HOW TO GET AROUND BENEFICAL OWNERSHIP REPORTING RULES

Many “Onshore” jurisdictions have passed laws requiring that local Companies file a register of beneficial owners with the local Corporate registry.

 

For those interested in Corporate Privacy this would be of some concern. There are good reasons as to why one might not want “onshore” authorities to know who is ultimately behind a particular company.

 

If you are the controller of a Company and don’t want your name to be placed on record as BO there is a solution that may work to protect your privacy…

 

The solution here would be to register (as your ultimately holding entity) a Foundation, (ideally)in Seychelles, and have that Foundation set up as a Purpose Foundation.

 

Why Seychelles?

 

Well, a Foundation is presumed at common law to be both the legal owner AND the beneficial owner of any asset it holds. BUT Seychelles, uniquely, has taken this aspect of Common Law and enshrined it in legislation; In section 71 of the Seychelles Foundations Act it clearly provides that the legal owner AND BENEFICIAL OWNER of any asset held by a Seychelles Foundation is the Foundation itself.. (you can access a copy of the Legislation here – refer page 36: https://www.dropbox.com/scl/fi/3mhhpbszei8mahuxpbqfg/Consolidated-Foundations-Act-2009-to-20th-December-2021.pdf?rlkey=29uzvfy7tmimyqxvmg74o59u0&st=wmybuvq3&dl=0 )

 

But there’s more you can do to protect yourself from being considered potentially as the beneficial owner of any Company/Asset owned by the Foundation…

 

You see, a Foundation is a 3 headed creature.

 

Typically a Foundation..

 

 

But…

 

A Foundation in Seychelles can be established as either a Foundation with beneficiaries or as a Purpose Foundation.

 

A Purpose Foundation is a particular type of Private Foundation which, unlike a conventional Foundation (ie which has certain person/s or a category of person/s nominated to be beneficiary/s), can be formed to hold assets for a purpose without conferring a benefit on any specific person. An example of such a purpose is to hold shares in a company.

 

Purpose Foundations are currently used, among other things, in conjunction with asset financing transactions and securitisations.

 

They are also sometimes used to hold the shares in a Private Trust company (PTC) structure, where confidentiality and control issues are important. A key advantage of using a Purpose Foundation in such a scenario is that there are no registration or disclosure requirements of such trusts at law generally speaking. Therefore the ownership of the PTC will be confidential, and the shares in the PTC will be immune from an attack on the Settlor (ie the person who sets up the Trust).

 

Generally speaking, there are two types of Foundations ie Foundation with beneficiaries and Foundations which are set up to fulfil a specific purpose. A Foundation set up to fulfil a specific purpose does NOT need to name any person or class of person as a beneficiary. Hence, because there are no beneficiaries attached to the Foundation (a) it’s impossible to argue that any particular person has a legal or beneficial interest in Foundation assets and (b) it’s impossible to argue that any particular person is entitled to receive income from the Foundation.

 

Recently a lawyer friend succeeded in registering a Purpose Foundation in Seychelles where the sole stated purpose of the Foundation was to own 2 Mauritius Companies.

 

The nett result of deploying a Purpose Foundation in such a scenario?

 

  • Assets held by the Foundation should be safe from attack by creditor of the Foundation’s creator; and
  • If the Foundation is set up in a nil tax jurisdiction, and say it owns a Company incorporated in a nil tax jurisdiction – which Mauritius is – (and provided the Foundation and any Companies it owns are not seen to be controlled from onshore) you may potentially end up with a scenario whereby income streams owned by the Foundation avoid falling into the net of the onshore taxman

 

In the case of a Purpose Foundation the specific Purpose or Purpose for which the Foundation is being formed will appear in the Foundation Charter.

 

In the above case in the Foundation’s Charter it will have stated “The purpose of this Foundation is to hold the shares of 2 Mauritius Companies”.

 

Here ‘s an example of some Charitable purposes taken from a previously formed/registered Seychelles Charitable Purpose Foundation:

 

(a)         To provide assistance and relief for children in ill-health;

 

(b)         To raise funds for, and to financially assist, children in ill-health;

 

(c)         To promote the health and wellbeing of children, including promotion of the provision of proper health care and treatment for children;

 

(d)         To make distributions to non-U.S. entities and institutions that are organized and operated exclusively for charitable purposes and which further the purposes referred to in sub-paragraphs (a) to (c) above.

 

Flexibility is everything. No doubt you’ll be pleased to hear that a Purpose Foundation does not have to remain a Purpose Foundation for life; A Purpose Foundation (by amending its Charter) can, later on down the track, morph into a Foundation with beneficiaries!

 

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

 

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 (& Where) to set up a Web3 Gaming Business Offshore?

Are you looking to monetize a GameFi project ie a blockchain-based ecosystem that combines decentralized finance with online gaming?

 

Have you considered setting up “Offshore”?

 

Would you like expert guidance on How (& Where) to set up a Web3 Gaming Business Offshore?

 

Such games are typically play-to-earn ie they use their own cryptocurrencies and NFTs (Non Fungible Tokens) to incentivize potential players – In order to earn crypto tokens and NFTs in-game, participants have to complete various objectives and engage in contests against other participants.

 

Starting up your own GameFi enterprise typically necessitates the issuance of a native cryptocurrency token or an in-game NFT. These would be used as currency for game participants to earn and trade. With the game’s native token, gamers in the ecosystem will be able to acquire land, character skins, costumes, weapons, etc depending on the nature of the game.

 

Game Fi/Defi projects are increasingly capturing the attention of law makers. In the current regulatory environment, to be able to offer your own crypto token or NFT to game participants, you must ensure that you launch in such a way as to keep your enterprise within the relevant regulatory framework. As a starting point you’ll need to ensure that your Token/NFT wouldn’t be classified as a Security which would typically require one to obtain a Securities Dealer’s License or a Financial Services Provider License.

 

You’ll also need to consider the Crypto/VASP (Virtual Asset Service Provider) and Gambling regulations (if any?) of the country where you intend to incorporate. As a rule, a crypto license is needed if a platform offers any kind of crypto-to-fiat or fiat-to-crypto transactions. A Gambling/Gaming license may be required if the result of the proposed game can be determined by some form of randomness or chance.

 

The good news is that OCI specializes in incorporating Blockchain related startups and our in-house Lawyer can help map out a safe path enabling you to glide through the sea of regulation without running aground on an unseen reef! In short, we can supply the expert guidance you’ll need if you’re in learning about How (& Where) to set up a Web3 Gaming Business Offshore!

 

Crypto Token Launches

 

Are you looking to issue a Crypto Token or NFT as part of your game?

 

If so, there are various ways to Legally structure such an enterprise but the most common approach we see is to create a collective of legal entities including:

    1. A DAO Foundation +
    2. A Developer Company +
    3. A Holding Company +
    4. A Token Distribution/Issuance Company (Token Co) ie the Exchange intends to sell it owns native Token +
    5. A Management Company

 

(Check this Flowchart which maps out the inter-relations between the various players: https://www.dropbox.com/scl/fi/x6beptavr0xbai1q3nxfq/ICO-Legal-Structure-Typical-DIAGRAM.pdf.jpg?rlkey=cmjui85wfw85uq6unkznafyuy&st=11qu31zj&dl=0 )

 

DAO Foundation

 

In terms of roles the DAO Foundation can potentially do several things ie it can/would/could:

  • Engage/pay the Developer Co
  • Act as an Incubator fund for collecting seed Capital (eg privately introduced/early stage investors and/or DAO members could make donations to the Foundation and in return receive tokens or a SAFT ie a Simple Agreement for Future Tokens)
  • Own the Tokens as developed and or it could own/provide working capital to the Exchange Company (ie act as a/the Treasury)
  • It could be used to incentivize sweat equity (ie it could be used to gift and/or air drop tokens to high performing team members or to benefactors)

 

The Developer Company

 

The Developer Company would be engaged to do the IT/Tech work and would typically be owned by the Tech Members of/Coders for the Collective. This enables the software developers to be remunerated on a commercial basis for the work they do.

 

Public Facing Token Issuing Company

 

If you plan to develop/sell your own Coin or Token (ie a Token that could be publicly traded) then ideally (eg to minimise liability exposure to the rest of the Group) this function should be carried out by a stand-alone Company. This Company could be owned by the DAO Foundation and or by stage 2 Investors/founders collectively via a Holding Company.

 

Management Company

 

To ensure that the Founders get paid fairly for running the business (ideally before taking on substantial investors) the Founders should form their own Management Company. This Company would be engaged via contract by the Token Issuing Co to manage the day to day affairs of the business.

 

IP Holding Company

 

Sometimes we see the DAO Foundation form an IP Company so that the technology/IP can be sold separately later and/or protected from law suits. Where an IP Company is deployed typically it is owned by the DAO Foundation and it hires/engages the Developer Company.

 

Investors Company

 

Occasionally we see a Holding Company deployed to own the Exchange Co and or the Token Issuing Co. Typically post launch Commercial Investors (eg if/when you need to do a 2nd capital raise to fund expansion) would hold shares in this Company as would the Founders of the Enterprise.

 

There’s no one perfect way to structure a Crypto Token Enterprise. Every business is different. Moreover you don’t necessarily need to kick off with a menage of Companies – some can be “bolted on” later as the business grows. That said I/OCI can provide detailed guidance in this regard ie we can assist you to tailor a Legal structure designed to meet your particular goals/needs having regard to your budget, potential for legal exposure, location, growth aspirations and time frames.

 

Where to Incorporate?

 

The first thing you’ll need to decide is where to incorporate your web 3 EGaming Company Offshore (and then how to structure the entity).

 

If all you are looking to avoid having to go down the Licensing road and if tax minimisation (or ownership privacy) is a key consideration then you might want to think about incorporating your Gaming Company in one of the following jurisdictions as all can deliver a nil tax result and none of the these currently have in place activated VASP regs:

 

 

Cost there would be:

 

  • For a St Vincent Company, including incorporation, registered/agent office service and one year’s basic admin: $1,300. 2nd and subsequent years $990
  • For a Panama Company, including incorporation, registered/agent office service and one year’s basic admin: $1,500. 2nd and subsequent years $890
  • For a Samoa Company, including incorporation, registered/agent office service and one year’s basic admin:  $1,500. 2nd and subsequent years $990
  • For a Costa Rica Company, including incorporation, registered/agent office service and one year’s basic admin:  $2,600. 2nd and subsequent years $1,700

 

All of these countries are low regulation and thus historically have been very popular with Cryptocurrency/Blockchain related businesses.

 

Crypto Business License Options

 

Depending on your business model and particularly if you’re looking to attract a higher level of investor/client and or if you want to have Regulatory certainty moving forward (eg if you are looking to do an ICO or an ITO or launch some form of Exchange) you might think about applying for some form of Crypto License.

 

There are a number of Licenses you could potentially apply for “Offshore” for Crypto/Blockchain related Enterprises including:

 

 

The cost to incorporate and apply for a License for businesses of the kind described above typically ranges from $US 18,000 to $50,000 depending largely on which jurisdiction you choose.

 

OCI & Defi

 

For the past 7 years we have specialized almost exclusively in assisting Blockchain/Cryptocurrency/Defi focussed startup, (including one of the world’s biggest Cryptocurrency Exchanges (eg the Bitmex Group) and some of the world’s biggest Defi DAOs including

 

 

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

 

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 Use a Tax free Offshore Company to Run a Software As A Service (SaaS) Business

In this article we are going to learn about how to use a Tax free Offshore Company to run a Software As A Service business.

 

Software as a Service (SaaS) is a cloud-based method of delivering software where users subscribe to access applications on the Internet rather than purchasing them outright. Common SaaS examples include email, calendaring, and cloud-based collaborative/office tools (eg Slack, Microsoft Office 365 etc). Such a business model operates similarly to streaming services, offering flexible, subscription-based access from any compatible device. By hosting the software in the cloud, SaaS provides a complete solution that enhances accessibility and convenience, allowing users to connect and use these apps on a pay-as-you-go basis.

 

If you are going to learn how to use a Tax free Offshore Company to run a Software As A Service business here are the key things you need to know…

 

Most SaaS businesses operate on a Subscription base ie you pay a periodic fee (commonly a yearly fee) to gain access to the software.

 

Subscription Based businesses began in the media world many moons ago; Before the Information age people would subscribe to a particular magazine or news service or book club or record club ie the subscriber would pay a regular fee (eg a monthly fee or yearly fee) to regularly receive a particular newspaper or magazine or etc. (Eg when I was a boy my parents subscribed to a record club and received a certain number of new vinyl LP records every month).

 

With the technological revolution and in particular the advent of SaaS (Software as a service) products, a LOT of businesses are shifting away from the traditional cash flow model where revenue is derived from a customer’s one-time purchase to a subscription based revenue model where revenue flows in on a recurring basis. In the SaaS world subscribers pay subscription fees periodically in return for consistent access to, or for the delivery of, a particular service.

 

Examples of latter day subscription based models include:

  • Salesforce
  • Zoom
  • Microsoft
  • Adobe
  • Accounting program providers (eg MYOB/MS Books, Quickbooks etc)

 

How To structure a SaaS business using a tax free Offshore Company

 

So what are the mechanics in terms of how to use a Tax free Offshore Company to run a Software as a Service business?

 

With such a business, typically, the services are offered Online (ie via a website and/or an active online direct marketing campaign), the subscriber signs up online and the service is delivered online (ie via download or via email) or via post/courier.

 

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

 

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

 

  • A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated to own/operate the business
  • You design/launch a website or Online Product/Sale portal which is owned by the Offshore Company
  • The IBC owns all proprietary items (including also the/any Trademarks, Operating software/systems, soft products to be delivered to customers etc)
  • Your website/landing page should ideally should be hosted in a nil tax/private Jurisdiction (Iceland is currently the most popular destination for such web hosting, Singapore is also often favoured)
  • The clients find you and/or contact you via the web
  • The IBC would be seen to be managed and controlled from (and ideally beneficially owned from, see below) Offshore. This is achieved via the appointment of a (nil tax jurisdiction based) “Nominee” director.
  • The client applies to become a subscriber Online (eg via your website)
  • Your standard sale agreement/website terms and conditions should provide that a contract is not formed until the customer’s offer is accepted by you (ie the Offshore Company)
  • Before the client clicks the “subscriber” button he/she clicks on a button acknowledging that he/she has read and agrees to be bound by your terms & conditions
  • Acceptance of the buyer’s offer would be provided by the Company (which is seen to be managed from “Offshore” via a nil-tax-jurisdiction resident Nominee Director) sending an email or text to the buyer, after he/she has paid online;

 

In simple terms what that means is that the situs of the Contract ie the place where the contract of sale (ie the agreement between you and the buyer for you to supply goods in consideration of the buyer paying), at law, is formed is the Company Director’s location ie a nil tax environment…

 

Hence the Subscription income flowing from each contract of sale is derived, prima facie, in a zero tax jurisdiction (every time a client buys and you send an email thanking him for payment that concludes a contract of sale at law).

 

Ideally the Company’s Board of directors would meet periodically (eg once a month to ratify (ie belatedly approve) all subscription contracts signed up/entered into in the period/month previous.

 

An Offshore account (which can/would also be set up to receive card payments via a merchant account) is opened in a nil tax banking centre (ie a jurisdiction/country which does not tax monies banked in the jurisdiction nor interest paid by local banks on bank deposits).

 

In terms of money flows how it would work is:

  • Customers/clients pay the IBC; All such monies are banked free of tax in the first instance
  • Ideally you or your local Company would/could be contracted by the IBC to manage sales/delivery of product/website maintenance/whatever
  • (If you need a regular income) You/your local Company 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 (as a contractor) to claim a series of expenses (ie tax deductions/allowable deductions) against this income (eg home office, equipment, travel, car costs, some meal costs, phone/internet/utilities etc) to significantly reduce the amount of tax that would otherwise be payable on this income (Assessable income less Allowable deductions = Taxable income)
  • Ideally once your business starts to grow, and to add substance, you would be wise to set up your MD/Board and or a sales team to take orders and receive income in a low tax onshore environment (eg Hong Kong, Ireland, Singapore, Cyprus etc as per the Amazon/Google model).

 

Management/Ownership Structure

 

As alluded to, in order to minimise the chances of the IBC being taxed onshore, ideally, the IBC should/would be (and be seen to be) managed and controlled from Offshore. How this can be achieved is by including a (nil tax jurisdiction based, arms’ length) “Nominee” Director as part of the Corporate structure. For details of how that can work click on these links:

 

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/

 

Ideally – so you can swear on oath in the event of a tax investigation, law suit or regulatory inquiry – I am not the beneficial owner of this Company, (which could get you around what might otherwise be a substantial tax or legal liability eg imprisonment for tax evasion) you will want to set up a Private Foundation to act as the shareholder of your IBC. (This should also assist you to get around CFC rules ie if you live in a country which has such laws).

 

With a bespoke legal/admin structure in place you should only be liable to declare and pay tax on income paid to you by your Offshore Company (and/or on any distributions paid to you by the Foundation); The rest of your Online sales earnings you should be able to bank, and/or invest, tax free Offshore, ie in a nil tax environment.

 

Similarly, if a product that you sell doesn’t perform and a customer tries to sue you the good news is your personal assets should not be at risk as the customer has contracted with a limited liability Company (ie the Company carries the legal risk, not you personally). Moreover, having your business incorporated Offshore in a foreign/strange land is of itself a deterrent. (Have you ever tried to sue/get money out of an “Offshore” Company? It’s the Litigation Lawyer’s equivalent of climbing Mount Everest!)

 

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.

 

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

 

 

 

 

Nevis Private Trust Companies (“PTCs”)

 

A Private Trust Company (“PTC”) is, essentially, a company which possesses Trustee powers and which does not conduct trust business with the general public, its sole purpose being to act as a trustee of a family Trust or a group/series of related Trusts.

 

As long as certain criteria are fulfilled the PTC will not have to obtain a licence to carry out Trust Company business.

 

A PTC can be particularly useful for wealthy families who either do not wish to relinquish control to professional Trustees or where the Trust fund is to be invested in assets, which a professional Trustee may be reluctant to deal with, such as works of art or family businesses.

 

Key features:

  • The board of the PTC may consist of family members or trusted advisors. The residence of the PTC’s directors may have an impact on the underlying Trust’s tax status so professional advice is recommended. Generally, a company is classed as being resident for tax purposes in the jurisdiction where mind, management and control are exercised. Care needs to be taken to ensure that the directors of the PTC are not deemed to be resident in a high tax jurisdiction;
  • Representatives of the Trust company business are appointed to the board to ensure appropriate governance;
  • The PTC may be owned in a variety of ways such as by a Purpose Trust or a Foundation for confidentiality purposes;
  • The professional service provider acts as an administrator of the structure and assists the board of the PTC with corporate governance and trustee considerations.

 

Advantages:

 

Control – By retaining the power to appoint the directors of the PTC the Settlor (https://offshoreincorporate.com/faq/what-is-a-settlor/ ), whether or not a director themselves, will experience a high degree of control over how the Trust is run. The Settlor and his/her family have an opportunity to be involved in the management, investment and disposition of the Trust assets.

 

In Depth Knowledge – Allows family members and their advisors to bring their varied knowledge onto the Board. Particularly useful if the underlying assets are complex, high-risk or part of the family business.

 

Succession Planning – By engaging younger family members in the management of family assets, and involving them in the decision-making process, a training programme is instituted preparing the younger generation to effectively and responsibly manage wealth.

 

Diversity of Asset Base – Professional Trustees may be reluctant to hold certain assets therefore a PTC allows greater choice as to what investments may be made with the Trust fund.

 

Continuity – The administrator may change but the PTC will remain as the Trustee providing continuity of asset ownership.

 

Nevis Private Trust Companies

 

A Nevis Private Trust Company is free of regulation in Nevis. This means that a standard Nevis International Business Corporation can be a PTC and the Nevis International Exempt Trust Ordinance (NIETO) states that for a Nevis Trust to qualify as a NIETO Trust the following criteria must be met:

 

There must be at least one Trustee, which can be:

(i) a Corporation incorporated under the Nevis Business Corporation Ordinance, Cap 7.01; or

(ii) a Limited Liability Company formed under the Nevis Limited Liability Company Ordinance, Cap 7.04; or

(iii) a Trust company licensed in Nevis; or

(iv) an Attorney-at-law or firm of Attorneys-at-law duly licensed by the Nevis Island Administration to carry on the business of a registered agent; or

(v) a Multiform Foundation established and registered under the Nevis Multiform Foundations Ordinance, 2004;

 

As regards connection with Nevis:

  • The Settlor and Beneficiaries must at all times be non-residents of St. Kitts and Nevis; and
  • The Trust property must not include any land situated in St Kitts and Nevis.

 

The assets and income of a Nevis International Exempt Trust are exempt from all exchange controls and all forms of taxation and stamp duty in St. Kitts and Nevis.

 

Key Features of the Nevis model of PTC include:

 

  • A Nevis Trust cannot be declared void, voidable or defective by reason of any forced heirship rules of the Settlor’s domicile;
  • The rule against perpetuities does not apply. A Nevis Trust may continue for one hundred years from the date of commencement;
  • Foreign Judgments against the Trust are not enforceable in Nevis. Any civil action to recover assets from a Nevis Trust must be brought anew in the Courts of the Federation of St. Kitts and Nevis.
  • The Proper Law of the Trust is the Law of the jurisdiction expressed by the terms of the Trust; or failing that, with which the Trust at the time it was created had the closer connection; or failing either, then the proper law of the Trust shall be the law of Nevis.

 

Fraudulent Transfers

 

In most onshore jurisdictions if an asset is transferred to a  third party purely to defeat a Creditor’s claim over it, that transfer can often be overturned. This transfer is referred to in the Legal world as a Fraudulent Transfer or a Fraudulent Conveyance or a Fraudulent Disposition.

 

Where an asset has been transferred to a Nevis PTC the sole remedy available to a Creditor is to allege fraudulent transfer or disposition. BUT if the Trust is settled after the expiration of 2 years from the date of the Creditor’s cause of action, it is not deemed fraudulent. In any event, a Creditor seeking to set aside a transfer to a Nevis Trust must prove beyond a reasonable doubt, and with clear and convincing evidence, that the transfer constituted a fraudulent disposition. Moreover, a Creditor must deposit with the Ministry of Finance, a security bond of US$100,000.00 before he/she can bring an action against a Nevis Trust;

 

Protectors

 

The Nevis Law also provides for the appointment of a Protector ( https://offshoreincorporate.com/faq/what-is-a-protector/ ) who is responsible for monitoring the operations of the Trust. This provision allows the Protector to ensure that the purpose of the Trust is fulfilled. One of the outstanding features of the Nevis Law is that the same person can act as Settlor, Beneficiary and Protector. This particular aspect allows the Settlor to maintain control over the Trust assets if desired.

 

Confidentiality

 

The Nevis Law also provides for there to be confidentiality with respect to the Trust. Though a Trust register is maintained, it only records the name of the Trust and the date of settlement and is not a public document available for inspection. The only exception is where a Trustee of a specific Trust gives written authorization allowing the inspection of the entry of that Trust on the register. Additionally, the Law provides that all non-criminal judicial proceedings relating to the Trust shall be heard in private and that no details may be published without leave of the Court.

 

Nevis PTC Costs

 

The cost to set up and maintain a Nevis PTC would be as follows:

 

First Year

Incorporation – US$400

Government registration charges – US$270

Registered office/agent – US$470

Compliance maintenance – US$150

Administration and collections – US$110

 

Annually thereafter

Government registration charges – US$260

Registered office/agent – US$470

Compliance Maintenance – US$150

Administration and collections – US$110

 

Registration

 

If you intend to engross and register A NIETO (Nevis International Exempt Trust Ordinance) Trust it will need to be registered to qualify under the ordinance and must have a registered office in Nevis (which OCI can/will supply). At registration the Registrar of Trusts is informed of:

 

  1. The name of the Trust
  2. The name of the Trustee
  3. The place of the registered office of the Trust; and
  4. The date on which it was engrossed

 

The Trust Deed (ie the document which governs the operation of the trust) is not filed and remains a private instrument.

 

The procedure for registering a NIETO Trust is as follows:

 

-        We draft and provide the Trust deed to the Compliance Manager in Nevis for review to ensure that it qualifies as a NIETO Trust;

-        Assuming that the deed qualifies the client then engrosses it and provides us with a signed deed;

-        We register the Trust, obtain the registration certificate and provide it to the client.

 

Note: The Nevis PTC can be the Trustee of NIETO and non-NIETO Trusts without the need for licencing.

 

The costs relating to the establishment of a Nevis NIETO Trust would be as follows:

 

First year

Review of the Trust deed for compliance with NIETO – US$1,000

Provision of registered office – US$470

Due diligence maintenance – US$170

Administration and collections – US$110

(+ Providing a Trustee if required $1,750)

 

Annually thereafter

Provision of registered office – US$470

Due diligence maintenance – US$170

Administration and collections – US$110

(+ Providing a Trustee if required $1,750)

 

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

 

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 Stake Cryptocurrency Using a Tax Free Offshore Company

Crypto staking is the practice of locking your digital Tokens to a blockchain network in order to earn rewards – usually a percentage of the tokens staked. Think of it as being the Cryptosphere version of fixed interest (term deposit) investments (ie where you commit to leave a certain amount of money with your Bank for an agreed amount of time and the Bank guarantees to pay you an agreed/fixed rate of interest upon maturity).

 

Cryptocurrency staking can take many forms, but it generally falls into two categories: active and passive.

 

Active Crypto staking is the process of locking your Tokens to a network for the purpose of actively participating in the network. Active participants may validate transactions and create new blocks to earn Token rewards.

 

Passive Crypto staking involves simply locking your Tokens to a blockchain network to help keep it secure and operating efficiently.

 

Here’s a basic example: Suppose a blockchain network is offering a 5% reward for a staking period of, say, a month. You decide to lock up and stake 100 Tokens in the network. After a month, you’re able to access your staked Tokens and you receive 5 additional Tokens as your reward.

 

Crypto Staking Using an Offshore Company

 

Straight up you’ll be pleased to hear that Offshore Companies are widely used in the Cryptosphere for Staking!

 

The starting point would be to set up a Company in a nil tax jurisdiction. Ideally, ie for tax optimization, that Company would be seen to be managed/controlled from Offshore (which would entail the appointment of an arms-length, nil tax jurisdiction based, “Nominee” Director) & beneficially owned from Offshore (which would entail the deployment of a Private Foundation to act as shareholder).

 

The Offshore Company would then acquire some Cryptocurrency. There are two ways to go about this.  Either you would lend money (on an arms length basis) to the Offshore Company and it would acquire the Crypto or you could transfer Cryptocurrency owned by you to the Offshore Company (Check out this Article which explains how you might go about that: https://offshoreincorporate.com/how-to-transfer-ownership-of-cryptocurrency-to-an-offshore-company/  )

 

Once that’s done the following steps would apply…

 

Choose the form of Cryptocurrency you wish to stake. Not all Cryptocurrencies support staking, so your first step would be to choose an appropriate Token. Cryptocurrencies that use proof of stake or a similar consensus mechanism usually support staking.

 

Acquire the Cryptocurrency. Your next step would be to acquire the desired Crypto or exchange your current Crypto into your preferred staking Cryptocurrency. You can use one of many Crypto exchanges to complete this acquisition/exchange.

 

Select a staking platform. Choosing a staking platform is the most important part of this process. Your selected platform determines the type of staking and whether the Token storage is custodial or noncustodial.

 

Stake your Cryptocurrency. With the preferred Tokens in your digital wallet and a staking platform selected, you’re ready to follow the protocols of the platform to stake your Crypto. Staking a Token locks it to a blockchain network for a predefined time period.

 

Earn rewards. Your staked Cryptocurrency should (hopefully) then begin to generate rewards/returns in the form of more Crypto/Tokens!

 

All returns in this instance are generated by the nil tax Offshore Company. Those profits would be booked “Offshore” ie in a nil tax environment. Provided you take care in terms of how you go about structuring/administering your Offshore Company, potentially you should only have to declare/pay tax locally on any income that may be paid to by the Offshore Company. The remainder of your staking profits would be banked, and/or would be reinvested, 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

 

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 Do I Avoid My Name Being Recorded as a Beneficiary of My Foundation?

As we’ve discussed in a previous article a Foundation can be either have Beneficiaries or it can be set up as a Purpose Foundation

 

(Check this Link for access to the related previous article “What is a Purpose Foundation”: https://offshoreincorporate.com/what-is-a-purpose-foundation/  )

 

A “Beneficiary” (in the case of a Private Foundation) is a person who is designed ultimately to benefit financially from the set up of a/the Foundation.

 

A Private Foundation, at set up, can either nominate a beneficiary/s which could be a person (including a corporate body) or a class of person (“eg all the blood descendants of John Smith” ).

 

Alternatively a Foundation can be set up to fulfil a specific purpose or a set of purposes. Here are some examples of such Purposes: https://www.dropbox.com/scl/fi/39pdmedsponhn7jkxk2gp/SAMPLE-Charitable-Purpose-Foundation-Purposes.docx?rlkey=pcjerj28fbkogq35d8iiorx0n&st=k4rk2pgw&dl=0

 

Note a Foundation can also be set up to fulfil a simple purpose. For example we had a client recently set up a Purpose Foundation where the sole stated purpose was “to hold the shares of a Belize Company”.

 

To begin with, when setting up a Private Foundation, you need to decide whether your Foundation is going to be a Purpose Foundation or a Foundation with Beneficiaries.

 

If it’s going to be a Purpose Foundation you’ll need to specifically advise what the Purpose (or Purposes) is (are) going to be. If it’s going to be a Foundation with beneficiaries you need to tell us who the initial beneficiaries will be. (Minimum 1)

 

In essence you’re either happy to you see your name/your family member’s names listed as beneficiaries from the outset. Or you’re not.

 

If your plan is to set up a Seychelles Foundation – & given the Seychelles Foundations Act specifically provides that (when a Sey Foundation owns assets) the Foundation is classified as both the legal AND beneficial owner of any asset that it owns/holds – potentially there may not be any legal issues with you/your family members being named as beneficiaries. That said we are not experts in the acquisition/property/insolvency/tax etc laws of every country; hence if you have any doubts or concerns about whether being named as a Beneficiary is going to have any legal consequences in your home country you should probably consult with a local specialist Lawyer on this point.

 

It should also be noted that if your Foundation begins life as a Purpose foundation it can mutate/morph later and become a Foundation with Beneficiaries. But it cant work the other way. A Foundation that is initially set up with Beneficiaries can’t later on change and become a Purpose Foundation.

 

In short, if your main aim is to ensure that your name doesn’t’ appear as a Beneficiary of the proposed Foundation then you will want/need to set up your Foundation as a “Purpose” Foundation.

 

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

 

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.

 

 

Vanuatu Broker & Crypto Licenses

Are you looking to apply for a Broker’s License (or a VASP style License) Offshore?

 

Then certainly one option you should be considering is to apply for a Vanuatu Financial License.

 

Vanuatu is an attractive option in that:

  • It offers a range of Licenses tailored to your particular Trading or Investment strategies
  • It has low paid up capital requirements (only $US50,00)
  • There’s less red tape applied compared with the bigger Offshore jurisdictions (such as Caymans and the BVI)
  • It’s a popular location for such Licenses and hence the application process has become quote streamlined; &
  • The costs are very reasonable (around half the price of the more established jurisdictions such as BVI & Caymans)

 

License Options

 

The Vanuatu Financial Service Commission (VFSC) regulates the FDL and the license can be obtained based on Dealer’s in Securities (Licensing) Act [CAP 70]. Through the amendments of the FDL Act the principal license has been divided into Class A, Class B, Class C and Class D Principal’s License and a Representative License is required for each of the classes.

 

There are 4 Licenses you could apply for in Vanuatu:

 

  • A Class A License: Debenture stocks; loan stock, bonds; certificates of deposits, proceeds of foreign exchange
  • A Class B License:  Shares in share capital of a corporation; proceeds of precious metals; proceeds of commodities; a right whether or not conferred by warrant, subscribe for shares or debt securities; or a right under depository receipt
  • A Class C License: Future contracts and derivative products but not limited to futures and options; an option to acquire or dispose of any security falling within any other provision of the Act; a right under a contract for the acquisition or disposal of the relevant securities under which the delivery is to be made at a future date and at a price agreed when the contract is made in accordance with the terms of that contract
  • A Class D License: Carry on or purport to carry on the business of dealing in digital assets. *A class D principal license may only be issued to the license holders of Class A, B and C Principal’s Licenses, unless the person applying holds a similar type of license (Class D) in another jurisdiction.

 

Principal License Application Docs etc Required

 

When applying for a Principal License there are a number of documents you’ll need to submit including:

 

1. Principal Application Form, fully completed, signed and witnessed by a notary public or commissioner of oaths

2. Personal Questionnaire Form – Personal Questionnaire & Undertaking To Be Completed by Each UBO, Shareholder, Director, Manager or Any Other Key Persons

3. Evidence of experience in the class of license applied for

4. A detailed business plan

5. Three year financial projections

6. A Prospectus

7. AML/CTF Procedure manual

8. Complaints procedure

9. Current PI (Professional Indemnity) Insurance covering the company and its officers

10. Certified copies of passports of all UBOs (Underlying Beneficial Owners) and key persons

11. Certified copies of Police clearance certificates re all UBOs and key persons;

12. Certified copies of proof of addresses of UBOs and key persons;

13. Certified copies of evidence of source of funds

14. Certified copy of a license issued in a foreign jurisdiction to the applicant or UBO

15. Detail of the security platform to be used by the company

16. Risk management procedure

17. Details of a physical office based in Vanuatu for company’s operations (estimated approval time to set up is 3 months)

18. Bond of USD50,000 is to be paid upon license approval, the bond is applicable to  the Applicant company not on each class of license applied for.

 

Representative License – Docs Etc required

 

1. Representative Application Form, fully completed, signed and witnessed by a notary public or commissioner of oaths

2. Copy of CV

3. Certified copies of qualification

4. Certified copy of a passport

5. Certified copy of evidence of residential address, either a utility bill or phone bill

6. Certified copy of Police clearance certificate

7. Two independent references including contact details of referees

NB: Ensure experience is noted for all 3 categories if applying for all 3 categories

 

Additional information required from an applicant for a Class D license

 

Apart from above mentioned applicants for a Class D License must also submit:

 

  • Evidence of minimum Capital of USD$ 500,000
  • Risk Management Procedures
  • AML/CTF Procedures regarding provision of custody services
  • Outsourcing agreement in relation to custody arrangements;
  • Details of firm providing custody
  • Internal control and compliance procedure manual
  • Details of Chief Technology officer
  • Details of measures to be put in place with regards to infrastructure, security and safety of digital assets
  • Detailed information of arrangement to ensure confidentiality, security and reliability of client(s) information
  • Copy of promotional material(s) to be use in connection with the proposed business
  • A holder of a Class D license must establish an Escrow Account where investor’s funds are held separately from the company’s funds. The escrow account must be audited annually by an independent auditor and the audit reports must be filed at VFSC, together with the company accounts no later than 90 days after the financial year

 

A Class D license holder must establish a physical presence in Vanuatu with the following key persons present in Vanuatu:

a). At least one director;

b). A Manager;

c). A Chief Technology officer.

 

Miscellaneous Requirements

 

Once the License is received, the license holder needs to commence company operations within three months and if they have not, the VFSC needs to be notified.

 

Failure to commence operation without notifying the VFSC may lead to revocation of the license.

 

The VFSC may issue a conditional letter with the license usually giving the Applicant Licensee 60 days to provide the information requested. The Applicant has to ensure that it provides the required information at least 10 days prior to the 60 day due date.

 

Forms and templates (where applicable) will be provided upon request to assist with the application.

 

The Client is responsible for providing us with all accurate information, supporting documents and related fees as required by the regulators.

 

All documents must be translated and certified in English if the original documents are in a different language.

 

Any clarifications and additional documents requested by the VFSC is the responsibility of the Client and they need to be provided within the time frame stated by the VFSC.

 

Vanuatu Financial Intelligence Unit (VFIU) Registration

 

The Vanuatu Financial Intelligence Unit was enacted in September 2000 and is governed by the new Anti-Money Laundering and Counter Terrorism Financing Act No. 13 of 2014.

 

The Financial Intelligence Unit is Vanuatu’s national agency responsible for the receipt, analysis, assessment and dissemination to competent authorities of disclosures of financial information to counter money laundering, terrorism financing and suspected proceeds of crime. It is a requirement of all financial type companies to be registered with the VFIU.

 

VFIU Registration – Docs required:

1. FIU – Registration Form For Reporting Entity

2. VFIU – AML/CTF Compliance Officer and Alternative Officer form

3. VFIU – Key persons form

4. VFIU – Compliance Report form

5. Certified passport for Compliance Officer/Alternative Compliance Officer

6. Certified police clearance for Compliance Officer/Alternative Compliance Officer from country of passport and country of residence

7. CV for Compliance Officer/Alternative Compliance Officer

8. Certified academic qualifications for Compliance Officer/Alternative Compliance Officer

9. AML/CTF policy and procedure manual

 

The process takes around 6-8 weeks. We will provide the forms for completion and execution, this service can be done directly by the compliance officer or we can assist in the lodgement of forms, however the compliance officer will need to communicate with the VFIU registration officer for the completion of the registration.

 

Vanuatu Competent Authority (VCA) Registration

 

The Vanuatu Competent Authority oversees tax administration regulation in Vanuatu.

 

From the year 2020, VCA has requested that all financial institutions register with VCA whereby the Entity will be provided with a Tax Identification Number (TIN).

 

An FDL company is recognised as a financial institution under the tax administration act however, a self-assessment is to be made by the company’s management as to whether they require registration or not.

 

Once a company is registered, it is required to notify the VCA that they have a reporting obligation under the Automatic Exchange of Information Regulations Order No.76 of 2017 and Tax Administration Act No.37 of 2018. The process takes around 5-10 working days.

 

The Company must lodge an annual report (including nil report) no later than 31 July of each year.

 

Please note there is no income tax charged for companies or individuals in Vanuatu, the above report is disclosure of customer information for automatic exchange of information purposes only.

 

VCA registration requirements

1. MDES Registrations are due by 31 March each year

2. Tax identification form

3. Certified copy of company incorporation certificate

4. Registration of company via MDES portal online

 

SET UP COSTS

 

As indicated there are several components to a Vanuatu Financial License Application including Incorporation of a Vanuatu Operating Company, the Financial Dealer Application itself, VFIU Registration and VCA registration. You’ll also need to account for annual renewal costs ie from year 2 onwards. Costs for each part of the jigsaw are as follows… (all fees are in USD unless otherwise indicated):

 

Vanuatu Company Incorporation

 

  • Incorporation of Vanuatu Licensee Company: $US1,000
  • Corporate Administrator Fee payable in advance (proratad at USD125 per month) from month of incorporation to December): $2,000

 

Financial Dealer License Application

 

The Vanuatu Financial Service Commission (VFSC) regulates the FDL and the license can be obtained based on Dealer’s in Securities (Licensing) Act [CAP 70]. Through the amendments of the FDL Act the principal license has been divided into Class A, Class B, Class C and Class D Principal’s License and a representative License is required for each of the classes.

 

  • OCI Fees for the financial licenses application and due diligence fees $7,500
  • VFSC Application Fees (Principle License) $1,500
  • VFSC Application Fees (Representative License) $1,500
  • VFSC Principle License Fees $1,500
  • VFSC Representative License Fees $1,500
  • Security deposit to be paid to the Commission $50,000
  • Assistance in relation with the registration of the company with VFIU $600

 

 

VFIU Registration:

Our fees to assist with form review and lodgement with VFIU, copying the compliance officer on application lodged for execution of registration of the company: $1,350

 

 

VCA registration:

Our fee to assist with lodgement of VCA registration including Certification fee for commissioner of oaths: $1,650

 

 

Annual Renewal

Licensed Companies (all Categories of License ie Class A, Class B, Class C and Class D) are required to renew on an annual basis with the VFSC to remain in good standing.

 

Requirement/Docs required:

1. Annual renewal fees need to be paid per invoice

2. Current certified documents for Shareholders/Director/Representative/Manager; passport, police clearance, utility bill and driver’s license.

3. Audited financial statement for the company

4. Proof of current professional insurance indemnity cover

5. Quarterly returns on investment due in January, April, July and October

Annual company administration fee (including govt taxes): $6,900

+ Disbursements:

VFSC corporate renewal fee: $300

FDL Class A- principal license: $1,000

FDL Class A- representative license: $1,000

 

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

 

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 Realise Cryptocurrency Gains Offshore (Almost) Tax Free

Recently we were approached by a client who had acquired Cryptocurrency some time back and who is confident that Crypto generally (and Bitcoin in particular) is going to go on a Bull Run (EG many respected Industry pundits are predicting that the price of a Bitcoin will punch through the $US100,000 price barrier by year’s end).

 

In short, the client was inquiring about strategies for how to get the Crypto into a Tax Free Offshore Corporate structure before the price booms without having to incur any, or any substantial, CGT (Capital Gains Tax) liability pre-transfer.

 

Some eminent tax lawyers have suggested that there are two methods one could consider deploying in terms of transferring Crypto cost effectively to a (nil tax) Offshore Company.

 

The first method would be to characterize the proposed Foundation as a Charitable or Benevolent Foundation and to “donate” the Crypto to the proposed Foundation. Would this amount to a disposal” such as might trigger the application of CGT (Capital Gains tax locally?). Maybe (hopefully) not! Nevertheless, that is a question you will need to seek specialist local Tax Advice on.

 

The second option, would be to lend the Crypto to the Offshore Company, that is you and the Company would enter into an arms-length loan agreement. This loan ideally should be seen to be on commercial terms with a commercially realistic/explicable interest rate (ideally, from your perspective, this would be the lowest interest rate possible). Usually, we see such agreements with loan periods of 30 years with the first 5 years of the loan only requiring the borrower to make interest only repayments to the Lender. Whatever profit the borrower makes on the Crypto it gets to keep (less the interest component, which it pays to you and which would presumably be reportable/taxable income your side). Potentially the interest only repayment period could be rolled over every 5 years such that the borrower would not have to pay the back the principle until you’ve moved to a nil tax jurisdiction and want to shut down the structure and cash out (See below).

 

That said for this strategy to work you’ll want to structure/administer the Offshore Company in such a way as to minimize the chances of the Company being called upon to pay taxes onshore/where you live.

 

For many clients this could potentially be achieved by setting up a nil tax “Offshore” Company:

(a)  With an Offshore Management System ie the Company would need to be seen to be managed/controlled from Offshore (which would entail the deployment of an active nil tax jurisdiction based “Nominee” director);

(b)  With an Offshore beneficial ownership structure ie the “beneficial owner of the Company would be seen to domiciled Offshore ie in a nil tax environment (which would entail the deployment of a Private Foundation to act as the shareholder of the Company – as a Private Foundation is presumed at common law to be both the legal owner and the beneficial owner of any asset it owns/holds.

 

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

 

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.

 

 

 

Offshore Legal Structures for a DEX (Decentralized Cryptocurrency Exchange)

If you’re like most new startups – and looking to a launch a new DEX (Decentralized Cryptocurrency Exchange) – you’re probably in a bit of a quandary about how you should structure your DEX from a Corporate/Legal Perspective. It can be a bit confusing and frankly there’s a lot of misinformation out there on the nett written by people with tech knowledge but no legal background.

 

I’ve been a Lawyer for 33 years, have worked exclusively in the “Offshore” Corporate Structuring field for the last 23 years and and have specialized in assisting Crypto startups for the past 7 years +. I’ve done a TON of research on this topic and assisted A LOT of such businesses to get structured. Hopefully this Article will cut to the thrust and tell you EXACTLY what you need to know…

 

(As you may know) Unlike a Centralized Cryptocurrency Exchange (“CEX”) a Decentralized Cryptocurrency Exchange (“DEX”) typically does not provide any custodial facility, ie it simply provides a platform where people can meet and trade sell or swap Cryptocurrency peer to peer. Given the DEX model of exchange never holds customer funds, this makes it difficult for law makers to overlay traditional regulatory oversight. Generally speaking, where an entity is holding third party funds in a custodial relationship, or assisting third parties to move or invest funds, this is a Licenseable Activity.

 

That said a lot of the jurisdictions whereat we used to incorporate DEXs have decided that such an enterprise is now either a prohibited activity or they require the enterprise to apply for some form of License.

 

There are a number of Licenses you could potentially apply for “Offshore” for a DEX including:

  1. A Gibraltar DLT License
  2. An Estonian Cryptocurrency Exchange (and/or Crypto Wallet Provider) License
  3. A Malta Crypto business license
  4. A Mauritius VASP License
  5. An Isle of Man ICO License
  6. A Swiss ICO license
  7. A Lithuanian Cryptocurrency Exchange/Wallet Provider License
  8. A Caymans VASP License
  9. A BVI VASP License

10.A UAE Crypto business license

 

The cost to incorporate and apply for a License for businesses of the kind described above typically ranges from $U15,000 00 to circa $50,00 depending largely on which jurisdiction you choose.

 

That said, if you’re on a budget, you’ll be pleased to hear that it’s still possible still to incorporate such a business “Offshore” without needing to apply for some of Special License. Panama, St Vincent and Samoa all present options in that regard. Check this Article for details: https://offshoreincorporate.com/where-to-incorporate-a-crypto-token-launch-business-offshore/

 

DEX Legal Structures – Overview

 

In the case of a DEX, the Exchange Company/Platform Provider can’t access the platform user’s assets. Nor can the owners. The token swap protocols of the DEX are, in most cases, ownerless and non-custodial. As such the DEX platform provider (general negligence principles aside) owes no Fiduciary duty to the Users. This is why the typical regulations encapsulating CEXs aren’t applied to DEXs.

 

That said, as an owner of a DEX, it’s important that you give considered thought to how you are going to structure the enterprise from a legal/entity perspective. In short, you’ll need to strike a balance as between potentially competing interests viz a viz the various stakeholders. At its core the legal/ownership structure should take into account and cater/provide for:

  1. Limiting the Founders’ liability in the event of a law suit against the DEX +
  2. Investor sensibilities +
  3. Ensuring that the relationships as between the DEX owners are carefully documented/governed +
  4. Tax Planning considerations +
  5. Insurance against potential allegations of non compliance with “onshore” Managed Investments Laws and/or Securities Industry Regulations

 

Behind the DEX protocols, we often see a Decentralized Autonomous Organisation (DAO) (like Uniswap DAO and Sushi DAO), the members of which vote for the protocol’s strategy (the principles of its work, commission sizes, etc.) and manage the Treasury (e.g., issue grants/tokens) in a decentralized way.

 

Given at its core the typical/pure DAO is an unincorporated association (like a Club, meaning all the members could be made jointly and severally liable if the DAO were to be sued) these days most such DAOs are usually incorporated/registered as ownerless legal entities (eg Private Foundations) or as Limited Liability Companies (eg DAO LLCs). Generically we refer to this as applying or setting up a DAO Legal Wrapper. These legal wrappers aim to protect DAO members from unlimited liability and implement the decentralized governance of the DAO. (For more information of what  DAO is and where you might set one up check this Article: https://offshoreincorporate.com/how-where-to-set-up-a-dao/ )

 

There are various ways to Legally structure a DEX but the most common approach we see to the legal structuring of a DEX is to create a collective of legal entities including:

  1. A DAO Foundation +
  2. A Developer Company +
  3. The (Consumer facing) Exchange Company
  4. A Token Distribution/Issuance Company (Token Co) ie if the Exchange intends to sell it owns native Token
  5. A Management Company

 

In terms of roles the DAO Foundation can potentially do several things ie it can/would/could:

  • Engage/pay the Developer Co
  • Act as an Incubator fund for collecting seed Capital (eg privately introduced/early stage investors and/or DAO members could make donations to the Foundation and in return receive tokens or a SAFT ie a Simple Agreement for Future Tokens)
  • Own the Tokens as developed and or it could own/provide working capital to the Exchange Company (ie act as a/the Treasury)
  • It could be used to incentivize sweat equity (ie it can be used to gift and/or air drop tokens to high performing team members or to benefactors)

 

The Developer Company would be engaged to do the IT/Tech work and would typically be owned by the Tech Members of/Coders for the Collective. This enables the software developers to be remunerated on a commercial basis for the work they do.

 

The Exchange Company would own and operate the business, in effect, ie, it is the Entity that would engage/contract with the DEX Platform users and receive the fees/commissions generated by their Cryptocurrency sales/swaps.

 

If you plan to develop/sell your own Coin or Token (ie a Token that could be publicly traded) then ideally (eg to minimise liability exposure to the rest of the Group) this function should be carried out by a stand alone Company. This Company could be owned by the Exchange Co or it could be owned by the DAO Foundation and or by stage 2 Investors.

 

To ensure that the Founders get paid fairly for running the business ideally the Founders should form their own Management Company. This Company would be engaged via contract by the Exchange Co (and the Token Issuing Co) to manage the day to day affairs of the business.

 

Sometimes we see the DAO Foundation form an IP Company so that the technology/IP can be sold separately later and/or protected from law suits. Where an IP Company is deployed typically it is owned by the DAO Foundation and it hires/engages the Developer Company.

 

Occasionally we see a Holding Company deployed to own the Exchange Co and or the Token Issuing Co. Typically post launch Commercial Investors (eg if/when you need to do a 2nd capital raise to fund expansion) would hold shares in this Company as would the Founders of the Enterprise.

 

Potentially each of the Service/Etc Companies/Entities could be set up in a nil tax jurisdiction to help potentially deliver an enhanced bottom line. Popular jurisdictions include the BVI, Seychelles, Belize, Nevis, Hong Kong etc.

 

There’s no one perfect way to structure a DEX> Every business is different. Moreover you don’t necessarily need to kick off with a menage of Companies – some can be “bolted on” later as the business grows. That said I/OCI can provide detailed guidance in this regard ie we can assist you to tailor a Legal structure designed to meet your particular goals/needs having regard to your budget, potential for legal exposure, location, growth aspirations and time frames.

 

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

 

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.

 

 

 

 

 

 

Seychelles Private Trust Companies

Introduction

 

A Trust is a legal arrangement in which a Trustee holds assets on behalf of beneficiaries, who benefit from the assets but do not own them. Trusts are commonly used for estate planning, asset protection, and philanthropy.

 

  • A Trust is set up by a person called a Settlor
  • A Trust is managed day to day by a Trustee
  • A Trust typically has Beneficiaries ie persons who are designed to benefit ultimately/financially from the set-up of the Trust
  • A/The Trustee manages the Trust assets in accordance with a Trust Deed ie a governance document drafted or supplied by the Settlor or his/her Lawyers

 

In Seychelles, individuals and corporations can establish Trusts under the Seychelles Trusts Act 2021. However, there is also the option of setting up a Private Trust Company (PTC) instead of a traditional Trust. In this article, we will explain the key features of a Private Trust Company and how it differs from a normal Trust established under the Seychelles Trusts Act 2021.

 

What is a Private Trust Company?

 

A Private Trust Company (PTC) is a company specifically set up to act as a Trustee for one or more trusts. PTCs are often used by wealthy families or businesses to maintain control and confidentiality over their assets. The PTC can be owned and controlled by the family or business, allowing them to have greater input and control over the management of their assets.

 

Key Features of a Private Trust Company

 

  1. Control: One of the key features of a PTC is that it allows the Settlor to retain a significant degree of control over the Trust assets. This is because the PTC is owned and controlled by the Settlor, who can appoint the Directors and determine the investment strategy of the company.
  2. Customization: Another advantage of a PTC is that it can be customized to suit the needs of the Settlor and his/her Beneficiaries. The PTC can be set up to manage multiple Trusts, each with their own investment strategy and beneficiaries.
  3. Confidentiality: A PTC also offers greater confidentiality compared to a traditional Trust. This is because the Settlor can choose to keep the ownership and control of the PTC private, which can help to protect both the Settlor’s and the Beneficiaries’ privacy and anonymity.
  4. Limited Liability: A PTC is a separate legal entity and therefore provides limited liability protection to the Settlor and his/her beneficiaries. This means that the assets held within the Trust are protected from any claims or liabilities against the PTC.

 

Normal Trusts Established under the Seychelles Trusts Act 2021

 

In contrast to a PTC, a normal Trust established under the Seychelles Trusts Act 2021 is a traditional Trust arrangement. The Settlor establishes the Trust, appoints a Trustee to manage the Trust assets, and identifies the Beneficiaries who will benefit from the Trust assets/investments.

 

Key Features of a Normal Trust Established under the Seychelles Trusts Act 2021

 

  1. Asset Protection: A normal Trust established under the Seychelles Trusts Act 2021 provides asset protection for the Beneficiaries. This means that the assets held within the Trust are protected from any claims or liabilities against the Beneficiaries.
  2. Tax Efficiency: A Trust established under the Seychelles Trusts Act 2021 can also offer tax efficiency. This is because the Trust assets are held separately from the Settlor’s personal assets, which can help to reduce the Settlor’s tax liability.
  3. Confidentiality: A normal Trust established under the Seychelles Trusts Act 2021 also offers confidentiality to the Settlor and the Beneficiaries. The Trust Deed is not a public document, and the identity of the Settlor and Beneficiaries can be kept confidential.

 

Conclusion

 

In summary, a Private Trust Company (PTC) is a company specifically set up to act as a Trustee for one or more Trusts. PTCs offer greater control, customization, confidentiality, and limited liability protection to the Settlor and Beneficiaries. In contrast, a normal Trust established under the Seychelles Trusts Act 2021 provides asset protection, tax efficiency, and confidentiality to the Settlor and Beneficiaries. Ultimately, the choice between a PTC and normal Trust comes down to the circumstances and preferences of the Settlor.

 

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

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

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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.