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:

A Gibraltar DLT License
An Estonian Cryptocurrency Exchange (and/or Crypto Wallet Provider) License
A Malta Crypto business license
A Mauritius VASP License
An Isle of Man ICO License
A Swiss ICO license
A Lithuanian Cryptocurrency Exchange/Wallet Provider License
A Caymans VASP License
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:

Limiting the Founders’ liability in the event of a law suit against the DEX +
Investor sensibilities +
Ensuring that the relationships as between the DEX owners are carefully documented/governed +
Tax Planning considerations +
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:

A DAO Foundation +
A Developer Company +
The (Consumer facing) Exchange Company
A Token Distribution/Issuance Company (Token Co) ie if the Exchange intends to sell it owns native Token
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 2^nd 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

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

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.
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.
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.
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

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.
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.
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

Where To Incorporate a Crypto Token Launch Business Offshore

Are you looking to launch a business that will sell Crypto Tokens to the general public?

If so, there are a number of License and or Jurisdiction Options you would naturally be considering.

In our experience, most well-heeled or sophisticated investors looking to invest in Crypto Tokens would probably prefer to invest with a Licensed Operation.

If you’re aiming for such a market – and/or if your preference would be to obtain a Crypto Business License prior to going to market – there are a number of options you could/would be considering including:

A Gibraltar DLT License
A Malta Crypto business license
A Mauritius VASP License
An Isle of Man ICO License
A Swiss ICO license
A Caymans VASP License
A BVI VASP License
A UAE Crypto business license

The cost to incorporate and apply for a License for a Crypto Token Issuing business typically ranges from $US30,000 00 to $50,00 depending largely on which jurisdiction you choose.

Non Licensed Options

If you don’t have the wherewithal or the finances to apply for a Special License for your Crypto Token Issuing Business there are several jurisdiction options available to you.

The first such option to consider would be to incorporate as an IBC or as an LLC Company in St Vincent & the Grenadines (“SVG”), a small but well regarded Caribbean Island Tax/Privacy Haven Jurisdiction.

Notwithstanding that SVG has passed VASP (Virtual Asset Service Provider) Licensing Legislation it is possible to set up a Company in SVG presently and conduct cryptocurrency activity without having to apply for a VASP License as the SVG Government is yet to pass regulations governing the License application process.

That said, once the SVG Government passes the Regulations you will need to either redomicile the Company to another jurisdiction (that does not require a license eg Panama or Samoa, see below) or you’ll need to shut the Company down, or you’ll need to apply for a VASP license in SVG.

To set up such a Company in SVG would cost around $US1,500.

For detailed information in regards to St Vincent check this Link: https://offshoreincorporate.com/saint-vincent-and-the-grenadines-svg-companies/

Samoa

If you’re wanting to incorporate a Crypto Token issuing business without having to apply for a special License the second option would be to incorporate as an IBC in Samoa.

Samoa is a small self-governed (former British colony) island nation in the South Pacific region. It has offered a nil tax IBC Company regime since around 1994 and, whilst not a wealthy country, it does have a history of political stability + the comfort of a British style legal system.

Samoa has not passed VASP Legislation and has not yet publicly expressed any intention to do so.

To set up such a Company in Samoa would cost around $1,500. For detailed information in regards to Samoa check this Link: https://offshoreincorporate.com/samoa-international-business-companies/

Panama

The third option to consider if you want to avoid having to apply for a VASP style license would be the Central American Economic powerhouse of Panama.

Panama is an interesting case study …

You see, the Panama authorities favored the implementation of VASP regulation and the Legislature passed the required Bill.

BUT the Panamanian President (as is/was his right) challenged the validity of the proposed legislation by issuing a legal challenge in the Panama Supreme Court.

To many observers surprise, the Court found in the President’s favour ie the proposed Panama VASP was found to be unconstitutional by the Panama Supreme Court and hence struck down ie it never made it past the Bill stage. Hence there is very little (if any) risk, if you incorporate in Panama, of a law being passed subsequent to your incorporation requiring you to either migrate/redomicile out of the jurisdiction or apply for a VASP license.

To set up such a Company in Panama would cost around $1,500. For detailed information in regards to Panama check this Link: https://offshoreincorporate.com/panama-offshore-companies/

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

DISCLAIMER: This information is current as at 14.7.24 and the accuracy thereof may have been altered by legislative changes subsequent to publishing. OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers, financial 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.

Cayman Islands Crypto Funds

Are you looking to set up a Startup or Incubator Fund?

Once your team’s investment strategy has been determined, the decision needs to be made on the most optimal structure for your Investment Fund.

Often an offshore jurisdiction such as the Cayman Islands comes into play in the event where any of the investors are located outside of the U.S. and are U.S. tax exempt. In these scenarios it is very common for an offshore jurisdiction to form part of the fund structure.

Benefits of using the Cayman Islands include:

1. Familiarity to Managers and Investors.

2. Robust and Flexible Legal Framework.

3. Stable Political Climate.

4. Availability of High Quality Service Providers.

5. Proven Record as a World Leading Financial Centre.

Questions to Consider when it comes to structure

What will be the investment strategy of your fund?
Will you mainly be investing and trading in Cryptocurrencies, Blockchain start-ups or a combination of the two?
If cryptocurrencies, what exchanges are you trading on?
Any DeFI protocols and if so, how will the fund administrator and auditor be able to perform valuations? Is there a valuation policy?
Will you be accepting investment in fiat and non-fiat currencies?
What volume of trades will you undertake on a daily and monthly basis?
What liquidity will your investors have? Do you need to operate as an Open-ended or closed-ended Fund?
What fees will you charge for managing your fund in terms of management and performance fees?
Where will your investors be located?

10.What type of investors will you have e.g. friends and family, family offices, institutions?

11.Do you currently have a fund management company?

12.Have your onshore tax advisors expressed a preference for the type of legal entity that the fund should be?

13.Do you require assistance with the appointment of service providers? (Not all service providers are crypto friendly).

Legal Structures

The two most common structures that we see in the Cayman Islands for Cryptocurrency or Blockchain Funds are the Open-Ended Cayman Islands Exempted Company and the Closed-End Cayman Islands Exempted Limited Partnership.

Open-Ended Cayman Islands Exempted Company

This structure is more common for those managers looking to pursue an investment strategy which focuses on trading in Cryptocurrencies. These strategies tend to be more liquid in nature and investors are able to redeem their investment at their own initiative. These structures are therefore open-ended and similar to a traditional hedge fund. They need to be registered with the Cayman Islands Monetary Authority (“CIMA”) unless certain exemptions apply. This CIMA registration means that these funds will need to have at least two directors (who are themselves CIMA registered). To the extent that the equity interests of the fund are to be tokenised, CIMA would consider the fund to still be offering equity interests and therefore CIMA registration will be required.

Closed-Ended Cayman Islands Exempted Limited Partnership

This structure is more common for those managers looking to pursue an investment strategy which focuses on long term investments in Blockchain start-ups or projects. These strategies tend to be illiquid in nature and investors are unable to redeem their investment without the manager’s consent. These types of funds are akin to a private equity or venture capitalist fund. Pursuant to the recently enacted Private Funds Law closed ended funds will also need to be registered with CIMA unless certain exemptions apply.

Service Providers

Once you have decided on the most appropriate structure for your fund it is important to consider the range of services providers that your fund

may need to engage. Some of the key ones are:

Legal Counsel

To advise and prepare the necessary legal documentation such as offering memorandum, investment management and advisory agreements, subscriptions documents, side letters and other ancillary agreements.

A Registered Office provider in the Cayman Islands

It is a legal requirement for the fund to have a registered office (“RO”) in the Cayman Islands. The RO will also attend to a wide range of administrative matters on behalf of the fund. (OCI holds a Cayman Islands International Corporate Service Provider sublicense and can supply this service)

Administrator

For open-ended funds it is common to appoint a third-party administrator who will be responsible for the accounting of investor subscriptions and redemptions and computing the net asset value of the fund.

Custodian

With respect to custodians, many sponsors who have the expertise in the digital asset space prefer to self-custody rather than appoint a third party custodian. However, if institutional investors are to come into Cryptocurrency funds, they are likely to require a third party custodian (and also if the investment fund reaches a particular AUM that requires a third party custodian under applicable laws). CIMA is focused on valuation and custody of Cryptocurrencies and are likely to review the fund offering documents on these issues carefully.

Auditor

Both opened-ended and closed-ended funds registered as mutual funds and private funds respectively will need to appoint a local auditor based in the Cayman Islands who will be responsible for signing off the fund’s annual audit. All of the major accounting firms have branches in the Cayman Islands so it is relatively straightforward to find an auditor for CIMA registered funds.

Independent Directors

The directors are seen to act as “watchdogs” for investors over the investment manager and other service providers to the fund. We are increasingly seeing crypto funds appoint independent directors to demonstrate that they have independent oversight of fund functions. Also, with ever increasing regulatory requirements, having professional directors with experience acting on Cayman funds combined with experience of crypto developments can be extremely beneficial to all involved and provide comfort to investors and regulators.

FATCA and AML

The fund will be required to comply with Cayman Islands laws relating to FATCA, the Common Reporting Standard and Anti-Money Laundering. It is common for funds to appoint specialist third-party providers to assist with this. This is especially common for new funds who have limited experience with these regulatory regimes. To the extent that the fund accepts subscriptions in Cryptocurrencies, CIMA permits this provided that the administrator has the capability to conduct the AML due diligence including the source of wealth. CIMA now also requires natural persons to be appointed as AML officers to investment funds (who are subject to personal liability).

Bank Account

The fund will invariably need a bank account to receive investor subscriptions and on-ramp to exchanges or convert into cryptocurrencies or the funds wallets.

OCI Crypto Fund Services

To set up a Caymans Crypto Fund typically costs somewhere in the vicinity of $US20-30,000, depending on what legal services are required.

The OCI team have set up many Investment funds over the past 22years including several Crypto Funds AND we have assisted to set up several of the world’s leading Defi DAOs including:

Mantra DAO (https://www.mantradao.com/ ) ; &
Defactor DAO ( https://defactor.com/ ); &
Kunji Finance DAO ( https://docs.kunji.finance/kunjifinance/governance/kunji-finance-dao )
Genomes DAO Foundation: https://genomes.io/
Asgard DAO: https://www.livecoinwatch.com/price/AsgardDao-ASGARD

We also work with fund managers directly to assist with the legal and operational launch of such funds. We have set up funds with a wide range of investment strategies and understand the optimal legal structures to use and the appropriate service providers for each fund. We also act as independent directors to crypto funds bringing over 20 years of senior level industry experience to the board, acting for other investment funds, compliance and regulatory reporting services, registered office and corporate services. (Our CEO and Founder has been a qualified Lawyer for over 30 years).

We also routinely advise on and set up offshore fund management companies to compliment a crypto fund launch, act on the board of Cayman entities often foundations for DAO communities and blockchain start-up companies.

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

DISCLAIMER:

Information current at 4.7.24. 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.

Panama Money Remittance Licenses (“MRO”)

Any legal person that intends to operate a money remittance house in Panama must request the corresponding authorization from the Panama Ministry of Commerce and Industries, through the Directorate of Financial Companies.

The relevant law does not limit the operations of the company to brick and mortar style companies – any such business can be an online, digital company owned/run/staffed from anywhere in the world. That said the company must have a physical address in Panama and will be subject to inspections from the Panama Directorate of Financial Companies and from the Panama AML regulator.

The application will be presented through a local Lawyer and must contain the following information:

Name or business name of the applicant.
Type of company in question
Date of its registration in the Public Registry, with indications of the respective registration details
Name of its directors, officers and legal representative
Legal domicile of the applicant in the Republic of Panama
Commercial name of the company
Exact physical address of the commercial establishment and telephone numbers in the Republic of Panama
An indication of the capital with which the business will operate.

The application must be accompanied by the following documents:

A copy of the public deed of protocolization of the articles of incorporation and the amendments, if any, duly registered in the Public Registry
A certificate from the Public Registry issued within the thirty days prior to the date of submission of the application, stating the validity and registration data of the company, its share capital and the name of its directors, officers, and legal representative
Certification issued by an authorized public accountant stating that the minimum initial paid-in capital stock is fifty thousand dollars (US$50,000.00). (The corresponding shares must be fully subscribed, paid and released. This means the share capital must be paid in full).
A check or money order issued in favor of the Ministry of Commerce and Industries as an issuance fee for the sum of one thousand dollars (US$1000.00).
Authenticated photocopy of the personal identity card/passports of the Applicant’s directors, officers, and Legal representative.
Description of the objectives and economic and financial projections of the company.

Please also note that Natural persons, legal persons and representatives of legal persons authorized to develop the business of a money remittance house must be domiciled in the Republic of Panama. This entails that the management of the company is in Panama. Nominees are not recommended as these would not pass the review of the authorities due to lack of expertise and knowledge of the business.

In addition, the applicants that wish to operate a money remittance house must establish and maintain in favor of the National Treasury a guarantee of fifty thousand dollars (US$.50,000.00), to respond for the amount of losses resulting from negligent or intentional action with the funds they manage, and, before the Government, for the sanctions imposed on them in accordance with the Laws of Panama.

Compliance and AML

All operations or transactions carried out by money remittance houses will be recorded in writing on the corresponding forms, which will contain, at least, the place and date of the transaction along with details of the transaction including:

Name of sender and beneficiary
Class and number of the sender’s identification document
Principal amount of the transaction carried out
Fee charged
Place of origin and destination of the transaction
Operation control number
Currency in which the remittance will be paid and the exchange rate agreed upon at the time of the transaction.

Within the four months following the closing of their corresponding fiscal year, money remittance houses must submit their financial statements, duly audited by an authorized public accountant, to the Directorate of Financial Companies of the Ministry of Commerce and Industries.

Every year the Financial Companies Directorate of the Ministry of Commerce and Industries must carry out, at least, one audit in each money remittance house, to determine its financial situation and whether in the course of its operations it has complied with the provisions of the governing Law and the existing laws on the prevention of money laundering.

In order to prevent the operations of the Money Remittance Houses from being used to commit the crime of money laundering and the financing of terrorism, said companies have the obligation to identify their clients according to the following details:

Full name of the natural or legal person, personal identity card, passport, and RUC (Unique Taxpayer Registry)
Residential and commercial location. Home and office phone numbers, PO box and email
Delivery of declaration reports to the Financial Companies Directorate, for the Financial Analysis Unit (UAF).

The Money Remittance Houses must apply the proper communication and internal control procedure to prevent money laundering and terrorist financing, taking into consideration the following aspects:

The instituted obligation to combat money laundering and terrorist financing
The adoption of a Manual of Procedure and Internal Control aimed at the prevention of money laundering and the financing of terrorism
The operational structure to enforce regulations that are required against money laundering and terrorist financing
Appoint a person to work in the company to coordinate and execute compliance activities with a sense of responsibility.
The risk of money laundering and terrorist financing. The MRO must promote a continuous training program to prevent money laundering, which should consist of conferences, talks and seminars, as well as the distribution of literature on the subject.
The MRO must make the managers and staff of remittance houses and companies that are part of the economic group aware of the policies, standards and procedures for the prevention of money laundering and terrorist financing.

Taxation

As the company will be required to have a physical presence in Panama and will further require the attainment of the Aviso de Operation or Operations Notice, the company will be subject to Central Government Tax and the Taxes levied by the Municipality where the business locates or sets its office.

Generally, the applicable taxes to this operation would be:

25% Income Tax on the net income;
- Estimated income tax (advance payment of income tax for the following year, assessed on the income tax paid for the previous year). This is payable in three installments: April, August and December;
- Complementary tax, applicable when the company does not distribute dividends or when the amount distributed is under 40% of the gains or profits obtained;
- Dividend tax is 10% which is withheld to the shareholders by the company;
  - Municipal taxes (differ from Municipality to Municipality and its generally assessed on the type of business)
  - 12.5% of Social Security contribution as employer;
    - 7% tax on goods and services (VAT) that must be charged on fees charged by the company to its clients.

Notwithstanding the above, if the company is considered as a Micro, Small or Medium enterprise, it can apply for a tax benefit. Registration with the Authority of the Micro, Small or Medium Enterprise will provide the company with exemption of Income Tax during its first two (2) years of operations;

In addition, by means of Law 189 of 2020, provides for a special tax regime for Micro, Small or Medium businesses, always that:

The income of the company does not exceed US$500,000.00
- Legal persons that are duly registered in the Business Registry of Authority of the Micro, Small or Medium Enterprise.
- Legal persons that do not result, directly or indirectly, from the division of a company into several legal persons, or that are not affiliated, subsidiary or controlled by other legal persons.
- Legal persons whose shares or participation quotas are nominative and whose shareholders or partners are natural persons.

The applicable tax rates in this case would be:

Income Tax on net income

Up to US$11,000.00 0%

US$11,000.01 to US$36,000.00 7.5%

US$36,000.01 to US$.90,000.00 10%

US$90,000.01 to US$150,000.00 12.5%

US$150,000.01 to US$350,000.00 17 .5%

US$350,000.01 to US$500,000.00 22.5%

Further tax relief might be obtained by deployment of legitimate Tax Planning Strategies. For example commonly businesses of this type will have a Service Company or IP Company (incorporated in a nil tax jurisdiction) that will invoice the MRO Licensed Company for services or License fees as applicable thus (potentially substantially) reducing the amount of profit that would otherwise be liable for taxation in Panama.

What OCI can do for you?

OCI CEO Patrick J. Flynn, Attorney at Law for 12 years+ has been an Associate Lawyer with a Panamanian Law Firm with over 15 years in business in the Republic of Panama, providing bespoke legal services in Corporate, Real Estate, Business, Intellectual Property, Immigration, Asset Protection and Estate Planning. The firm has grown rapidly to one of the most successful practices of its size and now has offices in Guatemala, Belize and Madrid, Spain in addition to a network of affiliates and correspondent offices all over Latin America, the US, Canada and Europe.

Moreover OCI can provide company formation services in more than 20 jurisdictions worldwide, as well as establishing bank accounts, obtaining second citizenships and residences in various countries.

In essence, we are your one stop shop for all your legal, accounting and digital marketing needs in the Republic of Panama.

Financials

Below we outline the fees and estimated costs to set up the whole structure of your Panama MRO business:

Legal fees: US$9,0000 (includes VAT) for the formation of the company, registration of the company before the tax authorities, notice of operation, registration with the municipality and attainment of the MRO license;
Estimated expenses $2,500(includes all the notarial and registration expenses of the company, costs of the notice of operation and estimated expenses for the attainment of the registration at the local Municipality, estimated expenses for the registration at the tax authority, estimated expenses for the attainment of the MRO license).
The US$50,000.00 is not included in this proposal as the client must process this bond with a local Insurance Company.

Please note that this proposal does not include setting up an office, however, we have good connections with real estate agents in Panama who will be able to help with locating a suitable office space for your business.

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

How To Run an Offshore Service Vessel Charter Business Using a Tax Free Offshore Company

Offshore Support Vessels (“OSVs”) are specially designed ships for the logistical servicing of offshore platforms and subsea installations, from installation through the full service life of offshore oil etc fields.

OSV Chartering, given its international clientele, is a business that lends itself well to an “Offshore” Corporate Structuring Plan. Here’s how it can/would typically work:

The Vessel/s will be owned by (or the leases held in the name of) the/a tax free Offshore Company (“IBC”)
The IBC should have in place a (nil tax jurisdiction domiciled) “Nominee” Director
Your international clients will enter into an agreement with the said Offshore Company (which is commonly an “IBC” ie International Business Company)
The situs of the agreement (ie the place at which the contract was formed and or services provided) will be deemed in the agreement to be Offshore
Ideally all Charter contracts would be signed “Offshore” ie in a/the nil tax jurisdiction by the Nominee director
The nil tax IBC will have a bank account Offshore ideally in a nil tax International Offshore Financial Centre
You will want to set up a merchant account facility for your Company so clients can pay you by card (and also ideally by Paypal) as well as by bank wire if/as they may prefer
Funds will ultimately be directed to the Offshore Company’s tax free bank account and receipted free of tax in the first instance
The operating expenses can/will be paid from the Offshore account
Your or your local company will be engaged by the Offshore Company to perform certain functions (eg client liaison, yacht sourcing, fleet maintenance, logistics management etc etc etc). This will enable you, as a contractor, to draw down some regular income (and as a Contractor, with a smart tax accountant, you should be able to rack up a stack of tax deductions enabling you to substantially lower the amount of tax that would otherwise be payable on this income). The rest of the profit would remain and or be reinvested Offshore potentially tax free (or be rerouted onshore as, non taxable, financing/debt transactions)

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Where To set Up a Non-Licensed Forex Brokerage Company Offshore

For the longest time entrepreneurs wanting to set up Forex etc broker businesses without the risk of regulatory arbitrage looked to the Caribbean Island state of St Vincent & the Grenadine (“SVG”) as their preferred incorporation centre.

But with the SVG having declared Forex Broker business as a prohibited activity we are regularly asked “Where can I set up a Forex Brokerage Business Offshore without having to apply for a Special License”.

The answer is the shimmering island jewel of St Lucia!

The St Lucia FSA boldly advertise that “Forex trading activities are not licensed in St Lucia”. As such there is no reason at Law for why a St Lucia Company could not be deployed to own/operate a Forex Brokerage Business.

History

St Lucia is a peaceful idyllic tropical island state in the Caribbean Sea south of Barbados with a population of 180,000. Its primary Industries are Tourism Financial Services and Agriculture.

Following the arrival of Europeans in the 1600s multiple battles for ownership/control over the island were fought between the French and the English before British sovereignty finally prevailed in the late 18th century. St Lucia achieved independence from Great Britain in 1979 but retains the English/Westminster system of law and governance.

St Lucia offers an International Business Company (“IBC”) product which can be deployed to own and operate an (unlicensed) Forex Broker business.

Key features of the St Lucia IBC Legislation include:

• Ownership information is not publicly accessible

• Directors details are not publicly accessible

• Disclosure is only possible to specified authorities in accordance with specific legislation.

• There is no Local director requirement for local directors

• Meetings of directors can be held anywhere.

• Shares can be issued without par value.

• No requirement to file Annual/Tax returns with the St Lucia Govt

• Well established network of locally licensed “Offshore” Banks

• Accounts do not have to be audited

AND, since 2021, St Lucia has declared it has a Territorial Tax system meaning Corporate/Trading income sourced from outside of St Lucia should not be taxable in St Lucia.

At OCI we believe in giving you more for your money than would the average IBC formation service. Hence included in the incorporation package for your Samoan Company is the following:

Services:

• Unlimited name availability inquiries

• Advice from an experienced International Corporate Lawyer on how to structure your company

• Preparation (overseen by a lawyer) of application to incorporate the company

• Preparation (overseen by a lawyer) of the company’s memorandum of association

• Preparation (overseen by a lawyer) of the company’s articles of association

• Attending to filing incorporation request with the company registry

• Attending to payment of government filing fees

• One year’s Registered Agent service in the country of incorporation

• One year’s Registered Office service in the country of incorporation

• Mailing address in the country of incorporation

• Delivery of Incorp pack by international courier (ie DHL/Fedex/TNT etc)

• Unlimited free legal consultations for 12 months

Documents included in your Incorp pack:

• Certificate of incorporation

• 2 sealed/stamped copies of the company’s Memorandum of Association

• 2 sealed/stamped copies of the company’s Articles of Association

• Resolution appointing first director/s

• Resolution appointing first shareholder/s

• Up to 5 share certificates

• Resolution to open a bank account

• Resolution to rent an office

• Resolution/s to engage a Phone, Internet & Website service provider

• Resolution to hire a staff member/s

• Resolution to appoint a company lawyer

• Resolution to appoint a company accountant

• Resolution appointing you as the company’s authorised representative in commercial negotiations

• Resolution issuing a Power of Attorney in your favour

• Agreement authorising you to represent the company in commercial negotiations

• Power of attorney authorising you to sign documents on behalf of the company

• Register of directors

• Register of shareholders

• Expression of wishes (ie an “Offshore” Will)

• Lawyer authored User Guide (“How to Use Your Offshore Company”)

Price (all inclusive): $US 1,400

With tax effective offshore company management (ie including Professional Corporate “Nominee” Director, Shareholder & Company Secretary): + $800

From 2nd year $US $US1,350 (+ nominees if required)

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Best Offshore Jurisdictions For Trading Bitcoin?

With the price of Bitcoin having surged by over 100% in the past 12 months (perhaps not surprisingly) we are seeing an upsurge of interest in Cryptocurrency Trading.

Cryptocurrency Trading is an activity which lends itself well to an Offshore Corporate Structuring Plan. Here’s how:

You set up a zero tax Offshore Company/International Business Company (“IBC”) with a nil tax jurisdiction based “Nominee” Director
The IBC opens an account with a Cryptocurrency Exchange/s
You are appointed as the IBC’s Authorised Trader or Trading Manager (ie you are given the power place the buy and sell orders on behalf of the company)
All Exchange Account agreements would be accepted/signed/closed “Offshore” by the Company under the hand or by the authority of the Director
You as the IBC’s Authorised Trader or Trading Manager go ahead and place buy orders & sell orders on the Company’s Exchange Account
Periodically the Board of Directors meet to review and ratify (ie approve retrospectively) trades made in the previous period by the Authorised Trader/Trading Manager
The Director sits in (& is seen to be managing/controlling the Company from) a nil tax jurisdiction.
On any objective assessment it is clear that trading profits arise from decisions made by the Company Director ie in a nil tax environment.
When you need some living/spending money the IBC pays you a wage, or consulting fees or a commission (eg a percentage of trading profits generated)
That living/spending money can be paid to your local bank account (which means it would be assessable income wherever you are tax resident though you should also be able to claim a sizeable amount of allowable deductions eg for home office, car, equipment, insurances, travel, stationary etc etc to reduce the amount of your “taxable” income at home)
If you don’t want the vultures to know how much money you are earning by way of wages/commissions you could use an anonymous ATM or Debit/VISA card to withdraw your wages/commissions from an Auto Tele Machine. That said, (unless this is reimbursement for expenses incurred by you in working for the IBC) technically these receipts should be declared
The majority of trading profits could be reinvested Offshore potentially tax free.

Where to incorporate?

If ease of set up/maintenance and/or ownership privacy are priorities and/or if you’re on a budget you might want to think about incorporating your Company in a Privacy Haven ie somewhere which (i) does NOT have a public register of directors, shareholders or owners & (ii) which does not require any local presence. Most people in that position choose to incorporate in either:

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

Cost there would be:

For a Belize IBC Company, including incorporation, registered/agent office service and one year’s basic admin: $US1,000. 2^nd and subsequent years $690
For a Nevis Company, including incorporation, registered/agent office service and one year’s basic admin: $1,400. 2^nd and subsequent years $1,350
For a Seychelles Company, including incorporation, registered/agent office service and one year’s basic admin: $720 2^nd and subsequent years $575

Belize also offers an (Asset Protection focussed) LLC product. Check this link for details.

https://offshoreincorporate.com/belize-offshore-companies/

Other low cost and/or low maintenance and/or private and/or potentially nil tax jurisdictions worth considering include:

Panama – For detailed information (including pricing info) Check this link: https://offshoreincorporate.com/panama-offshore-companies/
Samoa – For detailed information (including pricing info) Check this link: https://offshoreincorporate.com/samoa-international-business-companies/
St Vincent – For detailed information (including pricing info) Check this link: https://offshoreincorporate.com/saint-vincent-and-the-grenadines-svg-companies/
The BVI – For detailed information (including pricing info) Check this Link: https://offshoreincorporate.com/products-services/offshore-companies/bvi-tax-free-ibcs/
Hong Kong – For detailed information (including pricing info) Check this link: https://offshoreincorporate.com/hong-kong-companies/

(Sadly Nevis has recently declared Cryptocurrency Trading a prohibited activity so you won’t be able to incorporate a Crypto Trading Company there!)

You may be interested to know that the most popular place to incorporate a (potentially) tax-free Offshore Company is Hong Kong. Check this link which explains why it’s so popular: https://offshoreincorporate.com/why-incorporate-in-hong-kong/

If you’re looking for ease of maintenance you might want to take a close look at Samoa which has the simplest Account Keeping requirements (Check this link for details: https://offshoreincorporate.com/where-to-set-up-an-offshore-company-with-no-accounting-requirements/ )

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Can one Foundation Work or do Partners Each Need Separate Foundations?

Are you looking to incorporate a Joint Venture (“JV”) Offshore with a business partner?

Certainly, in many cases, there are a lot of benefits in incorporating a JV Offshore (Check this previous article which explains why: https://offshoreincorporate.com/how-to-set-up-a-joint-venture-tax-free-offshore/ )

So what entity are you going to use to hold your/your partners shares in the JV Company?

If you are looking to incorporate a Joint Venture Offshore – and you’ve done your research – then you’d know that the best possible holding entity is most likely a Private Foundation.

Why?

Because unlike a Trust (or a Holding Company) a Private Foundation is presumed at law to be both the legal owner AND the beneficial owner of any asset it holds. This can get you around CFC rules and, when combined with Offshore Management, (ie where Management & Control of the Company is seen to be taking place from Offshore – which can potentially be achieved via deployment of a nil tax jurisdiction based “Nominee’ Director) can lead to a result whereby you may only have to declare and pay taxes locally on profits/income actually received by you from the Company.

In a joint venture scenario (ie where 2 parties are coming together to form a Trading or Investment Company), whilst shares could potentially be held in each partner’s personal name, ideally each partner should set up/have his/her own holding entity.

Your holding entity is your alter ego, ie it will hold your shares in the JV Company.

Ideally, for tax planning reasons, your holding entity would be incorporated in a nil tax jurisdiction.

That entity could be a Company or it could be a Foundation (or it could be a Company owned by a Foundation).

The latter scenario is commonly deployed by clients who want to have options in terms of how they might go about selling their interests in the JV Company. For example (depending on where the JV Company is incorporated) it might be cheaper in items of stamp duty for somebody wanting to buy your shares in the JV Company to acquire your Holding Company instead. Plus, it would be cleaner and easier for you to sell a Company than to sell a Foundation.

Assuming your business partner is also tax resident in a jurisdiction that has a CFC law he/she will certainly want to have a Foundation at the bottom of his/her family/ownership tree.

Could you just set up one Foundation to begin with to hold both your shares in the JV Company?

Potentially you could do that, but it could get really messy. One would assume you’d both be nominated as beneficiaries of the Foundation. But the problem there is, unlike say a Unit Trust, beneficiaries in a Foundation do NOT have separately divisible/recognizable interests. If there’s only one Foundation but with 2 business partners as beneficiaries you can’t say with any clarity “Hey I am the beneficial owner of X% of the JV Company”. And you’d face big problems should you and your partner decide to split in a scenario where one partner decides he wants to continue the JV Company. If there’s only 1 Foundation owing the JV Company how do you value the exiting partners interests in the JV Company?

Usually Private Foundations are deployed as Family asset holding vehicles, one per Partner/Family. Like a Family Trust. (Eg Our typical client is a 50 year old + plus career entrepreneur with a spouse and kids. Usually, he/she sets up a Foundation and nominates himself his spouse and children as beneficiaries of the Foundation).

To summarize, when two parties are coming together to form a JV Company (and in particular where both partners are based in a country which has CFC rules) ultimately each partner ideally should set up/have his/her own Foundation.

And where 2 Foundations are formed to own the issued shares in a JV Company its always prudent for each Foundation/partner to agree on and sign off on a Shareholder’s Agreement (like a Pre-nuptial agreement for business partners!).

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Where to set up an Offshore Company with No Accounting Requirements

Of late we have been receiving a heightened level of inquiry from prospective clients asking where one can set up or domicile an Offshore Company without having to meet onerous Account keeping requirements.

The starting point here is to note that it’s the law, in almost every Offshore Company jurisdiction, that you are required to keep financial records from which a set of Accounts (“Books of Account”) could be compiled. The reality of course is that, in most jurisdictions, this requirement is not policed. That said (and coming from a background of having owned multiple enterprises over the course of the past 30 years) it is of course wise to keep Books of Account so that you can monitor the financial health of your business!

Unfortunately, over the course of the past 12 months more and more Offshore Company jurisdictions have begun succumbing to outside pressures – forcing their Companies to file accounts (and or to prepare financial summaries) and or to store at least soft copies of the Company’s Financial records/Accounts Offshore.

That said there are 2 jurisdictions still that, as at the time of writing (ie 29.1.24), have extremely limited Account keeping requirements.

Those jurisdictions are:

1. Nevis: – For detailed information click on these Links:

https://offshoreincorporate.com/nevis-llcs-your-questions-answered/

https://offshoreincorporate.com/st-kitts-and-nevis-offshore-companies/ AND

2. Samoa – For detailed information click on this Link: https://offshoreincorporate.com/samoa-international-business-companies/

Samoa Companies Accounting Records Requirements

Every company incorporated in Samoa is required to keep and maintain accounting records:

(a) to disclose the current financial position of the Company;

(b) to enable the directors to check that any accounts prepared by the Company comply with the laws of Samoa;

(d) to detail the following;

(i) all sums of money received and expended and the matters in respect of

which the receipt and expenditure takes place;

(ii) all sales and purchase and other transactions; and

(iii) the Company’s assets and liabilities, or other arrangements; and

(e) for a period of at least 7 years from the completing of the transactions or

operations to which they relate.

Additionally, the Company must inform its Samoan Registered Agent in writing of the location where the accounting records are to be kept.

Should there be any changes to the location, the Company must inform the RA in writing of the physical address of the new location of the records within 14 days of the change of the location.

Accounting records may required by the Samoa Financial Services Authority and upon request they must be made available to comply.

Nevis Companies Account Keeping Requirements

Accounting requirements in Nevis are thankfully not as onerous as elsewhere.

Every Nevis entity is required to maintain sufficient and accurate records from which accounts might be prepared should the Directors or Shareholders choose to do so. In other words, there is no absolute requirement to do so.

Unlike places such as BVI, there is no requirement to file any accounting information with the Registered agent, and there is no public filing of accounts, schedules of assets/liabilities etc.

That being said, each Nevis entity is required to file an annual Tax Return in St. Kitts & Nevis. Where the management of the entity is conducted outside of St. Kitts & Nevis, the required return is informational only, and need not include any financial or transactional information.

A sample of the current return can be viewed here: https://offshoreincorporate.sharepoint.com/:b:/s/OffshoreCompaniesInternational/EY9qhVbBnDxPqIoqK7hclxgBGxN7pKymMzwgImGS_utnCg?e=PQhIqK

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com