IBCs – How To Get Around New EU Economic Substance Requirement

Following on from the OECD’s BEPS Action plan, in July 2018 the EU’s Code of Conduct Group (Business Taxation) decided that certain Companies/Legal Entities registered in tax havens would, moving forward, be required to show local substance. In short, the tax havens in question (eg the BVI, Cayman Islands, Bermuda, Guernsey, Jersey, the Isle of Man, Bermuda, Vanuatu etc) were threatened with blacklisting by the EU if they failed to pass laws forcing their International Business Companies etc to show economic substance on the ground in the jurisdiction (eg a local/stand-alone office and local staff).

 

The jurisdictions affected moved promptly to pass laws requiring such Companies to show substance, in particular with respect to the following business types:

 

  • Banking
  • Insurance
  • Shipping
  • Regulated fund management
  • Finance/leasing
  • Distribution and service centre
  • Headquarters
  • Intellectual property
  • Holding company activities

 

The argument for requiring businesses such as banking and insurance etc to have a local presence is hard to counter but of far greater concern is the requirement for Holding Companies to show presence on the ground. Given its passive nature, if a Company is just to set up to hold a parcel of shares for example why would it need to have a stand alone office (or staff for that matter)? It is self evidently an absurd requirement.

 

The good news is that for Holding Companies at least the requirement is easy to get around.

 

How so?

 

Across the board per the model legislation (eg in the BVI) to fit the definition of a Holding Company the Company in question must just hold shares. If it holds any other asset it doesn’t meet the definition of a “Holding” Company.

 

Any other asset could (would) include a bank account.

 

So, if you have a Holding Company in any of the effected jurisdictions – and you want to get around this ridiculous new EU requirement – (if you haven’t done so yet) we’d suggest you take steps NOW to open a bank account for your Company!

 

And if your current Offshore Company Service Provider (“CSP”) doesn’t believe you when you tell him/her that you shouldn’t be required to set up an office or hire staff refer him/her to this article and tell him/her to read the fine print of the legislation! (and or sack your CSP and change to a Provider who actually knows the fine print eg OCI).

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

 

Where To Incorporate a Crypto Business With No License?

We are often asked, Where can I set up a Crypto business (eg a Crypto currency Exchange) without a license?

 

As at the date of writing (ie 24 November 2019), the following nil tax jurisdictions do not license such activities currently:

 

  • Seychelles
  • Belize
  • Nevis
  • Panama
  • Hong Kong
  • Cayman Islands
  • Dominica
  • Hong Kong

 

To clarify the position last week we wrote to Lawyers we know in 11 different jurisdictions and asked this question: “We have a Japan based client who wants to incorporate a new business namely a Cryptocurrency Exchange business where they buy Cryptocurrencies and sell Cryptocurrency (ie they will exchange one form of Cryptocurrency for another and charge a commission or margin. What special license/s if any will the client need to apply for in your jurisdiction?”

 

Here are the answers we received, verbatim:

 

Estonia

 

“First, regarding your question: we recommend to order a service for preliminary legal analysis for specific cases for full assurance but from the first view I would say that the company would also need a Crypto license.

The crypto licenses for which we can apply are:

  • · providers of a service of exchanging a virtual currency against a fiat currency
  • · providers of a virtual currency wallet service”

 

Hong Kong

 

“Cryptocurrency exchange is not yet officially regulated in Hong Kong but presumably they will need to have their own operating office, staff, compliance officer and follow the Anti-Money Laundering rules as a minimum.  However, they are not likely to open an account in HK for its operation.

 

Alternatively, the client can consider setting up a company in Malaysia Labuan where they can apply for a money operator license that include Crypto currency in the license like fiat currency.”

 

Seychelles

 

“Agreed that it is not a prohibited business and will thus depend on DD issues.”

 

Panama

 

“Presently there are no regulations or licenses in Panama for Crypto business.”

 

UAE

 

“In UAE all financial and non financial licenses are regulated in DFIC , FSA and ADGM authorities.

Currently we are working on details clarification with the authorities and we will revert you ASAP. “

 

Dominica

 

“Cryptocurrency exchange is not regulated by the IBC Act 1996 of Dominica, and as amended thereafter. It remains a grey area, just as in the majority of jurisdictions. Thus we confirm that this type of activity for an IBC is not restricted. Legal opinion can be available upon request.”

 

Nevis

 

“At this time we do not have any cryptocurrency legislation.

 

I suppose the better option is number 1. The entity can be formed and the Articles allows the company to do any legal business. To ensure nil tax in Nevis, it would be better not to operate the business activities in Nevis, in addition to the fact that cryptocurrency activities are not regulated in Nevis (it would be hard to make a claim if monies are lost).”

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

Cayman Islands Fund Options

During the course of the past 20 to 30 years the Cayman Islands, an independent former British Protectorate in the norther Caribbean Sea, has risen to become one of the World’s Premier Fund set up destinations.

 

Whether you’re looking to set up a Hedge Fund, a non-regulated Closed End Fund or a High End Mutual Fund Caymans provides options.

 

Fund setups are governed in the Caymans Islands by the Caymans Mutual Funds Law

 

The said legislation defines a mutual fund as being any company, trust or partnership either incorporated or established in the Cayman Islands, or if outside the Cayman Islands, managed from inside the Cayman Islands, which issues equity interest redeemable or re-purchaseable at the option of the investor, the purpose of which is the pooling of investors’ funds with the aim of spreading investment risk and enabling investors to receive profits or gains from investments.

 

Regulation of Funds & Fund Administrators

 

The Caymans Mutual Funds law makes the Cayman Islands Monetary Authority (“CIMA”) responsibility for regulating certain categories of funds operating in and from the Cayman Islands (see Categories of Regulated Mutual Funds below) as well as Fund administrators.

 

Interestingly not all mutual funds fall within the Regulatory ambit. Certain categories of mutual fund ie Funds that meet the criteria set out in section 4(4) of the MFL are exempt from Licensing/Regulation. All other mutual funds are regulated and must be licensed.

 

The licensing requirement is coved in section 4 of the act which states as follows:

 

4. (1) Unless a mutual fund is complying with subsection (3) or is exempted under subsection (4), it shall not carry on or attempt to carry on business in or from the Islands unless —

(a) it is the holder of a Mutual Fund Licence, and it has —

     (i) a registered office in the Islands; or

     (ii) if a unit trust, a trust company licensed under the Banks and Trust Companies Law          as its trustee; or

 

(b) a licensed mutual fund administrator is providing its principal office in the Islands, and, unless an exemption from this requirement has been granted by the Authority, there is filed with the Authority, in respect of the mutual fund, a current offering document that complies with subsection (6).”

 

Categories of Regulated Mutual Funds

 

The following categories of funds must apply for a License in the Cayman Islands:

 

A Licensed Mutual Fund 

The MFL (Section 4(1)) specifies that a mutual fund operating in and from the Cayman Islands must have a licence unless: a licensed mutual fund administrator is providing its principal office; it meets the criteria set out in Section 4(3), which allows for funds to be registered, or it is exempt from regulation under Section 4(4).

The provisions relating to licensed mutual funds benefit large, well known and reputable institutions, which do not propose to appoint Cayman Islands service providers.

 

Administered Mutual Fund 

To be approved as an administered mutual fund, the fund must have a CIMA-licensed mutual fund administrator providing its principal office. The regulatory responsibility for the administered fund, which has more than 15 investors and which is not a licensed or registered mutual fund, is placed largely in the hands of a licensed Mutual Fund Administrator.

 

Registered Mutual Fund 

A Registered Fund must have either a minimum aggregate equity interest of CI$80,000 (US$100,000) purchasable by a prospective investor or the equity interests must be listed on a stock exchange approved by CIMA.

 

A Master Fund must have either a minimum aggregate equity interest of CI$80,000 (US$100,000) purchasable by a prospective investor in the master fund or the equity interests of the master fund must be listed on a stock exchange approved by CIMA.

 

Common Fund Vehicles

 

The Cayman Islands has company, trust, partnership and related laws that allow a high degree of flexibility for establishing mutual funds. The four vehicles commonly used for operating mutual funds are the exempted company, the segregated portfolio company, the unit trust and the exempted limited partnership.

 

Exempted Company - The exempted company may redeem or purchase its own shares and may therefore operate as an open-ended corporate fund. Closed-ended corporate funds can also be established using the exempted company and it is a relatively straightforward procedure to convert from one to the other.

 

Segregated Portfolio Company - An exempted company can also be established as a “Segregated Portfolio Company” (“SPC”) with protected cells or portfolios. The SPC makes it possible to provide a means for different groups to protect their assets when carrying on business through a single legal entity.

 

Unit Trust - The unit trust is usually established under a trust deed with the investors’ interest held as trust units.

 

Exempted Limited Partnership - The exempted and limited partnership provides a second unincorporated vehicle and it can be formed as easily as the exempted company or the unit trust.

 

Closed End Fund Exemption

 

Section 4(4) of the Caymans Mutual Funds Law specifically provides that:

“A mutual fund may carry on or attempt to carry on business in or from the Islands without complying with subsection (1) if —

  • (a) the equity interests are held by not more than fifteen investors, a majority of whom are capable of appointing or removing the operator of the fund; or
  • (b) it is a fund, not incorporated or established in the Islands, which makes an invitation to the public in the Islands to subscribe for its equity interests by or through a person who is the holder of a licence under the Securities Investment Business Law (2019 Revision), for a regulated activity specified by the Authority for the purposes of this subsection and —
  •    (i) those interests are listed on a stock exchange (including an over the-counter-market) specified by the Authority by notice in the Gazette; or
  •   (ii) the fund is regulated in a category, and by an overseas regulatory authority, approved by the Authority for the purposes of this subsection.
  • The ongoing supervision of funds and fund administrators falls under the remit of CIMA’s Investments and Securities Division.

 

Closed-End/Exempted Funds

 

A Closed End Fund is an investment fund wherein the investor commits to invest his or her money for a set period of time; The investor cannot redeem his /her shares (ie the investor can’t cash out) until the minimum/fixed investment period has expired.

 

In the case of a Closed End Fund typically a Limited Company is set up (ie a Company Limited by shares); the investor receives shares entitling him/her to take home a percentage of the profits (ie in proportion to the percentage of the company that the investor owns) based on net asset value at the conclusion of the fixed investment period.

 

A closed-ended fund is most appropriate for investments which typically require a longer period to mature, eg private equity, venture capital, real estate or infrastructure investments.

 

Exempted funds are mutual funds that are not required to be regulated by CIMA ie where there are no more than 15 investors, the majority of whom are capable of appointing and removing the directors of the fund. (Provided the fund meets the criteria) Closed-ended funds incorporated in the Cayman Islands are not regulated and are not required to obtain a Fund License in the Cayman Islands.

 

Closed End Fund Companies are often established via a tailored Articles of Association/Constitution which allows the Company to issue 2 different classes of shares ie Class A shares and Class B shares. Class A shares (often called Management Shares) come with both voting rights and the rights to share in profits. Class B shares (often called Equity

Shares or Investor Shares) ony entitle the shareholder to a share in the profits ie they do NOT come with voting rights.

 

This model of Closed End Fund is most commonly Incorporated in Seychelles or Belize or Nevis because such funds, if incorporated in these jurisdictions, do not fall within the regulatory ambit of the local Mutual Funds Law.

 

Why Set Up Your Fund In The Cayman Islands?

 

The Cayman Islands is presently the dominant “Offshore” Fund Jurisdiction. It, reportedly, is home to 75%+ of all new offshore fund formations including nearly half of the World Mutual Funds Industry’s estimated US$1.1 trillion of assets under management.

 

Why do so many funds choose to call Cayman Islands home? Because the Caymans offers:

 

  • Political and economic stability
  • No exchange control restrictions
  • Reputable quality professional service providers
  • A huge amount of expertise in the investment fund space
  • World class banks
  • Flexible, modern, quality legislation
  • Commerciality – Cayman regulators are very approachable, flexible, innovative and efficient
  • Affordability – Cayman’s investment fund fee structure is globally competitive, which benefits the manager and the investor with respect to the launch and ongoing operation/ maintenance of the fund.
  • Reputability – The Caymans is on the OECD “White List” and has signed tax information exchange agreements (TIEA) with 19 countries
  • Tax effective outcomes for both Funds and Fund Managers

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

How To Use a Tax Free Offshore Company to Invest in a Forex Trading Venture

Investing in a Forex Trading JV is an activity that lends itself well to an “Offshore” Corporate Structuring Plan.

 

Usually the deal provides that the investor contributes capital and the Forex Trader provides the knowhow, (ie does all the Trading) and profits are split between the Trader and the Investor (ie you) eg 50/50 or 60/40 or 70/30 ie whatever you manage to negotiate.

 

How it works is:

 

(a)  You incorporate a tax free Offshore Company (“OC”)

 

(b)  You structure the Company in such a way as to ensure that the Company is seen to be managed and controlled from Offshore; This can/will be achieved by via deployment of a tax haven based Nominee Director (which is a service that OCI can provide)

 

(c)   Your OC signs a general investment agreement/contract with the Forex Trading Company. This agreement sets out what each party will do and how profits will be shared (and when)

 

(d)  You advance funds to your OC

 

(e)  The OC then advances funds to the Forex Trading Company

 

(f)    The Forex Trading Company invests/trades your money

 

(g)  The Forex Trading Company pays a return periodically to your OC (eg monthly or quarterly or 6 monthly or yearly).

 

(h)  Returns paid to your OC will be banked and or reinvested Offshore potentially free from tax

 

(i)   To minimize the chances of local Controlled Foreign Company laws being applied to your Offshore Company (and or if your local tax man has the power/wherewithall to tax an Offshore Company if you are the “beneficial owner” thereof), ideally, you would not want to be seen to be the beneficial owner of the Company. This can be achieved by deploying a Private Foundation to act as the shareholder of your nil tax Offshore Company.

 

Note if you need to draw on or utilize these returns at home there are several ways to discreetly go about this (including options potentially with zero tax implications).

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

How To Set up a Staff Recruitment Business Tax Free Offshore

With the rise of the digital/global economy – and the greater job choices now on offer as a result of that rise – many businesses are finding it increasingly difficult to find and retain good staff, particularly in specialist or highly skilled fields. Consequently, more and more savvy business owners (in particular internationally focused enterprises) are turning to Specialist Staff Recruitment Agents to help locate & hire key staff.

 

Such a business model, particularly in the International field, lends itself well to an Offshore Corporate Structuring Plan. Often you’ll see a specialist Staff Recruitment Agency engaged where you have a business located in Company A which needs high skill, or unusual, work done in Country B by a person whose skills transcend and are recognized in (or transferable across) multiple jurisdictions (eg Engineers, CFOs, Lawyers, Geologists, etc) ie the target staff member could potentially come from any country.

 

Typically, such businesses operate Online. That is The Staff Recruitment Agent has a website, prospective clients and suppliers find the Agent online and contact/communicate with the Agent via email or via the website.

 

Usually, the Agent is paid a sign on fee once the employee is hired + a percentage of the employee’s earnings during the lifetime of the contract.

 

To summarize how such a business usually works from “Offshore” is:

 

  • You (ie The Recruitment Agent) set up a zero tax Offshore Company eg an International Business Company (“IBC”) with a nil tax jurisdiction based “Nominee” Director
  • Ideally your website will be hosted in a nil tax jurisdiction
  • You are appointed as the IBC’s Authorised Representative/CEO/GM (ie as a senior staff member)
  • On behalf of the IBC you negotiate terms with each client to pay your IBC a lump sum fee and or a Commission or Commissions if/when the Client/Employer and Employee sign a contract
  • The Agency agreement/contract is signed Offshore by the Nominee Director (ie the “situs” of the contract is a nil tax jurisdiction)
  • The source of the income is the contract
  • Because the contract was signed offshore, ie in a nil tax environment, there should be no tax payable on income generated by the contract (a) where the Company is incorporated and (b) where you live (assuming you structure and administer the Company in a certain way).
  • When you need some living/spending money the IBC pays you a wage, or consulting fees or a commission (eg a percentage of sales made)
  • That living/spending money can be paid to your local bank account (which means it would be assessable income wherever you are tax resident 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). More sizeable amounts could be accessed by way of loan (or a 2nd Offshore Company could be formed to buy your onshore investments)
  • If you don’t want the authorities to know how much money you are earning eg by way of wages you could convert your hard currency into Bitcoin and/or you could potentially use an anonymous ATM or Debit/VISA card to withdraw $ from an Auto Tele Machine (though technically that receipt would be assessable income for local tax purposes)
  • The majority of trading profits would be banked and or reinvested Offshore potentially tax free
  • To minimize the chances of local Controlled Foreign Company laws being applied to your Offshore Company, ideally, you would not want to be seen to be the beneficial owner of the Company. This can be achieved by deploying a Private Foundation to act as the shareholder of your nil tax Offshore Company.

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

IBCs – Why Have a Shareholders Agreement?

A Shareholders Agreement is a contract between some or all of the shareholders of a Company in which they agree to regulate the exercise of some of their rights as shareholders.

 

A Shareholders’ Agreement is a supplement to a/the Company’s Constitution/Articles of Association and will generally regulate shareholders’ rights and regulate the management/operations policy of the Company.

 

Potential Problems In The Absence Of A Shareholders Agreement:

 

1) The rights of minority shareholders are typically limited under a/the Company’s Constitution/Articles of Association. Minority shareholders must rely on the Courts for assistance if they have a complaint about the way in which a company is conducted. The Courts only provide help in limited circumstances (and usually at a sizeable cost).

 

2) What happens if a shareholder wishes to sell his or her shares upon -

•          Retirement?

•          Disability?

•          Death?

•         Or for any other reason?

Company Constitutions/Articles of Association are usually silent on detail with respect to these issues.

 

Unless these events are adequately covered in a Shareholders’ Agreement, the only potential purchasers are the other shareholders; If they don’t want the shares, (or aren’t prepared to pay full value for them) then the shares remain unsold or are sold at far less than their true value.

 

Death of a shareholder can result in the shares being worthless to the deceased’s estate because there is no purchaser. On the other hand, the beneficiaries who inherit the shares (eg the deceased’s spouse) may wish to become actively involved in the company against the wishes of the other shareholders.

 

Benefits of a Shareholders Agreement

 

Shareholders agreements can bind the shareholders to protect share value and control who becomes a future shareholder, for example:

 

•          Buy sell agreements: An agreement can provide that upon a shareholder wishing to sell out, existing shareholders have an option or first right to buy shares at a re-determined price or formula. If the existing shareholders don’t wish to purchase the shares, the agreement can set minimum requirements for an incoming buyer, for example that the party is acceptable to the remaining shareholders.

•          Compulsory buy agreements: An agreement can provide that upon a shareholder retiring, being disabled and/or dying the remaining shareholders must compulsorily buy the shares. Funding such buy outs can be planned and a savings plan or borrowings put into place, whilst in the event of death and disability, the buy outs can usually be funded through the provision of appropriate insurances.

•          Compulsory sell agreements: An agreement can provide that upon a shareholder breaching the shareholders agreement, becoming insolvent or on the happening of other specified events, the non-defaulting shareholder/s can elect to compulsorily acquire shares from the defaulting shareholder and eject that shareholder. The agreement can predetermine the price or formula for determination of the sale price. The price payable in the event of breach of the agreement may be less than that payable in other circumstances and generally discounted from the market value.

 

Matters Not Regulated By The Company Constitution/Articles of Association

 

A Shareholder’s Agreement can include provisions regulating -

•          Shareholder exit strategies

•          Shareholder warranties

•          Confidentiality agreements

•          Restraint of trade for directors and/or shareholders

•          Agreement specifying or limiting business activities of the company

•          A shareholder’s right to appoint directors and the number of directors

•          Director’s meeting procedures

•          Minimum budgeting, business plan, accounting and management reporting requirements of directors and management

•          Agreement concerning financing policy

•          Dividend distribution policy

•          Personal rights/obligations of shareholders

•          Documentation of shareholders’/directors’ loans and the right to payment of interest

•          Policies, management and procedures

•          Protection of minority shareholder interests.

 

A Shareholders Areement should cover all aspects of the relationship and the mechanics by which the company is to be operated. The agreement should also protect the respective interests of the parties to the agreement and outline dispute resolution.

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

Forex Traders – How To Set Up a Copy Trade Business Offshore Tax Free

With the rise in the volume of day traders entering the Forex market over the course of the past 10-20 years, it comes as no surprise to see a recent spike in the volume of Entrepreneurial Traders realizing that there is money to be made by allowing others to copy their trades and charging for the provision of such information.

 

Such an arrangement enables an experienced Forex Trader to allow novice traders/investors to “piggy” back on the frame of the experienced Trader (ie copy the trades of the experienced Trader) without the Trader having to endure the red tape, hassle, cost or legal risk that would likely otherwise come into play were the Trader to trade the Novice’s money directly.

 

If you are an experienced/successful Forex Trader, chances are you will have had (or will soon have!) friends or family or acquaintances come at you asking you to invest (ie Trade) their money.

 

Generally speaking, if you take people’s money and invest it (or if you offer financial/investment advice) such endeavours would require one to apply either for a Mutual Fund License or a Broker’s License or a Financial Adviser’s License.

 

If, however, all you are offering is a Copy Trade Facility/Service it may be possible to incorporate such a business in a low regulation/low tax jurisdiction without needing to apply for any form of Special License. This could potentially be achieved by characterizing your business/offering in a certain way eg:

 

  1. You could take in investors via the set-up of a Private (non-licensed) Closed End Fund. Click on the following link to read details of how this might be achieved: https://www.dropbox.com/s/vy9xgzj3gtu9dq1/Structuring%20Options%20for%20a%20Non%20Licensed%20Closed%20End%20Fund.doc?dl=0 ;or
  2. You could utilise a tax-free International Business Company (“IBC”) eg a Seychelles or Belize or Nevis or Samoa IBC – which could be contracted to trade an investor’s money in a/the broker’s account under Power of Attorney. Click on the following link to read details of how that can work: https://www.dropbox.com/s/h74029saaaa3mmm/How%20To%20Trade%203rd%20Party%20Funds%20Using%20a%20PoA.docx?dl=0 ;or
  3. Your IBC could enter into a service contract or consultancy contract or an information supply agreement with the “investor” whereby, in consideration of you supplying details of your trades or some other person’s trades as/when placed (or if you supply an introduction to some other service provider who provides the trade data), the investor agrees to pay you a fee (which could potentially be a percentage of the investor’s profits made from such trades). Such an agreement, if drafted very carefully by an appropriately experienced/knowledgeable Lawyer, could get you around the need to apply for a Special License.

 

Moreover, provided the Company is seen to be managed and controlled from Offshore and, (eg if you live a country that has CFC laws), is seen to be beneficially owned from Offshore, the profits from such a venture could be banked Offshore potentially tax free.

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

 

 

How To set Up a Tax-Free Company Brokerage Account with Interactive Brokers

Global citizens interested in privacy will have, or should have, noticed the rise of Euro Pacific Bank (“EPB”) over the course of the past 10 years.

 

The brainchild of ex Lehman Brothers Exec Peter Schiff (who was smart enough to leave Lehmann Brothers before, and in fact predicted, the GFC), Euro Pacific Bank was originally based in St Vincent & The Grenadines but shifted its base circa 2 years ago to Puerto Rico.

 

This was an extremely savvy move because Puerto Rico is an offshore territory of the US and, as such, is subject to and caught by America’s International treat network. With the US having cleverly refused to sign up to the MCAA (ie the head treaty which gives rise to AEOI ie Automatic Exchange of Information requirements and the CRS ie Common Reporting Standards) this means that one can open a bank account in Puerto Rico (which does not tax interest paid on bank deposits) and avoid the risk of the existence of said bank account coming to the attention of one’s local Revenue Authorities via AEOI/CRS.

 

Many OCI Clients are professional online traders (see below which explains how/why Online Trading lends itself well to an “Offshore” Corporate structuring plan). By far the most popular Brokerage Platform with OCI clientele to date has been Interactive Brokers.

 

Since its launch EPB, as part of its product range, has offered in house Brokerage Account Service known as Euro Pacific Trader. Until August this year this facility was delivered via Saxo Bank’s trading platform; But as of August 2019, Euro Pacific Bank customers can now open in house Brokerage Accounts utilizing Interactive Broker’s platform.

 

Euro Pacific Trader is offered by its subsidiary Euro Pacific Securities Inc. as an Introducing Broker to Interactive Brokers LLC. Interactive Brokers LLC is the custodian, technology provider, and clearing broker to all transactions executed through Euro Pacific Trader and thus the rates & trading conditions are as per those offered by Interactive Securities.

 

How To Trade Online Using a Tax Free Offshore Company

 

Online Trading (eg forex trading, share trading, options trading, derivatives trading etc) 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 Offshore Company eg an International Business Company (“IBC”)
  • The Company is seen to be managed and controlled from Offshore (ie ideally it will have a nil tax jurisdiction resident “Nominee” Director (which is a service that OCI can provide).
  • The IBC opens an account with a Broker
  • You are appointed 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/administered in a particular way)
  • 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).
  • Lump sums could potentially be drawn down tax free from the IBC (eg by way of an interest only loan – though normal commercial terms would/should apply to such a loan)
  • The majority of trading profits could be reinvested Offshore potentially tax free.

 

To minimize the chances of your Company being taxed at home (especially if you live in a country which has Controlled Foreign Corporation laws) ideally you won’t want to be seen to be the beneficial owner of the Company. This can best be achieved by including a Private Foundation as part of your Corporate Structure.

 

Local laws can have an impact. Hence you should seek local legal/tax/financial advice before committing to set up a Corporate/Brokerage structure such as that described above.

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

How To Invest in Shares Using a Tax Free Offshore Company

Investing in Stocks/Shares is an activity that lends itself well to an “Offshore” Corporate Structuring Plan.

 

How it usually works is:

 

(a)  You incorporate a tax-free Offshore Company (“OC”)

 

(b)  You structure the Company in such a way as to ensure that the Company is  seen to be managed and controlled from Offshore – This can/will typically be achieved by via deployment of a nil tax jurisdiction based “Nominee” Director – which is a service that OCI can provide (ideally, especially if you live in a country which has CFC laws, you’d be wise to also set up a Private Foundation to hold the shares of/own your Offshore Company ie so that you aren’t classified at law as/seen at law to be the “beneficial owner” of the Company)

 

(c)   Your OC engages a Broker/opens a Brokerage Account

 

(d)  You advance funds to your OC

 

(e)  The OC then advances funds to the Broker’s Account

 

(f)    The Broker acquires the shares for you and registers your Company as the owner of those shares

 

(g)  The Company you hold shares in pays a return/dividend periodically to your OC (eg yearly). This return is banked into a tax-free Offshore Bank Account in the name of your OC

 

(h)  Returns paid to your OC can/will be held in an interest bearing bank/deposit account and or reinvested Offshore, potentially free from tax… AND if you incorporate Offshore ie in the right tax free Offshore jurisdiction you should also be able to avoid having to pay CGT ie Capital Gains Tax when you sell your shares (most “Offshore” company jurisdictions do not have CGT laws)

 

Note if you need to draw on these returns at home there are a number of discreet (& potentially tax-free) ways to go about this. But that’s a discussion for another day….

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

 

How To Set Up a Travel Agent Business Tax Free Offshore

A Travel Agent Business lends itself well to an “Offshore” Corporate Structuring plan.

 

Most Travel Agents work on the Commission Agent model, ie you act as a middleman between the Travel Service Provider (ag an Airline or Hotel) and the end user customer.

 

Typically in this model of a Travel Agency you in effect act as a sales agent of the Travel Service Provider, ie you are authorized to market/sell the Travel Service Provider’s products/services and you get paid a commission (ie typically a percentage of the sale/deal proceeds) when the consumer orders/pays for the service.

 

To summarise how it would work is:

 

  • You set up a zero tax Offshore Company eg an International Business Company (“IBC”) with a nil tax jurisdiction based “Nominee” Director
  • You are appointed as the IBC’s Authorised Representative
  • On behalf of the IBC you negotiate terms with the Travel Service Provider to pay your IBC a Commission if/when the Buyer and Seller do business
  • The Commission Agent/Broker agreement/contract is signed Offshore by the Nominee Director
  • The source of the income is the contract
  • Because the contract was signed offshore in a nil tax environment there should be no tax payable on income generated by the contract (a) where the Company is incorporated and (b) where you live (assuming you structure and administer the Company in the right way).
  • 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 tax resident 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). More sizeable amounts could be accessed by way of loan or a 2nd Offshore Company could be formed to buy your onshore investments
  • If you don’t want the authorities to know how much money you are earning eg by way of wages you could convert your hard currency into Bitcoin and/ or you could use an anonymous ATM or Debit/VISA card to withdraw $ from an Auto Tele Machine (though technically that receipt would be assessable income for local tax purposes)

 

The majority of trading profits would be banked and or reinvested Offshore potentially tax free.

 

Online Based Travel Agency

 

The other model of Travel Agency Business that lends itself well to an “Offshore” Corporate Structuring Plan, is where your business operates 100% online (ie products are advertised online and orders are placed for and paid for online).

 

Here’s how such a business can work from an “Offshore” Perspective:

 

  1. A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated
  2. The IBC owns/operates a/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)
  3. An Offshore account (which received payments via a merchant account) is set up in a nil tax banking centre
  4. Ideally the server is located in a country which does not tax business on the basis of server location (eg Singapore or Iceland)
  5. Customers contract with and pay the IBC. All such monies are banked free of tax in the first instance
  6. You pay the actual Service Provider – the difference between what the customer pays you and what you pay the service provider is your profit (banked/held Offshore in a tax free bank account)
  7. You or your local company would be contracted by the IBC to manage sales/delivery of product/website maintenance/whatever
  8. 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.
  9. Often there is some kind of intellectual property (“IP”) created or behind the 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 would 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
  10. Ideally once you start to grow you 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)

 

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 Nominee Director etc as part of the Corporate structure. See this page for details of how that can work:

http://offshoreincorporate.com/faq/should-i-engage-nominees-or-should-i-direct-and-hold-the-shares-in-my-offshore-company/

http://offshoreincorporate.com/faq/how-can-i-protect-my-underlying-ownership-of-my-offshore-company-where-a-nominee-is-engaged-to-act-as-director-or-shareholder/

 

In either model of business, in most cases, it’s likely – notwithstanding that you may have an “Offshore” Management system in place (ie a nil tax jurisdiction based Nominee Director) – that, if you’re seen to be a/the beneficial owner of the Company, your IBC would be liable at law to declare income and pay tax where you live.

 

If you want to mitigate (to the greatest extent possible) against this risk you’d be wise to also set up a Private Foundation to be/act as the shareholder of your Company (in short because a Private Foundation is presumed at law to be both the legal AND beneficial owner of any asset it holds/owns). For more information check this link: https://offshoreincorporate.com/private-interest-foundations/

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com