By “Dropshipping” we mean a business where the customer orders something either via email or directly via your website and you then arrange for the manufacturer to post or airmail or courier the item direct to the customer.

In principle here’s how dropshipping can/will work via a tax free Offshore Company :

1. A nil tax offshore company (commonly an International Business Company ie “IBC”) is incorporated (Let’s say the Company is called “IBC Trading Limited”)
2. IBC Trading Limited (hereinafter “IBC”) owns/operates the business (eg it owns the web-domain and the website/artworks or trademark/s or any sole distributor rights are held by or transferred to the IBC)
3. You post terms and conditions on your website and or in your order form that effectively say the client is buying from IBC and that the contract is concluded Offshore (ie in a nil tax environment).
4. The client submits his order via the website or via email
5. IBC sets up an Offshore bank account, in a nil tax banking centre, which receives customer payments (including ultimately those made via a merchant account)
6. Ideally the website and server are hosted/located in a country which does not tax business on the basis of server location (eg Singapore)
7. Customers contract with and pay IBC. All such monies are banked free of tax in the first instance
8. IBC pays the manufacturer for the goods. The manufacturer ships (or couriers or posts or airmails) the product or goods direct to IBC’s customer
9. You or your local company would be contracted by IBC to manage sales/delivery of product/website maintenance/whatever.

10.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.

11.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 2^nd IBC to own the IP. The first IBC (ie the Trading Company) pays license fees periodically to the 2^nd 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

12.Ideally once you start to grow, and to add substance, you would be wise to set up your MD/Board and or a sales team onshore to take orders and receive income in a low tax onshore environment (eg Hong Kong, Ireland, Singapore, Cyprus etc ie 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/

To get around local CFC (“Controlled Foreign Corporation) laws and or prevent the existence of IBC’s bank Account coming to the attention of your local authorities you will also want/need to set up a Foundation to hold the shares of your tax free IBC/Offshore Company.

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

This update summarizes recent amendments to the International Business Companies 2016 (the Act), which is the Seychelles legislation providing for international business companies (IBCs). The Act has been amended by the International Business Companies (Amendment) Act 2018, Act 12 of 2018 (the 30.11.2018 Amendments) effective 30 November 2018 and by the International Business Companies (Amendment) Act 2018, Act 15 of 2018 (the 1.1.2019 Amendments) effective 1 January 2019 (together the Amendments).

SUMMARY OF AMENDMENTS

1. Continuation of no public access to Registers of Directors filed with the Registrar

1.1 Section 152 of the Act (read with sections 352 and 390) has been amended to provide indefinitely for no public access to IBC Registers of Directors filed with the Registrar. Prior to the 30.11.2018 Amendments coming into force, no public access to filed Registers of Directors was only guaranteed until 30 November 2018.

1.2 The penalties for breach of the obligation to file a copy Register of Directors have been reduced to US$250 (from $500) and a daily penalty of $25 (instead of $50) for each day or part thereof during which the contravention continues.

2. Deemed dissolution date extended from 5 to 7 years after striking off

Section 275 of the Act has been amended to provide that an IBC struck off the Register is deemed to be dissolved after being struck off continuously for seven (instead of five) years.

3. Registrar to have wider powers to restore struck off companies

Section 276(1) of the Act was amended to extend the Registrar’s power to restore a company struck off the Register to all struck off companies except for those struck off under section 272(1)(a)(iii) or (iv) of the Act, being companies struck off for involvement in fraud or for jeopardizing the reputation of Seychelles as a financial centre. These wider restoration powers of the Registrar avoid the extra time and cost of an application to the Supreme Court of Seychelles for a restoration order.

4. Increasing restoration order application period from 10 to 12 years

Section 276(2)(a) of the Act was amended to permit an application to the Supreme Court of Seychelles for an order to restore to the Register a struck off or dissolved company to be made within twelve years (instead of ten years) of the date of the striking-off notice published in the Gazette.

5. IBCs become Seychelles tax resident but continue to pay no Seychelles tax on foreign sourced income

5.1 The ban on IBCs carrying on business in Seychelles has been removed. An IBC is now tax resident in Seychelles and no longer tax exempt. If an IBC carries on business in Seychelles it must pay Seychelles business tax. Significantly however, if an IBC only earns foreign sourced income, it is not liable for Seychelles tax on any of its income or profits. Seychelles has a territorial tax system such that a Seychelles tax resident is liable for Seychelles tax on Seychelles sourced income but not on foreign sourced income

5.2 While the 1.1.2019 Amendments were prompted to ensure that Seychelles meets the standards set by the Base Erosion and Profit Shifting Standards initiative of the Organisation of Economic Co-operation and Development, they strengthen Seychelles IBC attractiveness and have no adverse fiscal impact on IBCs that only earn foreign sourced income. Despite the removal of the former section 361 tax exemptions, an IBC that solely derives its income outside Seychelles is not liable for Seychelles tax on its foreign income. Under Seychelles’ territorial tax system, a tax resident is liable for Seychelles tax on Seychelles sourced income but not on foreign sourced income. Seychelles does not tax capital gains.

5.3 IBCs continue to be exempt from Seychelles stamp duty on instruments relating to: (i) the formation of a company; (ii) transfers of property to or by a company; (iii) transactions in respect of the shares, debt obligations or other securities of a company; (iv) the creation, variation or discharge of a charge or other security interests over any property of a company; and (v) other transactions relating to the business or assets of a company (section 362 of the Act), except that no stamp duty exemption applies to an instrument directly or indirectly relating to Seychelles immovable property (real estate).

5.4 The former prohibition against IBCs carrying on business in Seychelles has been removed (but see paragraph 5.6 below for business restrictions). However, if an IBC earns assessable income (income sourced from Seychelles) it is legally required to:

(a)  within one month of deriving the first assessable income (income sourced from Seychelles), notify the Registrar in writing that it is deriving assessable income and the nature of the activities giving rise to such assessable income;

(b)  within one year of deriving the first assessable income, submit to the Registrar an Annual Return accompanied by the documents to be annexed to the Annual Return as required under the Companies Act 1972, including annual audited financial statements;

(c)  pay Seychelles tax on its assessable income.

5.5 Business Tax Act 2009 (BTA) has recently been amended by the Business Tax (Amendment) Act 2018, Act 14 of 2018 (BTA Amendment Act 2018). The following provisions of the BTA as amended by the BTA Amendment Act 2018 can be noted:

(a) “assessable income” only includes income derived from sources in Seychelles (sections 2 and 11 of the BTA);

(b) “non-taxable business income” means income not sourced in Seychelles and not included in the assessable income of a business (section 2 of the BTA);

(c) An amount derived by a resident person (including an IBC) in carrying on business is derived from sources in Seychelles if derived from activities conducted, goods situated or rights used in Seychelles, regardless of the residence of the parties participating in the transactions and regardless of the place where the agreements are executed (section 5(1) of the BTA);

(d) The remittance of an amount to a person outside Seychelles, out of non-taxable business income (see (b) above) is not subject to Seychelles tax (section 5(4)(a) of the BTA); and

(e) Whereas section 8(1) of the BTA provides for business tax (withholding tax) on certain payments by a resident person (including dividends, interest and royalties) to non-resident persons, section 8(4) of the BTA provides that subsection (1) shall not apply if dividends, interest, royalties or other payments are made by a resident person from income that is not sourced in Seychelles.

5.6 While an IBC may carry on business in Seychelles and earn Seychelles-sourced income (subject to the above-mentioned reporting and taxpaying obligations), pursuant to section 5(2) of the Act an IBC continues to be prohibited from:

(a)  carrying on banking business as defined in the Financial Institutions Act 2004 in or outside Seychelles;

(b)  carrying on insurance business as defined in the Insurance Act 2008 in Seychelles or, unless it is licensed or otherwise legally able to do so under the laws of the country in which it carries on such business, outside Seychelles;

(c)  carrying on business providing international corporate services, international trustee services or foundation services as defined in the International Corporate Service Providers Act 2003 except:

(i) to the extent permitted under the International Corporate Service Providers Act 2003; and

(ii) in the case of carrying on such business outside Seychelles, if the company is licensed or otherwise legally able to do so under the laws of each country outside Seychelles in which it carries on such business;

(d) carrying on securities business as defined in the Securities Act 2007 in Seychelles or, unless it is licensed or otherwise legally able to do so under the laws of the country in which it carries on such business, outside Seychelles;

(e) carrying on business as a mutual fund as defined in the Mutual Fund and Hedge Fund Act 2008 unless it is licensed or otherwise legally able to do so under the Mutual Fund and Hedge Fund Act 2008 or under the laws of a recognized jurisdiction as defined in the Mutual Fund and Hedge Fund Act 2008; or

(f) carrying on gambling business as defined in the Seychelles Gambling Act 2014, including interactive gambling business, in or outside Seychelles unless it is licensed or otherwise legally able to do so under the laws of the country in which it carries on such business.

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

There are in essence 2 categories of client that we typically assist to Incorporate Offshore:

1. Clients who buy and or sell outside their country of residence
2. Enterprises where goods and or services are sold online (eg an Ecommerce store) or income is otherwise generated online (ie Online Trading, eg Cryptocurrency Trading, Online Forex/Shares/Futures/Commodities/Metals/Options etc Trading)

If you don’t fall into these categories an option for you might be to set up a tax-free Offshore Service Company.

There are 2 possibilities here:

(a)  If your business can justify why the business would want to outsource the provision of products or services to an overseas supplier; and/or

(b)  If your business is heavily dependent on deployment of Intellectual Property which might include Trademarks, IT/software or Operating systems (eg a Franchise model). In this case you could set up a nil tax Offshore Company to own the IP/business operating systems.

In either case how it could/would work is:

1. You set up a tax-free Offshore company (“IBC”)
2. You have the IBC (i) enter in to an agreement/contract with your local Company/Business to supply services in return for payment or (ii) have the IBC enter into a Licensing agreement whereby the IBC agrees to supply certain IP in return for regular fees (ie licensing fees or royalty payments)
3. Once the contract is signed the local Company/business sends money to the IBC regularly (these payments should be tax deductible to the local Company/business)
4. These payments are banked by the IBC potentially tax free

Of course, ideally – where a service contract is signed – you’ll want to be able to show that the Offshore Company has actually delivered some services. Particularly where such services are capable of being delivered online, this shouldn’t be hard to do.

To maximize the chances of this working and surviving the blow torch if applied:

(a)  The tax-free Offshore Company should be seen to be managed and controlled from Offshore; and

(b)  You can’t afford to be classified at law as the owner, or beneficial owner, of the tax-free Offshore Company.

You should be able to adequately deal with (a) by deploying a (nil tax resident) “Nominee” Director as part of the Corporate structure; &

To cater for (b) you’ll want/need to set up a Private Foundation to hold the shares of the 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

If you’re in the Money Services Business (eg payment processing or currency exchange) and you’re looking for a private, low red tape, low tax place to incorporate Offshore then you’ll be pleased to hear that Nevis now offers a license regime for Money Services Businesses.

In Nevis a Money Services Business License can be issued to a business which plans to provide as a primary service any of the following services:

• transmission of money or monetary value in any form;
• cheque cashing;
• currency exchange;
• the issuance, sale and redemption of payment instruments;
• any other services the Minister may specify by notice published in the gazette; or the business of operating as an agent or franchise holder.

Key Features – Overview

The several classes of licence issued under the Money Services Act, No. 26 of 2008, shall authorize the holders to carry on money services business as specified:-

• Class A licence permits the holder to carry on the transmission of money or monetary value in any form, the issuance, sale or redemption of money orders or traveller’s cheques, cheque cashing and currency exchange.
• Class B licence permits the holder to carry on the issuance, sale or redemption of money orders or traveller’s cheques, cheque cashing and currency exchange.
• Class C licence permits the holder to carry on cheque cashing.
• Class D licence permits the holder to carry on currency exchange.
• Class E licence permits the holder to carry on pay day advances.

Where different places of business are kept in the name of the same legal person, a separate licence is required for each such place of business.

Legal Requirements

Tax Treatment

Corporate income tax is only payable for locally generated profit, transactions made solely to non-resident entities is not subject to tax.

Duration to Set Up

Minimum 3 maximum 6 months

Distinctive Benefits of Licence

• Numerous tax advantages
• Ease and speed of licensing

Licensing Procedure

In order to obtain a licence as a money services business, you must apply, via your Nevis Agent, in writing to the Financial Services Regulatory Commission, pay the prescribed application fee, complete Form A and Form B as outlined in Schedule 2 of the Money Services Business Act of 2008 and submit the required documents. (Contact Us if you wish to view/receive a copy of the said Act &/or the Application form provided for by the Act).

The Nevis Financial Services Regulatory Commission will process the application in accordance with its application processing procedures. Upon completion of this process, if it is satisfied that an application is in order and the applicant is a fit and proper person to be licensed to conduct money services business, the Financial Services Regulatory Commission will approve the application and issue a licence to the applicant subject to the applicant paying the prescribed licence fee and making the prescribed statutory deposit in accordance with the Money Services Business Act.

It is anticipated that every sponsor will arrange for a delegation of its senior officers, or, in the case of an independent institution, of its principal controllers, to make a presentation in respect of the applicant and its proposed business before a formal application is submitted.

The cost to apply for us to asset you to apply for such a license would be between $US12,000 and $20,000 depending largely on how much of the heavy lifting can be done your side.

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

As a result of the GFC and resulting consumer lending fallout, US Legislators decided to clamp down on 2^nd tier lenders (and, in particular lenders of last resort such as pay day lenders).

When this happened the progressive International Offshore Financial Centre of Belize saw a business opportunity. The idea morphed into a plan which became Legislation. In short the Belize Offshore Industry Regulators had the foresight to realize that such a business model was never going to go away, that in particular US based business owners would be looking for a new domicile, that IBCs were likely to be used for such purposes and better they offer a Licensing regime to bring such businesses out into the open and thus attract the more serious players.

The legislation ie the INTERNATIONAL MONEY LENDING (SHORT TERM & UNSECURED SMALL LOANS) REGULATIONS, 2008 (a copy of which can be downloaded from this site: https://www.ifsc.gov.bz/legislation/ ) provides that:

• A regulated entity may make loans of not more than $5,000 per loan
• The loan cannot be secured against real estate, motor vehicles or “other tangible personal property”
• The loan must have an initial repayment period of not more than 1 year
• Such loans must be for household purposes and personal expenses only
• Loans can only be made to “consumers”

There are also provisions regarding pre-contractual disclosures. In particular in the Lenders website (or in the loan contract) it must be stated:

• That the loan is designed as a short term cash flow solution & not as a solution for long term financial needs
• Additional fees may accrue if the loan is refinanced

Other features include:

(i)             A provision specifically providing that Belize law shall govern the loan regardless of where the Borrower is located

(ii)           The identity of the borrower must be proven

(iii)          The lender must satisfy the Regulator that at least 2 of its Management Level staff/team members have short term personal lending industry experience

(iv)          The Lender must keep in Belize books & records relating to the loans (in hard or soft form)

(v)            Not less than 70% of duties & activities relating to the Lenders business must be seen to be carried out from inside Belize (though these can be outsourced)

A Belize international money lending license requires you to form a Belize Company with paid up capital of not less than $US75,000. This amount can be increased by the BeIize FSC depending on your style of business model and your commercial/career background.

PROCEDURES TO FOLLOW WHEN APPLYING FOR A LICENSE FROM THE IFSC BELIZE:-

Company name:

We will check if the desired name is available and reserve the name. The IBC Registry allows us to reserve the name for 10 days free of charge. Thereafter, we can reserve the name for 90 additional days at a cost of $30. (NOTE – it may take up to one week for the IFSC to give an answer).

Company Incorporation:

(i)              Authorized Share Capital.

The authorized share capital depends on the what type of license is desired. For this type of Company the authorized share capital must be not less than $75,000.

(ii)            IBC Registry fees

The incorporation fee and annual renewal fee charged by the IBC registry (which is separate from IFSC fees) for a company with $US75k authorised capital is $1,000. The annual renewal payable to the IBC Registry is due January 1 every year, but we usually pay during the month of December before the due date.

(iii)          Bearer shares strictly prohibited

All shares must be registered shares. Bearer shares are not permitted. The Memorandum and Articles of Association of the company must state that bearer shares are strictly prohibited.

(iv)          Shareholders and directors

A shareholder may be a corporate entity, such as a company from another jurisdiction. However, that company must have physical persons as shareholders and directors. Any additional corporate layers are not allowed.

The company is required to have at least one director. (Trading in Securities and Foreign Exchange Services applicants are required to have two directors, one of which must be a resident of Belize.)

Bank Account

It is a requirement that every license holder keep a capital deposit in a bank in Belize as prescribed by the regulations. For example, a company that holds an International Money Lenders License is required to keep an unencumbered capital deposit of $75,000 in a bank in Belize.

After the bank receives the application form and other required documents, it takes two weeks for the bank to give its initial review. After we’ve addressed any issues raised in the review, it typically takes another two weeks for the account to be approved or declined.

Customer Due Diligence (CDD) requirement (for each beneficial owner/shareholder, director, officer and signatory):

• Photo Identification -  Notarized color copy of passport. Only the pages that show identification information, photograph and signature are required.
• References – An original reference letter is required as regards the beneficial owners/shareholders, directors, and signatories to the account. The reference letter should be from a bank (preferred), a practicing attorney or a licensed accountant. References should be recent (not older than three months), prepared with official letterhead, and should indicate the following:

(a) a period of relationship for at least (2) years;

(b)  type of relationship conducted;

(c) status of relationship;

(d)  clear contact details of the person who signs the letter.

(e)  Confirmation of Address – A utility bill issued within the past three months with complete residential address. A P.O. Box address is not accepted.

Note, where documents are issued in any language other than English, they must be translated to English by a certified translator.

IFSC application

The application package must contain the following:

• The application form properly completed and certified, along with the non-refundable application fee of $1,000.  The application form must be signed by a director or a shareholder/beneficial owner and the signature must be notarized.
• Certified biographical affidavit of beneficial owner, director/s, and signatories to the bank account. Also required is the certified biographical affidavit of the management of the company. In the case of corporate entities, the beneficial owners, directors and beneficial owners of that entity must also submit certified biographical affidavits.
• Know Your Client (KYC) documentation including:

i.     Proof of ID (Notarized passport – same as bank CDD requirement)

ii.     Proof of address (notarized recent utility bill)

iii.     Curriculum Vitae – showing education and work experience

iv.     Professional reference – from a lawyer or certified accountant (similar to the reference required for the bank account application)

v.     Bank reference and bank statement (the bank reference must be from a bank where the individual has done business for more than two years.)

vi.     World Check report – (we will provide this report)

• Business Plan – Detailed business plan including a three-year financial projection, together with diagram illustrating the company’s corporate structure.
• Detailed Anti-money laundering compliance, Complaints and Internal Control policies and procedures.
• Corporate documents (same as those mentioned in section 2.  Company Structure above). As registered agent, we provide a notarized set of copies which we then submit along with the application to IFSC.
• Proposed website name that will be used once the licence is approved.
• Name of external auditor who will prepare the audited financial statements on an annual basis.
• Certificate of Qualification of Directors and Management – At least one person must possess the expertise relevant to the type of licence being sought.
• Letter from either the Director, Shareholder or Beneficial owner of the applicant company indicating awareness of the following:

1. That a licensee should not offer services to residents of a country whose laws require such a licence prior to engagement of such services.
2. The Standard Conditions attached to the type of licence.
3. That the Memorandum and Articles of Association of the company will not be amended to provide for the issuance of bearer shares.

IFSC Evaluation process

In processing applications, the IFSC will conduct its own due diligence of shareholders/beneficial owners, directors and management and will evaluate and assess the following:

• The fitness and probity of each shareholder, director and management
• The viability of the business plan
• The AML/CFT Compliance Policy and Procedures to ensure compliance with the respective law and regulation
• The Complaints and Internal Policies and Procedures to ensure that they are detailed and address all pertinent areas.

It may take up to three months for the IFSC to review the application. At this point, the IFSC may need further clarification of information or request additional information. Once all the information is submitted, the application will be evaluated and it will be determined whether the licence is approved or denied.

Approval of the application

Once the application is approved, a letter will be sent to the Registered Agent requesting payment of the licensing fees and requesting that the company provide the bank confirmation letter. Upon evidence to this effect, the license certificate will be prepared and issued.

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

We are often asked How Can I Change The Name Of My Foundation?

To change the Name of a Foundation, in the first instance, we will need from you (if you have not provided this already) written instructions via email to change name confirming the existing name in FULL and intended future name (it’s wise to submit two preferred names in case the first choice is not available).

• Once in receipt of an email copy of the above authority (together with our fee, see below) within 24 hours we will:

(a)   seek name approval from the registry and advise you of name approval/refusal: &

(b)   draft and send to you (and then collect from you via email and airmail please, duly signed) a Change of Name minute/resolution

• Once we have received by email a signed copy of the resolution, within 48 hours we will draft & submit to the registry an amended Charter & a Board Meeting resolution extract (signed by us, containing all the relevant points of the above resolution but with the Foundation Councillor’s names not mentioned, to preserve privacy). If no reply is received from the Registry within 48 hours we will follow them up with a phone call

• Once the communication/certificate is received from the registry confirming that that  the PIF’s name has been changed (this should be received within 48 hours of our submitting to the registry the amended Charter & a meeting resolution Extract), we will email you, within 24 hours, to advise that the name has been changed

• Once the Change of Name Certificate has been received within 24 hours we will email you a copy and will dispatch original by airmail or courier as advised by you

Cost of attending to Change of Name as set out above is $399 inclusive of government charges and courier if required. As per Company policy payment is required in advance and may be made by bank transfer or credit card, or via paypal account (see ac details attached; if you’d prefer to pay by car or via paypal account please advise and we will send you the necessary).

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

We are often asked what the process would be, practically speaking, for a Foundation to form/own a new Company. How it normally works is:

Let’s assume you have already set up a Foundation.

You (ie our client, ie the person who set up the Offshore Entity) are, or should already be, appointed by way of Consultancy Agreement as the Foundation’s Authorised Representative or Investment Adviser.

• You would advise the Foundation Council of the need to form, or desirability of forming, a new Company and would suggest a Company name/s
• The Foundation Council would call a meeting and pass/sign a resolution (a) authorizing the new Company to be formed and (b) appointing OCI/Your International Corporate Service Provider as the agent to form the new Company.
• You would submit a Company order form signed by you as authorized representative of the Foundation
• We will issue an invoice for/re the Company formation
• Once the invoice is paid the formation will proceed forthwith

Foundations are widely used as part of an Offshore Corporate Structuring Plan, ie to own/hold the shares of a tax-free Offshore Company.

Setting up a Foundation to own your Offshore Company can be beneficial in two ways:

(a)   It can potentially enable you to avoid Controlled Foreign Corporation Laws – meaning you shouldn’t have to declare/pay tax at home on your Offshore Company’s income (you should only have to pay tax if/when the Company or Foundation actually pays you “income”).

(b)   Having a Foundation holding the shares of your Company makes you no longer the “beneficial owner’ of the Company. This is the ideal position to be in (i) when opening a bank account for your Company (ie so your name doesn’t appear in the bank’s records as the “beneficial owner” of the Company) or (ii) if you are ever facing a laws suit or governmental investigation/prosecution (in that case you can swear under/on oath “I am not the beneficial owner of the Offshore Company under investigation”).

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

There are 2 questions that are often posed to us by Crypto Exchange Entrepreneurs:

1. Do I need to apply for a License for my proposed Offshore Crypto Currency Exchange?
2. Should I go down the road of applying for a Special License for my proposed Offshore Cryptocurrency Exchange?

The answer to the first question is it depends on where you want to incorporate!

Certain “Offshore” (ie nil/low tax and or low regulation) jurisdictions (most notably Malta and Estonia) have passed laws making a Cryptocurrency Exchange a Licensable Activity.

Obviously if you want to incorporate your Operating Company in, or place your headquarters in, one of these countries you will have to apply for a Special License or else you run the risk of being prosecuted by the local Industry Regulator (which could, if you’re convicted, result in a large fine or potentially jail time or both).

Non-Licensing Road

If you’re not willing or able to go down the Licensing road (and or if tax minimisation/ownership privacy is important to you) you might want to incorporate your Company in a Low Regulation Privacy Haven ie somewhere where buying and selling Cryptocurrency is not a prohibited (or licenseable) activity and which does NOT have a public register of directors, shareholders or owners. Most people in that position choose to incorporate in either:

• Belize – For detailed information click on this link: http://offshoreincorporate.com/belize-offshore-companies/ ;or
• Seychelles – For detailed information click on this link: http://offshoreincorporate.com/seychelles-offshore-companies ;or
• Nevis – For detailed information click on this link: http://offshoreincorporate.com/st-kitts-and-nevis-offshore-companies/ ;or
• Hong Kong – – For detailed information click on this link: https://offshoreincorporate.com/hong-kong-companies/

You may be interested to know that arguably the world’s biggest Crypto Exchange ie Bitmex is incorporated in Seychelles.

Pros and Cons

Probably, like most OCI clients (we set up at least 1 new Crypto Exchange Offshore every week) you are wondering should I set up/apply for a License (eg Estonia, Malta etc) or should I take the easier road and just incorporate somewhere where such an activity is not regulated nor prohibited by law?

The question of where to incorporate your Exchange is a commercial decision for you and you alone to decide.

That said the main difference between places like Seychelles/Belize/Nevis etc and Malta/Estonia etc is that such a business in Seychelles etc is not a licenseable activity nor a prohibited activity. As such it will be a lot quicker, a lot easier and a LOT cheaper to set up there (You could potentially be incorporated and doing business within 24 hours of engaging a Company Formation Provider and for as little as $US900).

In places like Malta, Estonia etc such a business is a Licenseable activity. As such if you want to incorporate such a business in Malta/Estonia etc you MUST apply for a license. To do this will take anywhere between 6 weeks and 6 months and cost anywhere from $13,000 to as much as $US30,000.

Whether to go down the licensing road or not, again, is a commercial decision for you and alone to decide.

The advantages of having a license are business certainty, you will probably attract a better quality of customer and you will have a wider choice of banking partners.

The downside is the time it takes to establish, the cost to establish and red tape ongoing (eg if you incorporate in an unregulated jurisdiction you won’t need to collect DD/KYC etc re each customer making a lot easier to onboard new customers).

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

Are you worried about CRS or about your name appearing in an Offshore Company’s statutory records (ie the “register of beneficial owners”) as a/the beneficial owner of a Company?

There are 3 issues here you will need to consider:

1. Compliance requirements
2. Legal position
3. Exchange of information

Let’s address each issue in turn:

Compliance requirements

Regarding 1, these days, in almost every “Offshore” jurisdiction when you form a Tax Free Offshore Company your International Corporate Service Provider has to keep, in the Company’s registered Office, a register of beneficial owners.

Most country’s compliance requirements in this regard state that a natural person’s name must appear in the register… Which, frankly is a joke because it ignores the legal integrity of the structure particularly where the shareholder of the Company is a Seychelles Foundation (see below). The dilemma your ICSP ie International Corporate Service Provider (such as OCI) faces is, regardless of the legal structrure of the shareholder entity, if the ICSP doesn’t write in the beneficial owners register the name of a natural person your ICSP could be fined and or lose its Corporate Service Provider License/Sublicense in that jurisdiction.

Thus far Compliance Officials on the ground in the country of Incorporation usually require, where the shareholder of the Company is a Foundation, that the name/s of the Foundation beneficiary/s appear in the Company beneficial owner’s register. That doesn’t mean as a matter of law (which is what really counts eg if there were ever to be a tax investigation or law suit) that you are in fact/law the beneficial owner of the Company. Which brings us to the 2^nd issue above… ie Legal Position:

Legal Position

What the smart person does these days typically is he/she sets up a Seychelles Foundation to hold the shares of his/her Tax Free Offshore Company.

Let’s assume that the shareholder of your current or proposed Offshore Company is a Seychelles Foundation.

The Foundaton is in essence Europe’s version of a trust. It begain in Liechtenstein in the 1600s, was picked up by Holland etc and then made its way offshore where in Panama it became a legal sensation. Other nil tax jurisdictions (most notably Belize and Seychelles) have picked up on the utility and market attractivess of the Foundation and created their own version thereof with improvements on the Panama model.

The key differnce between a Foundation and a Trust is that a Foundaton is a separate legal entity ie it can sue and be sued and it can own property as both legal owner and beneficial owner. Contrast that with a Trust – at law if a Trust buys real estate, on the Title Deed -  in the space where the owner’s name appears -  it will say John Smith Trustees Ltd as Trustee for the XYZ Trust > The Trustee is the legal owner of the Property but the beneficial owner/s of the propery, at law, is the Trust beneficiary/s.

In short under European and etc common Law a Foundation is presumed at law to be both the legal and beneficial owner of any asset it holds. One jurisiction ie Seychelles has actually codified that position:- Section 71 of the Seychelles Foundations Act provides that a Seychelles Foundation is both the legal AND beneficial owner of any asset that it holds. (To view the legislation click on this link: https://seylii.org/sc/legislation/act/2009/32 )

Given the wording of the legislation any qualified Lawyer would tell you it’s inarguable… that as a matter of law (and regardless of what may appear in the beneficial owner’s register) the beneficial owner of any asset held by the XXXX Foundation Registered in Seychelles is the Foundation itself…

Exchange of Information

The final thing you’ll need to consider is Exchange of Information.

Generally speaking local authorites can only find out, as of right, who’s behind a Company or Foundation if the country in which the entity is registered has a TIEA (“Tax Information Exchange Agreement”)  with your home country.

Moreover typically there will be no requirement under the laws of youur Offshore Company’s Jurisdiction forcing the jurisdiction to share with your home country (or any other country) the name of the “beneficial owner” of the Company.

Hence if you set things up carefully the only way that information could potentially be exchanged is pursuant to the MCAA (“Multi Competent Authority Agreement”). The MCAA is a multi-party treaty that gives effect to CRS (Common Reporting Standards) also known as AEOI (“Automatic Exchange of Information”). In short each of the MCAA Treaty Member countries (around half the world’s countries have signed) have agreed to, once each year, automatically share with all the other treaty member countries details of Corporate bank accounts where the beneficial owner of the Company is a non resident.

If your Offshore Company(“OC”)’s Bank Account is located in a country which has signed the MCAA the Company’s Bankers might potentially advise of (ie to the home country of  the Company’s beneficial owners) the existence of the OC’s bank account.

The first thing to note here is that the Exchange (of Information) can/will only take place where the primary purpose of the bank account is to receive passive income (It doesn’t apply if your Company owns/operates a business or mercantile operation or trading operation). Additionally to limit the possibility of the existence of the OC’s bank Account coming to the attention of your local authorities (a) you will want to open the company’s bank account in a country which is NOT a signatory to the MCAA  and/or (b) you will want to set up a Seychelles Foundation to hold the shares of the OC (see above).

In any event there is a catch all fool proof way to avoid AEOI + the risk of your name appearing in your Offshore Company’s records as “beneficial owner” thereof; that is, by deploying a Charity or Nominee to act as the sole beneficiary of the Foundation at the time that the beneficial owner’s register is created/ noted and or when the Company’s bank account is opened.

Most ICSPs can/will supply a Nominee beneficiary for a fee.

Local laws can have an impact. Hence it would be wise to seek local legal/tax/financial advice before committing to set up an Offshore Company Trust or 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

With the passing of legislation regulating cryptocurrencies, ICOs, and associated technology service providers, Malta has announced itself as a major Fintech player (and is even being referred to as “The Blockchain Island”). Malta’s worldly attitude towards cryptocurrencies and Distributed Ledger Technology (“DLT”) has recently seduced some of the world’s biggest cryptocurrency exchanges, motivating them to redomicile to, or open fresh offices, in Malta.

The legal framework is pragmatic with its prime focus being on:

• Consumer protection
• Market integrity &
• Financial stability.

The primary legislative tool which will regulate cryptocurrency exchanges licensed in Malta is the Virtual Financial Assets Act (hereinafter the ‘VFAA’ or the ‘Act’) which was originally tabled in Parliament in April 2018, (and has just passed into law – see below Legislation Update). The VFAA, (along with the Technology and Service Providers Act and the Malta Digital Investment Authority Act) sets out the regulatory framework for DLT Assets.

Primary Obligations

To be able to operate as a VFA Exchange, a license is required from the Malta Financial Services Authority (‘MFSA’).

Key Persons behind the proposed VFA exchange will need to undertake a fit and proper test: – The MFSA will need to be satisfied that the applicant/s can/will comply with and adhere to the  the requirements of the VFAA and any other subsequent or related guidelines as may be prescribed.

PHYSICAL PRESENCE REQUIREMENT: If the applicant is a natural person/s, this person/s will need to be domiciled in Malta. Where the applicant is a Company, the Company may be incorporated in Malta. Alternatively the Company can be incorporated abroad in a “reputable jurisdiction” but it must set up a branch office in Malta.

PROGRAMME OF OPERATIONS: The Applicant/Licensee must at all times have, and must submit to the MFSA for initial approval, a Manual documenting and explaining the business/operational/IT etc  systems, security access protocols and any other items as the MFSA may from to time require you to include in the manual.

VFA EXCHANGE OPERATOR (OPTIONAL): The act provides for a VFA Exchange Operator to (at the discretion of the business) be appointed. If so appointed the VFA Exchange Operator’s role will be to manage and operate the business of the VFA exchange. This role however may be performed by the VFA exchange itself. Where a VFA Exchange Operator is appointed, the MFSA will decide, by means of Rules, how the different duties are going to be allocated as between the VFA exchange and the VFA exchange operator.

FINANCIAL INSTRUMENTS TEST: The Financial Instruments Test is a mandatory requirement for issuers of ICOs. That said, it may help all license holders to decide (a) whether a DLT Asset would qualify as a “VFA” within the ambit of the VFAA or (b) whether it should be regulated under any other law or (c) whether it should be exempt from regulation altogether.

STEPS TO GETTING A CRYPTO EXCHANGE LICENSE IN MALTA:

Here are the essential steps/stages involved in applying for a Cryptocurrency Exchange License in Malta:

1. The application and supporting documents are prepared
2. A Preliminary meeting is held with the “MFSA”
3. The MFSA Authorisation Unit will review the application docs and provides feedback
4. In Principle approval is then given (ie The license is approved subject to the applicant providing certain further docs or info)
5. The Applicant fulfils the outstanding requirements
6. The License is Issued

Timeline: Minimum 3 months

Cost: Circa $US30,000

Malta Cryptocurrency Exchange Legislation Update

On 20 July this year (2018) the Parliament of Malta approved and enacted three pieces of Legislation aimed at regulating Distributed Ledger Technology (hereafter referred to as “DLT”) and services relating thereto. The primary Act governing the licensing and operation of Cryptocurrency Exchanges is the Virtual Financial Assets Act (herineafter the “VFA Act” or “the Act”) – a copy of which can be accessed via this link: https://parlament.mt/media/95198/act-xxx-virtual-financial-assets-act.pdf ). The Act purports to regulate, amongst other things, the issuing of ICO/Virtual Financials Assets, (hereinafter referred to as ‘VFAs’) in or from within Malta.

One of the primary activities regulated by the VFA Act is the setting up and operation of DLT Exchanges and VFA exchanges. (The VFA Act defines a DLT exchange as any trading and, or exchange platform or facility on which any form of DLT asset may be transacted. )

A DLT asset is classified as any virtual token, virtual financial asset, electronic money, or financial instrument that is intrinsically dependant on or utilises DLT. The term VFA exchange refers to any DLT exchange on which only VFAs may be transacted in accordance with the rules of the platform or facility.

A virtual financial asset (“VFA”) means any form of digital recordation that is used as a digital medium of exchange, unit or account and that is not electronic money, a financial instrument or a virtual token. Resultingly exchanges on which only financial instruments are traded, shall not be licensable under the VFA Act but will fall within the jurisdiction/application of the Investment Services Act.

Primarily the VFA Act provides that before a VFA can be offered to the public in or from within Malta (or before a VFA can be traded on a DLT exchange) the issuer of the VFA must compile a whitepaper (in compliance with the requirements set out in the act) and have it registered with the MFSA. Additionally, the VFA Act purports to regulate/control the structure and content of the whitepaper, likewise any advertisements placed by the issuer of the VFA.

In terms of VFA Services to able to operate a VFA Exchange in or from Malta (eg under the guise of a Malta Company)  a person (or company as the case may be)  would need a licence granted by the MFSA as provided for in the VFA Act. The VFA Act specifically sets outs the licensing requirements that licensees wishing to offer VFA Services in or from within Malta will have to meet. The VFA Act also outlines the procedures as regards how to go about applying for such a license and the issuance of the said licence/s.

The Act also provides that an application for a licence under the VFA Act can only be made via a VFA Agent which is duly registered under the VFA Act. Apart from having to be registered by the MFSA, such individual must be authorised to carry out the profession of advocate (ie Lawyer), accountant or auditor. (OCI has achieved this requirement with our In House Lawyer having taken on a Consultant Advocate role at/with a Maltese Law Firm).

The VFA Act also makes it mandatory for a licencee to appoint or engage the services of an ‘administrator’ or ‘board of administrators’. The administrator (or board of administrators as the case may be) is/are entrusted with the duty of carrying out representative and fiduciary responsibilitiess on behalf of the licencee. The Administrator “must be of good repute, possess sufficient collective knowledge, skills and experience and commit sufficient time to perform their duties and be able to understand the licence holder’s activities, including the main risks”.

The VFA Act also contains other provisions which are aimed at stopping market manipulation by licence holders. Activities including insider dealing, unlawful disclosure of inside information and market manipulation are specifically prohibited under the Act.

The law also makes it incumbent on the VFA exchange to show that, at all times, it has effective systems, procedures and arrangements in place to monitor and detect market abuse. Whenever the possibility of any such activity is suspected by a Licensee, there is a mandatory requirement to report this finding to the MFSA.

The VFA Act also (as is common with such legislation) prescribes:

• the regulatory and investigative powers of the Minister
• the various duties of auditors
• sanction options and remedies; &
• the procedure for appeals against various decisions of the MFSA.

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