook-Islands-Trusts-Info-Sheet-CURRENT.pdf?rlkey=m9mc4gygo614ue12ki86uyljd&st=jpa1p29u&dl=0

(You may be interested to know the most popular jurisdictions with clients looking to set up Asset Protection Trusts are:

1. Belize

2. The Cook Islands

To register a Seychelles or Nevis Trust or Panama will cost $US3,500. In 2^nd and subsequent years the maintenance/service fee is $2,500.

To register a Belize or Mauritius Trust will cost $US2,990. In 2^nd and subsequent years the maintenance/service fee is $2,500.

To register a Cook Islands Trust will cost $US7,000. In 2^nd and subsequent years the maintenance/service fee is $4,500.

To register a BVI Trust will cost from $7,850. In 2^nd and subsequent years the maintenance/service fee is $3,500.

Private Interest Foundations

A lot of Lawyers (myself included) believe that a Foundation is a better option than a Trust. Check this article “Why a Foundation is Superior to a Trust FAQ” which explains why: https://www.dropbox.com/scl/fi/g03hztpck7s05kmnhd0d6/Why-a-Foundation-is-Superior-to-a-Trust-FAQ.docx?rlkey=wiiae4507e5lbw00unsh0sb3m&st=bti3bc6f&dl=0

For information on what a Private Interest Foundation is and how one can be used please click on this link: http://offshoreincorporate.com/private-interest-foundations/

We can assist you to set up a Private Interest Foundation in either Panama, The Bahamas, Belize, Seychelles, Mauritius & Nevis.

For detailed information on the features and benefits of the Panama Foundation please click on this link: http://offshoreincorporate.com/panama-tax-free-foundations/

For detailed information on the features and benefits of the Seychelles Foundation please click on this link: http://offshoreincorporate.com/seychelles-foundations/

For detailed information on the features and benefits of the Belize Foundation Check this Link: https://www.dropbox.com/scl/fi/m0e13cs0y0v0rurujm56c/Belize-Private-Interest-Foundations-Page.docx?rlkey=xqb8k9d89n34xfpckn7x1t9q6&st=xzdib1fw&dl=0

For detailed information on the features and benefits of the Nevis Foundation Check this Link: https://www.dropbox.com/scl/fi/jlrn97qzks2i2co64zakb/Nevis-Foundations-Info-Brochure.docx?rlkey=xqv34xec4a8bjcslzh2amwwoj&st=prfa76ll&dl=0

For detailed information on the features and benefits of the Mauritius Foundation Check this Link: https://www.dropbox.com/scl/fi/98zo2znk2vmrsz8rn0nm8/Mauritius-Foundations-Fact-Sheet.docx?rlkey=809q6zqupd0msn9f0037kxlof&st=kxkgmzw7&dl=0

For detailed information on the features and benefits of the Bahamas Foundation Check this Link: https://www.dropbox.com/scl/fi/dvd91uko2sfo7zguth10f/BAHAMAS-FOUNDATIONS-FACT-SHEET.docx?rlkey=xg74yhoiqrzncjtc099vpt8g7&st=32ehbj0r&dl=0

Given its superior tax planning and asset protection features historically most of our clients (90% +) have chosen to register their Foundation/s in Seychelles. For detailed information on the unique benefits a Seychelles Foundation can deliver please see click on this link: http://offshoreincorporate.com/seychelles-foundations-fact-sheet/

To register a Foundation will cost from $US1,900 (and to maintain from 2^nd year, from $1,600 p/a). For those who have tax planning and pr privacy needs we can also supply a Nominee Founder + a Nominee Councillor (and even a Nominee beneficiary) as/if required

Nil & Low Tax Offshore Companies

We can assist you to incorporate nil tax or low tax Companies in a wide range of jurisdictions including:

Seychelles
Belize
BVI
Hong Kong
Panama
Nevis
Anguilla
Cyprus
Gibraltar
USA
Australia
UK
Samoa
St Vincent & The Grenadines
Marshall Islands
RAK (UAE)
Ireland
Vanuatu
Mauritius
Malta
The Cook Islands
Estonia

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

How to Set up a Video Game Publishing Business Tax Free Offshore

Are you a video game creator?

Would you prefer to incorporate your business in a low regulation and/or tax friendly environment?

If so, you might want to think about incorporating your business “Offshore”.

Video games are, at core, Intellectual Property (“IP”) ie a creation of the mind. IP also includes things like inventions, literary and artistic works, designs and symbols, software code, names and images used in business.

IP is commonly protected in law by way of patents, copyright and trademarks which enable the person who came up with the idea to securely earn recognition or financial benefit from whatever it is he/she has invented or created.

An Offshore IP company is an ideal vehicle for the administration and management of licenses and intellectual properties including computer software, technical know-how, patents, copyrights and trademarks.

Practicalities

So how does it work from a practical perspective?

At core the Offshore IP Company (which is usually set up in a nil or low tax country) is used to divert income from Trading Companies or Businesses trading in developed or high tax countries.

The first step is to transfer ownership of the software/artworks underpinning your video game (ie your IP rights) to the Offshore Company/Entity.

Once that’s done the Trading Business then enters into a legal agreement (contract) with the IP Company whereby, in return for being allowed to use the IP, the Trading Company agrees to pay the Company royalties or license fees. The income arising from these agreements can then be accumulated offshore in a nil or low tax environment.

Timing is of critical importance – It is clearly preferable to acquire the IP (for example, a patent) at the earliest possible time (e.g. at the patent pending stage) before the IP becomes highly valuable. That way the capital payment for the acquisition of the IP (e.g. patent) can be set at a lower amount i.e. before its true worth has been determined in/by the market. (These capital payments may even be deferred and or staggered by way of an instalment contract such as would enable the Trading Company to use subsequent sales receipts to fund the cost of the IP).

If a deal is struck for the Offshore IP Company to buy the IP before the IP gives rise to a product or service which is offered/advertised in the market the IP might even be transferred for nominal consideration enabling the IP inventor/creator to transfer patent, copyright or trademarks in favour of the low/nil tax company before the IP suffers significant appreciation in value.

Businesses Who Pay Royalties or License Fees for the use of IP

Once it has acquired the Property the Offshore IP Company can then issue (IP) sub-licenses or exploitation rights to appropriate third party structures.

For example, a majority of software companies license their users through companies which are established in an offshore jurisdiction, or through a firm, which is not established in a classical offshore jurisdiction, but is owned or controlled by such a firm.

Typical examples of businesses that might pay license fees to a nil/low tax Offshore Company include:
- Software companies
- Companies doing business in information technologies
- License and copyrights to books, articles, music, films, etc.
- Users of Franchise operating systems

- Trademark product (e.g. Clothes/Consumer Goods/Accessories etc. Brand) manufacturers and or retailers

In some circumstances the royalties may be subject to withholding tax at source, however, the interposing of a second company in another jurisdiction may reduce the rate of tax withheld at source (a carefully selected jurisdiction can enable you to slash the rate of withholding tax that might otherwise be applied on royalty payments with the commercial application of a double taxation avoidance treaty ie DTA).

Structuring Options

Another option, whilst you are still in the process of creating a new piece of intellectual property, is to involve or engage an offshore (nil tax) company as a foreign partner or financial sponsor. Participation in development at this early stage would entitle the Offshore Company to register as the owner or co-owner of the property.

If you involve an offshore company later, you would have to sell or assign the title in the property to the offshore company, and these kind of transactions require at the least that a fair market price deal be apparent as if no associated parties were involved (+ the transfer may involve the incurring of some CGT on the part of the inventor/creator of the IP).

Benefits of an Offshore IP Company

There are numerous benefits that an IP holding company can deliver including:

By placing your IP in one entity you are able to streamline the internal processes for inter-group licensing
Cross-jurisdictional tax issues become simpler as you will be regularly licensing IP between the same jurisdictions
You can justify staffing that entity with people who have the skills to manage the same so protecting valuable assets of the company further, simplifying the licensing process
Assets can be valued due to the income stream that accrues for the benefit of the IP holding company
The value of the shares in the entity can be included into the accounts which will benefit the shareholders of the holding company
You can split your income streams in two enabling you to sell one chunk of your business first up (i.e. the operational business) whilst retaining the other (i.e. IP) arm of the business which would entitle you to receive passive income
If your business or trading company ever gets sued and the IP is owned by a 2^nd (e.g. Offshore) Company the most precious asset of your business can/will not be lost.
You get to retain ownership of your IP in a highly private environment where no one knows what you own or how much the IP is worth. (There have been many documented cases of inventors and artists who rise suddenly to fame only to lose their fortune just as quickly via a law suit filed by a disgruntled gold digging ex-lover or confidante… The chances of that happening if your IP is owned by a privacy haven company are GREATLY reduced)
You can significantly if not dramatically reduce the tax that your operating/trading company might otherwise have to pay

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Cayman Islands Exempted Companies

The Cayman Islands, consisting of Grand Cayman, Cayman Brac and Little Cayman, are located in the western Caribbean, about 150 miles south of Cuba, 460 miles south of Miami, Florida, and 167 miles northwest of Jamaica. The capital of the Cayman Islands is George Town which is situated on the western shore of Grand Cayman. Geographically, the Cayman Islands are part of the Cayman Ridge, which extends westward from Cuba.

The legal system of the Cayman Islands is based upon English Law and is a combination of common law and statute. The Cayman Islands is a British overseas territory, with its judiciary appointed by the territorial government. The Privy Council in London, United Kingdom is the ultimate appellate court.

The Cayman Islands Companies Law governs the operations of the Cayman Islands Exempted Company.

Key features of the Cayman Islands Exempted Company:

An exempted company may not conduct business within the Cayman Islands
A tax exemption certificate is available for application with an initial period of 20 years or 30 years
Simple corporate structure – minimum requirement of one shareholder and one director
Information on shareholders is not available for public inspection
Registers of Directors and Officers are required to be filed with the Companies Registry, however they are not available for public inspection
No minimum share capital is required, and it can be expressed in any currency
Shares can be issued with or without a nominal or par value
Chinese company names can be registered with the Registrar
No requirements for audited accounts or holding of annual general meetings

Benefits of the Caymans Exempt Company include:

A Cayman Islands Exempted Company offers the following benefits:

100% Foreign Owners: Foreigners can own all the shares.
Limited Liability: Only the unpaid amount for all the shares is a shareholder’s liability.
Privacy: The names of the shareholders and directors are not available to the public. Bearer shares are permitted.
No Taxation: The Cayman Islands do not levy any type of taxes on the company and shareholders. However, United States residents must declare all global income to the IRS just like residents of other countries taxing global income.
One Shareholder/Director: Only one shareholder and one director is required who can be the same person.
No Required Meetings: There are no requirements to hold shareholders or directors meetings.
No Audits: There are no required accounting standards and no required audits.
English: English is the official language.

Cayman Islands Exempted Company Name
As long as the proposed company name is not similar to any other legal entity’s name in the islands, exempted companies may choose a name in any language. They can even have a dual name in English and in another language without having to provide a translation.

Proposed names can be reserved for a limited time with the Registrar for a small fee.

Exempted companies are not required to use “Limited” or “Ltd” although they are limited liability companies.

Certain words may not be used with a company name as they are restricted including “bank”, “chartered”, and “royal”.

Types of Exempted Companies
The Companies Act provides for variations of exempted companies with different features:

Exempted Company – This type of company cannot engage in business inside the Cayman Islands with citizens or residents. However, they can contract with service providers to obtain internet, water, electricity, and other necessary services to run a business. To become registered, an applicant must file a declaration that no business will be conducted inside the islands.

Segregated Portfolio Company (SPC) – An exempted company is the only type which can apply to become a segregated portfolio company. The SPC can separate its assets and liabilities into portfolios independent of each other and the general assets of the company.

Exempted Limited Duration Company – This type of company limits its lifespan to a maximum of 30 years when it automatically dissolves.

Memorandum of Association
The constitution of a Cayman company are the Memorandum of Association and the Articles of Association. The Memorandum must contain this information:

• Company name;

• Initial subscribers’ names along with how many shares each one has subscribed (minimum of one share per subscriber);

• Purpose for the company;

• Registered office address;

• Declaration confirming the limited liability for its shareholders; and

• Authorized share capital in any currency.

Articles of Association
The Articles of Association describe the internal rules and regulations including:

• Shares issuance, types, how they are transferred, repurchased, or redeemed;

• Shareholders’ meetings;

• Shareholders’ voting rights;

• Appointment of officers and directors along with their powers, meetings, compensation, and indemnification;

• Dividends payments; and

• Winding-up towards dissolution.

A copy of the Articles of Association and the Memorandum of Association must be made available to all shareholders upon request.

Limited Liability
A shareholder’s liability is limited to his or her unpaid amount for all shares.

Registration
Two signed copies of the Articles of Association and the Memorandum of Association are filed with the Registrar of Companies who issues a Certificate of Incorporation. These documents will not be made available for public inspection.

Registered Office
Every company must have a local registered office whose location is filed with the Registrar and published by public notice. If the directors change its location it must be done by a formal resolution. A certified copy of the change of location resolution must be filed with the Registrar within 30 days of the resolution being passed.

Shareholders
A minimum of one shareholder is required who can be the sole director of the company.

A Registry of Members (shareholders) is required, but does not have to be kept at the registered office. Nor does the Registry of Members have to be available for inspection by the government or the public. The only exception is when an order for production is issued under the Tax Information Authority Law.

Shares may be issued:

• With or without nominal or par value;

• Negotiable or non-negotiable;

• Premium over par value:

• Issued in fractions of shares (with corresponding fractions of rights and liabilities);

• Issued with deferred, preferred, or other special rights; and

• Bearer shares (except when the company owns Cayman real property).

Share certificates are proof of ownership, but shares can be issued without certificates. Registered shares are also allowed.

Shares may be transferred if the Articles of Association provide for them or may restrict transfers.

Dividends may be paid out if the Articles of Association so provide.

Directors and Officers
A minimum of one director is required. Directors may be residents of and residing in any country. Since the Memorandum of Association lists the initial director(s), any removal and addition of directors must be in accordance with the Articles of Association.

Liabilities of the directors may be limited or unlimited according to the Articles of Association.

The Board of Directors is responsible for the management of the company and its officers. The Articles of Association should provide all the powers, duties, and responsibilities for the directors and officers.

The company has the option to appoint officers to manage the daily affairs like a President, Treasurer and/or a Secretary.

The names and addresses of the officers and directors must be maintained in a Register of Directors & Officers stored at the registered office. Within 60 days of the first appointment, a copy of the Register must be filed with the Registrar of Companies. The same requirements apply for any changes of directors or officers.

Accounting
The government does not require specific standards for accounting and bookkeeping. However, every company must maintain adequate accounting records showing income, expenses, assets, and liabilities. While the records do not have to be kept in the Cayman Islands, they must be available if the government and its tax authorities were to give notice or an order to inspect them.

There is no requirement for any audits or the appointment of auditors.

Minimum Authorized Capital
While not required, most exempted companies choose an authorized capital of $50,000 because this is the maximum capital a company can have to qualify for the lowest government registration fee.

Annual Filing
Every January each company must file a return with the Registrar declaring whether any changes to the Memorandum of Association have been made, and that all business was conducted outside of the islands and that no trade was conducted inside the islands.

An annual renewal fee must be paid by December 31 for the next year. The fee is a sliding scale based upon the authorized share capital amount.

Taxes
There are no taxes. No income tax, no corporate tax, no capital gains taxes, no gift taxes, no inheritance taxes, no wealth tax, or any other tax for a company exclusively conducting business outside of the islands.

Annual General Meeting
There is no requirement to hold an annual general meetings for the directors or the members (shareholders).

Public Records
The only document filed with the Registrar is the Memorandum & Articles of Association which is not accessible to the general public.

Registration Time
(Once you’ve passed Compliance checks) a Caymans Exempt Company can be registered in as little as 3 to 4 business days.

Shelf Companies
Shelf companies are not available for purchase in the Cayman Islands.

Summary

A Cayman Islands Exempted Company offers the following benefits:

100% foreign ownership
no taxes
privacy
limited liability
one shareholder/director for greater control
no audits
no required meetings
English is their official language AND
The Cayman Islands is a highly respected name/jurisdiction in International Business and Investment markets making it attractive to investors, banks suppliers and clients

OCI FEES FOR CAYMANS EXEMPT COMPANIES

INCORPORATION

Incorporation – Exempt Company $US 3,271.50

(Government Filing, Beneficial Ownership Filings, Economic Substance

Notification and Filing, Annual Return Filing, and Professional Fee)

ANNUAL MAINTENANCE

Annual Registered Office / Registered Agent $2,721.50

(Fee includes Annual Compliance Review – Regulatory

and Beneficial Ownership, Economic Substance

Annual Notification & Return Filing),

Government Annual Fee (Standard Share Capital))

DISBURSEMENTS

Notary Fee 35

Online Filing Fee 25

Incoming wire transfer (bank fee) 15

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Offshore Companies – How To Avoid Beneficial Ownership Registers

Many jurisdictions around the world now require newly formed Companies to file a “register of beneficial owners”.

In most jurisdictions this document is filed confidentially with the Government’s Company registry and is not publicly accessible information.

If you’re looking to incorporate an “Offshore” Company and don’t want to risk your name being listed with the government of that jurisdiction as the “Beneficial Owner” of the Company there are 2 stand out jurisdictions worth considering ie Singapore (“SG”) and Hong Kong (“HK”).

Both these jurisdictions work like a tax haven jurisdiction ie they don’t tax income that is earned outside the country of incorporation (unless you incorporate in SG and bring the money INTO Singapore).

Neither jurisdiction has “registers of Beneficial owners” but rather they have a register of controllers.

Singapore’s Register of Registrable Controllers

Singapore doesn’t require its Companies to create/hold a register of beneficial owners per se but (like Hong Kong) Singapore Companies are required to keep a register of registrable controllers, and to make the information contained therein available to public agencies upon request.

A Controller is defined as an individual or a legal entity that has a “significant interest” in or “significant control” over the company.

Controller based on Significant Interest

Under Singapore (“SG ) law a controller who has significant interest in a company may include any of the following:

In the case of Companies with Share capital:

an individual who has interest in more than 25% of the shares; or
an individual with more than 25% of total voting power in the Company

In the case of Companies without Share capital (eg Companies Limited by Guarantee):

An individual who has the right to share in more than 25% of the capital or profits of the Company

Controller based on Significant Control

Under SG law a controller who has significant control over a company is defined as a person who:

holds the right to appoint or remove directors who hold a majority of the voting rights at directors’ meetings;
holds more than 25% of the rights to vote on matters that are to be decided upon by a vote of the members of the company; or
exercises or has the right to exercise significant influence or control over the company.

Key points about the Register of Registrable Controllers:

The register of registrable controllers must be maintained at a prescribed place, e.g. the company’s registered office or the registered office of the registered filing agent.
The register can be maintained in paper or electronic format.
The register of registrable controllers is stored privately by the Company and is not accessible to the general public.
Companies must give the Registrar and ACRA (The Accounting & Corporate Regulatory Authority) officers, as well as public agencies administering or enforcing any written law (eg the SG Commercial Affairs Department, Corrupt Practices Investigation Bureau and the Inland Revenue Authority of Singapore) access to their registers of registrable controllers upon request.
The information therein can only be used by public agencies for the purpose of administering or enforcing the laws under their purview (e.g. investigation of money laundering offences).
Companies will have to declare with ACRA the location of the company’s register of registrable controllers when filing the company’s annual returns or annual declaration .
Companies can discharge their duties by sending notices to the relevant parties and recording their particulars, as well as sending further notices to any other parties that have been revealed as potential controllers. Notices can be sent and replies may be received, in electronic or hard copy format. The Company is not liable should recipients of these notices fail to respond or provide inaccurate responses.
A controller is required to provide and update information to the Company.

Hong Kong’s Significant Controllers Register

Hong Kong (“HK”) doesn’t require its Companies to create/hold a register of beneficial owners per se but (like Singapore) HK Companies are required to keep a Significant Controller Register “SCR”), and to make the information contained therein available to public agencies upon request.

Under HK law a person is deemed to have significant control over a company if one or more of the following 5 conditions are met:

The person holds, directly or indirectly, more than 25% of the issued shares in the company or, if the company does not have a share capital, the person holds, directly or indirectly, a right to share in more than 25% of the capital or profits of the company
The person holds, directly or indirectly, more than 25% of the voting rights of the company
The person holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company
The person has the right to exercise, or actually exercises, significant influence or control over the company
The person has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or a firm that is not a legal person, but whose trustees or members satisfy any of the first four conditions (in their capacity as such) in relation to the company

The SCR is NOT filed with the HK Government and need only be kept at the company’s registered office address in Hong Kong or any other Hong Kong address with prior notification filed to Companies Registry.

When requested by a law enforcement officer – for the purpose of performance of functions relating to the prevention, detection or investigation of money laundering or terrorist financing – a HK Company must at any reasonable time make its SCR available for inspection by the officer at the place at which the SCR is kept and the Company must permit the officer to make copies.

Privacy Solution – Set up a Seychelles Foundation to act as shareholder of the Company

Recently the following question was put to our senior legal adviser in HK…

“In the above scenario, and in particular given that a Seychelles Foundation is deemed via statute to be both the legal owner AND THE BENEFICIAL OWNER of any asset it holds/owns, if a Seychelles Foundation is set up to act as shareholder of a HK Company which party’s name (or which parties names) are inserted into the SCR???

The answer we received was as follows:

“Assuming a Seychelles Foundation is the sole shareholder of the HK the Foundation is the beneficiary itself until it decides to distribute benefits. Therefore, you would only need to record the name of the Foundation as the Significant Controller in the SCR.”

You might also like refer to the SCR guidelines page 25-33 in particular 10.4 to 10.6 to determine whether there might be any other entities / individuals that actually exercise a significant control over the company (even though they don’t hold shares or directorships / indirectly).

(The HK Govt “Guideline on the Keeping of Significant Controllers Registers by Companies”

is accessible via this Link: Guideline on the Keeping of Significant Controllers Registers by Companies )

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Is a Private Foundation Superior to an Offshore Trust?

Are you looking to set up an Offshore Trust?

Have you looked into or considered the Private Foundation option?

If your reason for wanting to set up an Offshore Trust is to try and avoid tax at home on the earnings of the Trust and/or if you want to be able to exercise ultimate control over the assets handed/transferred to your Offshore Trust you might want to consider setting up a Foundation instead.

The main disadvantage of a Trust is most Offshore Trusts are caught by Transferor Trust Rules (which tax the movement of assets into an Offshore trust) and/or are caught by local Controlled Foreign Trust laws. Put simply if you have the means to remote control an Offshore Trust or are a presently entitled beneficiary of an Offshore Trust in many jurisdictions you would be required to declare locally and pay tax on the Trust’s earnings (or on the share thereof that you would/should be entitled to as a Trust beneficiary).

A Foundation is very similar to a Trust in that it’s set up by a Founder (like a Settlor in the case of a Trust) and managed day to day by a Councillor (like a Trustee in the case of a Trust) who manages the Foundation property for the benefit of the beneficiaries of the Foundation.

Moreover, a Foundation may get you around the tax issues as it’s a separate legal entity in its own right (ie the Foundation actually owns the assets held by the Foundation – unlike a Trustee who holds property for someone else ie the beneficiaries) and by law the beneficiaries are not entitled to the income or capital of the Foundation until the Foundation actually resolves to pay a distribution. What this means is you should be able to defer paying tax at home on any income/gains derived from investments held/made by the Foundation enabling you to reinvest 100% of that income not just the after-tax component.

This should also enable you to access the power of compounding on those investment earnings meaning your net worth will grow MUCH faster than what it would were you to pay tax each year on your investment income.

Control

Often I am asked by a client “I want to set up a Trust to protect my assets and for the benefit of my children… How can I control what the Trust invests in and who is to benefit and when?”

In short if you want to have maximum control (of what would otherwise be your Trust Estate) without effecting the legal integrity of the entity/structure the preferred form of entity again would probably be a Private Foundation.

Why?

Because if/where a Trust is used any time you want the Trust to do something (eg buy/sell an asset, add/remove a beneficiary, etc) you need to work through the Trustee and the Trustee has to be agreeable… (and many Trustees are extremely conservative/risk averse and/or poor/slow communicators/administrators). In short the process of getting the Trustee’s approval can be slow, painful and expensive!

Trusts and Foundations are very similar creatures:

A Trust is set up by/at the request of a person called a Settlor, is managed day to by a Trustee and (typically) has beneficiaries ie persons who are designed ultimately to benefit financially from the set-up of the Trust.

A Foundation is set up by/at the request of a person called a Founder, is managed day to by a Councillor and (typically) has beneficiaries ie persons who are designed ultimately to benefit financially from the set-up of the Foundation

Unlike a Foundation a Trust (which is in essence an arrangement between the Settlor and the trustee, almost like a contract) is NOT a separate legal entity. If a Trust owns an asset (eg a piece of real estate) the legal/registered owner of the asset is the Trustee but the beneficial owners of the asset are the beneficiaries of the Trust. Moreover, in certain circumstances, the beneficiaries of a Trust are entitled to, and thus can compel the Trustee to pay the beneficiaries, a distribution. This can potentially leave Trust property at the mercy of any of the beneficiary’s Judgment creditors AND it leaves a door open for a local taxman to sneak through and try and tax the beneficiary’s share of the Trust’s earnings (ie the Trust and or any Company it might own would probably be caught by CFT/CFC rules)

A Foundaton on the other hand is a separate legal entity. It can sue and be sued in its own right. If a Foundaton owns an asset the Foundation itself is presumed at law to be both the legal owner AND THE BENEFICIAL OWNER of any asset the Foundaton holds. AND the beneficiaries of a Foundation have no interest in Foundation property/no entitlement to a distribution unless or until such time as the Foundation Council resolves to pay them a distribution. Only then should a beneficiary (potentially) be liable to declare/pay tax ie on the distribution then paid to him or her by the Foundation.

Why?

Because CFT rules and CFC rules are based on the presumption of beneficial ownership. If you aren’t/can’t be classified at law as the beneficial owner of the income producing asset – and/or if you’re not entitled to receive a distribution from the asset owner – it stands to reason that the entity that owns the asset shouldn’t be classified as a CFT/CFC.

Moreover with a Foundation, (and this will be of particular interest for persons who want to maintain maximum control over their Offshore Trust/Foundation) the Foundation Councillors rights/powers can be reserved at settlement to the Foundation Founder; + where a “Nominee” Founder is deployed (eg so that the actual Founders name doesn’t appear on the public record/publicly accessible record as Founder) the rights reserved to the Nominee Founder can be assigned to you (ie the person who authorized the set up of the Foundation) or any 3^rd party of your choosing (for more details, check this link: https://www.dropbox.com/scl/fi/vg8bze1p0nlf9uotinxtl/What-Powers-Can-Be-Reserved-to-a-Founder-Assigned.docx?rlkey=obxkgxlgt1q4m4npcg18ttolq&st=z5ctn3cy&dl=0 ).

In short, with each passing year, we are seeing more and more clients choosing to set up Private Foundations rather than Offshore Trusts. Hopefully having read the above verbage you can see why!

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com