A Token is a relatively new term in the business world but a key part of the vocabulary of those actively involved in the Cryptosphere particularly those involved in Cryptocurrency Coin Startups known as ICOs (Initial Coin Offerings).

In simple terms a Token can be described as a unit of value issued by a private company/entity.

Typically a Token is something that an organization creates to (a) self-govern its business model, and (b) empower its users to interact with its products. A Token also typically facilitates the distribution and sharing of rewards and benefits to all of the organization’s stakeholders.

A Token is an intrinsic component in a next-generation cryptocurrency 2.0 application. Like Bitcoin, it isn’t something that you can physically hold. Instead it is an electronic record – a kind of digital poker chip – stored on your computer, or mobile device. It securely records that you’ve made an entry level investment entitling you to certain rights once the business matures – Tokens are designed to let you participate in the project once it comes to market. Depending on what service the project offers, the Token will serve as a kind of access ticket to that service.

If the project is a software application for example that lets you find ride sharing partners without the use of a central website, then you might use tokens to pay for your rides.

From a Lawyer’s perspective a Token can be used in whichever way the person or organization designing and developing it decides. Ideally, from an investor’s viewpoint, a Token should entitle the investor to part of the Company’s revenue. Moreover a Token can admit several layers of value inside it, so it is the Token’s designer who decides what a specific Token will have inside.

Whilst Tokens bear many similarities to Bitcoins (eg they have a value attached to them which is accepted by a community and are blockchain-based), they typically serve a much wider purpose; Tokens are more than a currency because they can be used in a broader range of applications. Also, virtually all tokens rely on Ethereum’s blockchain protocol, which, is viewed by some Industry insiders as being more complete than Bitcoin’s blockchain.

From a Computing/IT Perspective Tokens are a representation of a particular asset or utility, that usually resides on top of another blockchain. Tokens can represent basically any assets that are fungible and tradeable, from commodities to loyalty points to even other cryptocurrencies!

From a Developer’s perspective the process to create a Token is a much easier than creating a Cryptocoin as you do not have to modify the codes from a particular protocol or create a blockchain from scratch; All you have to do is follow a standard template on the blockchain – such as on the Ethereum or Waves platform – that allows you to create your own Tokens. This functionality of creating your own Tokens is made possible through the use of smart contracts; programmable computer codes that are self-executing and do not need any third-parties to operate.

Tokens and ICOs

In the case of an ICO instead of a traditional fund-raising round, or even an IPO, companies offer Tokens – not shares – to the market, and investors typically use digital currencies like Bitcoin to pay for these Tokens. (Everything through blockchain.)

Unlike an IPO (Initial Public Offering), where investors receive shares in the Start Up Company, in an Initial Coin Offering, the Tokens are usually new digital currency units. These can be traded for other currencies or for the purchase and use of certain products developed by the start-up or licenses to run the software developed. In some cases, some ICOs issue their Tokens on existing digital currencies, where the Tokens represent voting powers in the invested project.

During an ICO, the investors buy Tokens at a previously established price which may vary depending on the stage the ICO has reached. Typically Token prices increase progressively as different investment thresholds are achieved, encouraging and rewarding early investors (ie ICO participants).

In a professionally run ICO model that raises funds by issuing Tokens, the Developers should:

• Incorporate a Company
• Publish its/their ICO rules
• Present the Investor (ie a would be Token Purchaser) with a purchase agreement (and/or terms and conditions presented on the ICO website) drafted by a competent Lawyer which:

(a)    Clearly explains what the Investor is getting for his money ie what the Token can be used for (and/or how it can be used) and (b)

(b)   Makes it clear in the purchase agreement that the Token is not a security

(c)    Contains disclaimers warning the investor that the value of the Token could rise or fall depending on market and legal/regulatory conditions

If the ICO is incorporated Offshore (ie in a zero tax jurisdiction), profits realized by the ICO Founders/Promoters could potentially be banked and or reinvested tax free. (Check our Blog Article 5 articles down from this which explains, in detail, how).

Likewise anyone investing in an ICO can potentially bank his/her investment income/return and capital gains tax free by setting up a tax free Offshore Company as his/her investment holding vehicle.

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

The Netherlands will seek to resume discussions towards establishing Double Taxation Avoidance Treaties (“DTATs”) with several countries in 2018, including the United States, the Netherlands Government has announced.

The Dutch Government will attempt to begin tax treaty talks with at least seven countries this year, including Australia, Colombia, Costa Rica, Ecuador, Morocco, Austria, and Portugal, according to an update on the Dutch tax treaty negotiation program, issued by the Ministry of Finance on January 26.

In addition, the Netherlands has announced it will continue discussions for new or updated treaties with several other jurisdictions, including, among others, Andorra, Belgium, Brazil, Chile, France, Liechtenstein, Mozambique, Uganda, Pakistan, Senegal, Sri Lanka, and possibly the United States.

Recently, the Netherlands has concentrated on agreeing new or updated treaties with developing countries. Treaties have been negotiated or renegotiated with 23 developing countries, the ministry said.

However, the tax treaty negotiations with Uganda, Sri Lanka, and Pakistan will mark an end to this developing country strategy, the Ministry added.

What is a DTAT?

A DTA (Double Taxation Avoidance Treaty) is a bilateral treaty (ie a legal agreement signed by two countries) which is designed to avoid persons being taxed twice ie in 2 countries on the same income. DTA’s usually also set out the taxing rights of each country where there would otherwise be a dispute about who has the taxing rights over certain income/gains.

DTAs tend to reduce taxes of one treaty country for residents of the other treaty country in order to reduce double taxation of the same income and to attract inward investment from the country receiving WHT discounts. The provisions and goals vary highly; very few tax treaties are alike. Most treaties:

• define which taxes are covered and who is a resident and eligible for benefits,
• reduce the amounts of tax withheld from interest, dividends, and royalties paid by a resident of one country to residents of the other country,
• limit tax of one country on business income of a resident of the other country to that income from a permanent establishment in the first country,
• define circumstances in which income of individuals resident in one country will be taxed in the other country, including salary, self-employment, pension, and other income,
• provide for exemption of certain types of organizations or individuals, and
• provide procedural frameworks for enforcement and dispute resolution.

What is a Holding Company and How Are Holding Companies Used?

The term holding company is usually used to describe a company which is set up (not to own/operate a business but to) passively hold an asset eg the shares of another company or a piece of real property.

Usually all a holding company does is receive passive income eg dividends if it owns shares in other companies or rent eg if it owns real property. The advantage of setting up a Holding Company “Offshore” is if you incorporate it in the right place and structure it properly (a) you might minimize withholding taxes when dividends etc are paid to the Holding Company (see below) and (b) you can potentially receive (and reinvest) your passive income free from tax.

The other advantage of setting up a Holding Company “Offshore” is privacy. If you don’t want certain persons to know that you own a particular asset or assets you might choose to set up your holding company in a privacy haven ie somewhere which does not have a public register of directors or shareholders or beneficial owners.

A Holding Company is often placed between a Trading company and the Ultimate Holding Entity (which might be a Company or Trust or a Foundation) as a means by which to access a favorable DTAT (ie Double Taxation Avoidance Treaty) such as would enable you to reduce the withholding tax (“WHT”, see below which explains in detail what WHT is) that would otherwise apply on dividends, interest or royalties paid by a Trading Company to your Ultimate Holding Entity.

Commonly when dividends, interest or royalties are paid by an onshore company to an offshore shareholder Withholding Tax (WHT) of around 20% is payable in the country from where the payments are being made.

However deals are often brokered between countries and written in to a DTAT which afford WHT discounts if the shareholder is a resident of, or incorporated in, a particular country.

For example Mauritius Companies are commonly used to hold shares in Indian Companies as Mauritius has a favorable DTAT with India that affords WHT discounts to Mauritius persons or companies.

Likewise Seychelles Holding Companies (CSLs) are commonly used to hold shares in Chinese Companies as China has a favorable DTAT with Seychelles that affords WHT discounts to Seychelles persons or companies.

The Netherlands is another popular place for the incorporation of Holding Companies as it has an extremely wide (and ever growing, as the above header article shows) network of WHT friendly DTATs.

Other popular low tax Holding Company Jurisdictions include Ireland, Malta and Cyprus.

The question of where to incorporate your Holding Company depends entirely on where the payments are coming from. Once you’ve decided on that we can advise on choice of Holding Company Jurisdiction.

What is Withholding Tax (WHT)?

Withholding tax (“WHT”) is tax levied:

(a)  When a company incorporated in one country pays dividends to a shareholder of that Company who is resident in a 2nd country

(b)  When interest is paid by a company incorporated in one country to a lender resident in a 2^nd country

(c)   When a royalty is paid by a company incorporated in one country to a party resident in a 2^nd country

The applicable rate of WHT is usually somewhere between 15 and 25%.

The rate of WHT applicable may be reduced if the person (or entity) receiving the interest/dividend/royalty payment is tax resident in a country which has a favorable Double Taxation Avoidance Treaty (ie one allowing for a reduced WHT percentage) with the country from which the payment is coming.

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

A Bitcoin/Cryptocurrency Exchange Business (ie an Enterprise that offers to buy Cryptocurrencies paying for same in either hard currency or some other form of Cryptocurrency in return for a Commission) lends itself well to an “Offshore” Corporate Structuring Plan.

In principle here’s how it can/will work:

1. A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated
2. A website is created and tailor made software developed – the IBC will be the owner of this website and the software and all the hardware required to run it
3. The IBC owns/operates the business (eg ownership of the web-domain and the website/artworks or trademark/s or any sole distributor rights are held by or transferred to the IBC)
4. An Offshore account (which received payments via a merchant account) is set up in a nil tax banking centre
5. Ideally the server is located in a country which does not tax business on the basis of server location (eg Singapore)
6. Customers contracts with and agreed to pay the IBC a commission on all sales concluded as a consequence of buyer/seller introductions enabled by the site.
7. All such monies are banked free of tax in the first instance
8. You or your local company would be contracted by the IBC to manage sales or provide accounting services or do website maintenance/whatever.
9. 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.
10. Often there is some kind of intellectual property (“IP”) created or behind such a 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 wold 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
11. Ideally once you start to grow you and to add substance you would be wise to set up your MD/Board and or a sales team onshore to take orders and receive income in a low tax onshore environment (eh Hong Kong, Ireland, Singapore, Cyprus etc as per the Amazon/Google model)

To minimise the chances of the IBC being taxed onshore ideally the IBC should be (and be seen to be) managed and controlled from offshore. How this can be achieved is including a Nominee Director etc as part of the Corporate structure. See this page for details of how that can work:

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

https://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/

Additionally if you live in a country which has CFC laws (see below which explains what CFC laws are) and/or if you don’t want your local tax authorities to become aware of your Offshore Company’s Bank Account (and, incidentally, your position as “beneficial owner” of the Company) you’d be wise to include a Foundation as part of the Corporate structure. See below “Why set up a Foundation” which explains how/why.

What is a Controlled Foreign Corporation Law?

A Controlled Foreign Corporation (or CFC) Law is one which purports to tax onshore income or capital gains made by Companies incorporated Offshore but which are controlled from onshore. Most western countries have them (see below which lists ALL countries with CFC laws presently).

Essentially how a CFC law works is if an individual owns or has the capacity to own the overriding majority of shares in an Offshore Company (the percentage of which varies from country to country) the that person is required to declare in his local tax return profits made by the Offshore Company.

How CFC laws came about was around 30 years ago the big western countries began to realise that certain of their citizens were using nil tax Offshore companies to avoid having to pay tax at home on their non-local sourced (ie international) income. In particular the CFC laws target the use of Nominee Shareholders and Directors. If you live in a country which has CFC laws (regardless of whether you are the director/shareholder of the Company or not) if you have the capacity to own and control the company by reference to shareholdings then you would be required to declare and pay tax at home on your Offshore Company’s earnings.

There are several ways to get around CFC laws. Historically clients used commonly to deploy an Offshore (Discretionary) Trust to own the shares of the Offshore Company. However with more and more “Onshore” tax systems claiming tax from any Trust with an onshore resident beneficiary discerning clients these days choose to establish Private Foundations (in particular Seychelles Foundations) as the ultimate holding entity as such entities should not caught by CFC laws or by CFT (Controlled Foreign Trust) Laws. For more detail click on these links:

https://offshoreincorporate.com/private-interest-foundations/

https://offshoreincorporate.com/seychelles-foundations/

https://offshoreincorporate.com/seychelles-foundations-fact-sheet/

Why Set Up a Foundation?

If an IBC alone is used to own/operate your Bitcoin/Cryptocurrency Exchange Business you will still be liable to declare and pay tax at home on your IBC’s earnings if/when you live in a country which has a Controlled Foreign Corporation (“CFC) law. Failure to do so would most likely constitute tax evasion.

What you might do then is set up a Private Interest Foundation to own the shares of the Offshore Company.

We used to use Offshore Trusts for such purposes back in the noughties but the problem there is that you have someone (ie a Trustee) holding property for the benefit of 3^rd parties who are inarguably beneficial owners of that property and probably/potentially entitled to the income/capital of the Trust (which can have tax consequences onshore).

A Foundation is very similar to a Trust in that it’s set up by a Founder (like a Settlor in the case of a Trust) and managed day to day by a Councillor (like a Trustee in the case of a Trust) who manages the Foundation property for the benefit of the beneficiaries of the Foundation. A key advantage of a Foundation is that it’s a separate legal entity in its own right (ie the Foundation actually owns the assets held by the Foundation – unlike a Trustee who holds property for someone else ie the beneficiaries) and generally speaking the beneficiaries are not entitled to the income or capital of the Foundation until it’s actually received.

What this means as a beneficiary is that you should be able to defer paying tax at home on the income of investments held by the Foundation enabling you to reinvest 100% of that income not just the after tax component. (One jurisdiction ie Seychelles has even taken this a step further by specifically stating in their law that the legal and beneficial owner of any asset held by the Foundation is the Foundation itself).

Seychelles Foundations

If you are a resident or citizen of a country which has the ability to track Offshore Bank account beneficiary details and you would like to keep private details of your Offshore earnings (or if you plan to set up a very sensitive business eg one that might illegal if owned/operated from where you live) again a Seychelles Foundation can help:

How so?

It all comes back to the legal structure/operation of the Seychelles Private Interest Foundation.

Bottom line is notwithstanding that individuals (or a class of beneficiary) may be named as beneficiaries in the Regulations:

1. The beneficiaries have no legal or beneficial interest in property owned by the Foundation (unless or until such time as that property is transferred to them – see section 71 of the Seychelles Foundations Act attached).
2. The Foundation is a legal entity in its own right not a mere Trustee (See section 23)
3. The Councillor of the Foundation owes no Fiduciary duty to the beneficiaries (see section 63)

As such there is no “beneficial owner” of the Foundation. The beneficial owner of any property/asset owned or held by the Foundation is the Foundation itself. Hence when we open a bank account for your Company, if the shareholder of the Company is a Seychelles Foundation, your name shouldn’t be written into the bank’s records as “beneficial owner” of the 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 looking to trade or invest in Bitcoin/Cryptocurrency using a tax free Offshore Company chances are:

(a)  you’ll already have a stash of Bitcoin/cryptocurrency; and

(b)   you are wondering how you could or should go about transferring ownership of that currency to your tax free Offshore Company, once incorporated.

However you go about it you’ll want to ensure that at the point when you realize your gain (eg when you convert the Cryptocurrency into Hard Currency) that, at that point in time, the Cryptocurrency is owned by – and the gain occurs in the name of – your tax free Offshore Company (“IBC”).

The first step is to transfer ownership of the Cryptocurrency to the Offshore Company/Entity.

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

If a deal is struck for the IBC to buy the Cryptocurrency before the Cryptocurrency gains traction in the market, ownership of the Cryptocurrency might even be transferred for nominal consideration enabling you to transfer legal ownership of the Cryptocurrency to the IBC before the Cryptocurrency experiences significant appreciation in value.

Alternatively, you might transfer ownership of the Cryptocurrency to your tax free Offshore Company for an agreed price but subject to a deferred or gradual payment basis. How that would work is you would transfer ownership of the Cryptocurrency up front and agree for the IBC to pay you in stages in consideration of a price premium and/or in consideration of the IBC engaging you in an ongoing/consultancy capacity.

However you transfer ownership of the Cryptocurrency to your IBC the transaction should be seen to be on commercial terms for fair market value.

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

Often we are asked “Can I get a bank account opened for me by the Nominee without my involvement?”.

In short we can’t just deliver a Company + an opened bank account without your involvement.

In terms of what we need from each client getting the Company set up is easy. We just need via email a completed signed order form, confirmation of payment and proof of the client’s ID and residential address per the requirements.

But the bank account is a slightly different story…

When we open a bank account we have to supply to the bank as a minimum:

• Proof, per the bank/s requirements, that the Company is incorporated
• Proof, per the bank/s requirements, of who the Directors of the Company are
• Proof, per the bank/s requirements, of who the shareholders of the Company are
• Proof, per the bank/s requirements, of who the beneficial owners of the Company are ie we have to disclose the name/ID of the person who asked us to set up the Company
• Proof of ID and residential address of the beneficial owners of the Company
• Proof of ID and residential address re the proposed authorized account signatory/s
• A very detailed business plan re the Company

Most banks these days also require a professional reference re the beneficial owners of the Company.

Many banks these days also want to video interview the beneficial owner of the Company.

Where the shareholder of the Company is a Foundation we also have to supply to the bank:

• Proof, per the bank/s requirements, that the Foundation is registered
• Proof, per the bank/s requirements, of who the Councillors of the Company are
• Proof, per the bank/s requirements, of who the Founder of the Foundation is/was
• Proof, per the bank/s requirements, of who the beneficiaries of the Foundation are
• DD/KYC/ re Proof of ID and residential address of the beneficiaries of the Foundation

And invariably the bank will put two, often three, sometimes even 4 rounds of questions to us via email back and forth. To answer those questions most times we need to go back to the client to get instructions/info/docs.

In short the banks are paranoid (a) about the Company being used to launder money and (b) that the client’s business model might create reputational risk to the bank particularly if the business fails or if it falls foul of onshore regulators.

The owners of OCI have been in this line of business for 17 years. When we first got in the business we could get accounts opened in 2 to 3 days. Now, on average, the minimum it takes to get an account opened is 3 weeks post incorporation. Offshore (especially “tax haven”) Companies are considered high risk by the banks; Hence they ask a million questions and want to seemingly conduct a forensic examination of the Company/Enterprise/Owners before even they’ll even consider opening an account for such a Company.

Bank Account Opening Procedure/s

If you engage us to assist you to open an Offshore Account here’s how the system usually works:

(i) When you first contact us we email you a bank account brochure showing details of the 53+ banks that we hold introducer relations with

(ii) Once you’ve confirmed your order for a Company Trust or Foundation (or Bank account) we will email you for completion and return a banking questionnaire (see sample BELOW)

(iii) Once that’s received we send you detailed information as regards banks which we feel are most likely to meet your needs (ie based on the answers given in the questionnaire)

(iv) You tell us which bank you want to open an account with

(v) We send you an order form for that bank

(vi) We use the data in the order form to complete the bank account application forms

(vii) We arrange for the bank account application to be signed by the Company Director and account signatory and then delivered to the bank + we will email you to tell you what you need to do/supply

(viii) You will then furnish us/the bank with a detailed summary of the company’s proposed business activities + proof of your ID/residency as per the bank’s requirements (ie in the event that you are the underlying beneficial owner of a company applying for the account or nominated as account signatory). Certain banks also require a bank reference.

(ix) We follow up with the bank until the account is opened

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

Much has been speculated about the possible impact on financial privacy of the OECD’s MCAA driven Automatic Exchange of Information program (also known as CRS). Smart pundits are beginning to pick up on the fact that MCAA/CRS is unlikely to have anywhere near the impact of what the OECD claims. We stumbled across this article recently in the Tax Justice Network website which highlights but some of the weaknesses of the High Tax Countries Cartel’s latest faux pas:

“The OECD’s Common Reporting Standards (CRS) is the big game in town for curbing cross-border financial transparency. As we’ve often noted, it is a good project, with global reach, but with loopholes.

One of the biggest of these loopholes, perhaps — after Loophole USA — is the problem of ‘fake residency’, where countries allow wealthy people from elsewhere to “buy” their way into being residents of that jurisdiction, perhaps in exchange for their investing a certain amount there, or paying a flat fee.

How does this enable people to escape the CRS?

Very simply: the CRS collects information about the beneficial owners of assets, then transmits that information to the owner’s place of residence. If the residence is fake, then the CRS system will require relevant agencies to collect and transmit the relevant beneficial ownership information to Dominica, say, and Dominica will ignore it, and not tax it either. End of story. The information trail goes cold. Banks, which are a core part of the CRS project, willingly collude in this monkey business.

For most of these fake residency schemes, there is a requirement to hand over relatively serious cash. Dominica, with only 70,000 residents, charges $100,000 for individual fake residency, and they only need a relatively small number of applicants to receive revenues that are meaningful for its 70,000 odd residents, many of whom are quite poor fisherfolk and so on. (No matter that the scheme may be cheating the citizens of other developing countries out of tens of billions: that’s not their concern.)

All sorts of places are jumping on this bandwagon. Following the recent decision of St Lucia to dive in, there are now five such places in the Caribbean alone, including St. Kitts and Nevis, Antigua and Barbuda, Grenada and Dominica.

Of course, this is a recipe for a race to the bottom. The next jurisdiction will offer residency for $75,000, and then it’ll be 50,000.

Well, in fact, the race already appears to be scraping the bottom. And it’s that fast-growing purveyor of offshore sleaze, Dubai. Take a look at this.

In short, you can obtain residence visas through three main avenues.

First, buy real estate in one of the United Arab Emirates, worth over a million Dirhams.

Second, get an employment contract there.

Third – and this is the super-sleazy one…

Incorporation of your own company in the United Arab Emirates. This is the most convenient and efficient option for obtaining business visas in the UAE. It takes only a few weeks to obtain visa and the expenses incurred are relatively low. Moreover, it is not necessary for a company to perform real activity – its business may be purely formal.
. . .

within a few days you are issued a certificate of incorporation of onshore company. Thereupon you and your family members receive residence permit in the UAE.”

The other thing the Article failed to pick up on is that Information Exchange will only effect passive investment Companies. If your company can be characterized as a Trading Operation there will be no information exchange. 

The other obvious things you can do to avoid the risk of Information Exchange are:

(a)  Open a bank account for your Company in  a country which has not signed the MCAA (We have solutions in that regard); &

(b)  Set up a Seychelles Foundation to hold the shares of your Offshore Company (Because section 71 of the Seychelles Foundations Act deems a Seychelles Foundation to be both the legal AND beneficial owner of any asset it holds).

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

ocil@protonmail.com

oci@tutanota.com

oci@safe-mail.net

ociceo@hushmail.com

We’re seeing a lot of interest in this field in particular clients looking for a second residency or a 2^nd passport. The UAE is doing a lot of business in this regard as a number of Emirates offer a nil tax Company product that comes with a residency permit.

The key question with a second residency is how it would all work from a taxation perspective ie who has the right to tax you and why and which country’s tax laws would/should apply?

As we see it there are 2 angles:

(a)   Application of tax laws in theory

(b)   Disclosure and practicalities

Re (a) most countries (particularly big western countries like the USA, EU, Canada, Australia, UK etc) have a very broad definition of “resident for tax purposes”. Regardless of what passport or residency permit you hold if you’re in that country for more than 6 months and or if you have a substantial connection to that country (even if you’re on the ground there for less than 6 months in any tax year) you can be classified as a “resident for tax purposes” making you liable to declare your worldwide income in and pay tax there.  

Substantial Connection

So what constitutes “substantial connection”?

In considering whether you still have a “substantial connection” to your mother country a number of factors are looked at including:

• Do you retain a residency/home in your mother country?
• Do you own any personalty in your mother country (eg a car, furniture/home contents/boat/leisure toys etc etc)
• Do you have a bank account in your mother country?
• Do you have investments or business interests in your mother country?
• Do you retain a professional or trade license (eg Lawyer/Plumber/Doctor/Teacher/Nurse/Engineer/Architect/Builder/Dentist etc) license in your mother country?
• Do you keep current a golf/tennis/leisure club membership in your mother country?
• Do you regularly renew a driver’s license in your mother country?
• Do you have children at school in your mother country?
• Do you have a spouse/partner living full time in your mother country?
• Etc etc etc

Chances are, as a minimum, what you will need to do in order to become non-tax resident in your mother country is:

(a)   Sell your home/residence in your mother country (or cancel any lease you might have over residential premises there)

(b)   Sell any business you own on the ground in the mother country

(c)   Sell all personalty owned/held in your mother country

(d)   Hand in (and not renew) any professional/trade license you may have in your mother country

(e)   Close down any bank/investment accounts you might have in your mother country

(f)    Write to your local IRS/Tax Office and advise that you have departed the country permanently and filed your last tax return.

Disclosure & Practicalities

Re (b) the question here is will a 2^nd residence enable you to incorporate an Offshore Company and or open a bank account for your Company wherein your name won’t be recorded as being a resident of your home/birth country. Generally speaking in these instances you’d need to produce photographic proof of ID AND proof of residential address. If you can produce evidence of ID/Residential address from/as being in your country of 2nd residence, in the event of information exchange, your details won’t be given to the tax authorities of your home/birth country.

The ideal end game there would be that your mother country’s tax authorities would (hopefully) never find out about the existence of your Offshore Company or your connection to it giving them no chance to apply a potentially extensive tax residency law/definition in their favor.

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

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oci@tutanota.com

oci@safe-mail.net

ociceo@hushmail.com

We are often asked by Seychelles IBC owners “what are my Accounting obligations”?

Seychelles Companies are not required to keep audited accounts. In theory a Seychelles IBCs is supposed to keep books of account but that requirement is not enforced (ie nobody ever actually checks or asks “Are you keeping Books of Account? If so please show me copies”.

The only requirement is you will have to tell your Corporate Service Provider where the Company’s “Accounting Records” are being kept.

To summarize by Accounting Records I mean the raw data from which a set of books of account could be created/drawn (By raw data I mean bank statements, receipts, invoices, vouchers, contracts, etc, see below).

Whether to keep accounts in effect is up to you; That said in our view every small business should keep books of account. Which is easy to do yourself these days. There so many DIY (Do It Yourself) Accounting packages on the market presently (eg MYOB, Quickbooks, MS Books etc), for anyone who can use a computer, it’s child’s play.

Here’s a synopsis of the relevant provisions of the new Seychelles IBC Act in so far as Accounting Requirements are concerned:

• Section 2 of the Act: “Accounting records”, in relation to a company, means documents relating to: (i) the company’s assets and liabilities; (ii) all receipts and expenditure of the company; and (iii) all sales, purchases and other transactions to which the company is a party (e.g., bank statements, receipts, title documents, agreements, vouchers, etc).

• Companies are not required by the Act to prepare or file annual accounts or to appoint an auditor. However, under section 174(1) of the Act a company is required to keep reliable accounting records that: (i) are sufficient to show and explain the company’s transactions; (ii) enable the financial position of the company to be determined with reasonable accuracy at any time; and (iii) allow for accounts of the company to be prepared (notwithstanding that a company is not required under the Act to prepare accounts). For such purposes, accounting records shall be deemed not to be kept if they do not give a true and fair view of the company’s financial position and explain its transactions.

• A company shall preserve its accounting records for at least 7 years from the date of completion of the transactions or operations to which they each relate.

• A company that contravenes the requirements to keep accounting records in accordance with section 174(1) of the Act is liable to a penalty fee of US$100 and an additional penalty fee of US$25 for each day or part thereof during which the contravention continues. A director who knowingly permits a contravention of the requirements to keep accounting records in accordance with section 174(1) of the Act is liable to a penalty fee of US$100 and an additional penalty fee of US$25 for each day or part thereof during which the contravention continues.

• Section 175(1) of the Act: A company’s accounting records shall be kept at its registered office or such other place as the directors think fit. Where a company’s accounting records are kept at a place other than its registered office, the company shall inform its registered agent in writing of the physical address of that place (section 175(2) of the Act). It is sufficient if the company provides the Registered Agent with an emailed scanned copy of the completed, signed and dated Notice.

• Where the place at which a company’s accounting records are kept is changed, the company is required to inform its Registered Agent in writing of the physical address of the new location of the accounting records within 14 days of the change of location (section 175(3) of the Act). It is sufficient if the company provides the Registered Agent with an emailed scanned copy of the completed, signed and dated Notice.

• A company that contravenes section 175 of the Act (location of accounting records requirements) commits an offence and is liable on conviction to a fine not exceeding US$2,500.

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

In a previous article we looked at how Contractors can potentially minimize tax through Offshore Incorporation.

This article revisits the specific situation of expat workers ie persons working abroad, away from their home country, temporarily on a contract basis.

A compelling reason of itself to incorporate Offshore as an overseas contractor is to avoid being called on by your home Authorities to pay tax at home. You see, as an expat worker unless you’ve taken certain legal steps to become non-resident for tax purposes in your home country almost certainly you would still be liable to declare your contracting income in, and pay tax on that income in, your country of origin (see below which explains in details what resident for tax purposes means/is) .

In fact, if you are living in a country which does NOT have a Double Taxation Avoidance Treaty with your home country you could even be liable for double tax ie liable to pay tax on your income where you work and liable to pay tax again on that income in your country of origin. All such scenarios can potentially be avoided if you set up a tax-free IBC to act as your contracting entity.

The last thing you want to see happen when you return home is to be presented with a letter from your home tax authorities asking you to pay tax on the money that you earned whilst abroad. Such a scenario can be avoided with advance planning.

What is “Resident for Tax Purposes”?

We are often asked by individuals where (ie in what country/s) am I liable to pay tax?

The starting point is this: If you are regarded at law to be tax resident (ie resident for tax purposes) in a particular country you are liable to pay tax there on your (usually, worldwide) income.

The concept of tax residency however (ie what it takes to be classified as non-tax resident) varies from country to country. Depending on where you originate from you may pass the non-tax resident test of one country but fail the same test had you originated from the country next door.

Let me explain….

The most well-known tax residency test is in fact the oldest ie the days spent at home test. Historically, in most countries (USA excepted – see below), you would be considered non-tax resident for a particular tax year if you have spent less than half of that the year inside your “home” or mother country.

Over the years, and particularly with the proliferation of “fly in-fly out” jobs (seen most prevalently in the oil/mining industries) a number of countries (in particular the more developed countries) have brought into play a multifaceted tax residency test. In other words notwithstanding that you might spend less than half the year on the ground in your mother country if you have a “substantial connection” with your mother country you may still be classified as tax resident of/in that country.

So what constitutes “substantial connection”?

In considering whether you still have a “substantial connection” to your mother country a number of factors are looked at including:

• Do you retain a residency/home in your mother country?
• Do you own any personalty in your mother country (eg a car/furniture/home contents/boat/leisure toys etc etc)?
• Do you have a bank account in your mother country?
• Do you have investments or business interests in your mother country?
• Do you retain a professional or trade license (eg Lawyer/Plumber/Doctor/Teacher/Nurse/Engineer/Architect/Builder/Dentist license etc) in your mother country?
• Do you keep current a golf/tennis/leisure club membership in your mother country?
• Do you regularly renew a driver’s license in your mother country?
• Do you have children at school in your mother country?
• Do you have a spouse/partner living full time in your mother country?
• Etc etc etc

Chances are, as a minimum, what you will need to do in order to become non-tax resident in your mother country is:

(a)   Sell your home/residence in your mother country (or cancel any lease you might have over residential premises there)

(b)   Sell any business you own on the ground in the mother country

(c)   Sell all personalty owned/held in your mother country

(d)   Hand in (and do not renew) any professional/trade license you may have in your mother country

(e)   Close down any bank/investment accounts you might have in your mother country

(f)    Write to your local IRS/Tax Office and advise that you have departed the country permanently and filed your last tax return.

For USA citizens however a unique situation applies. Generally speaking if you are a US citizen you are required to declare worldwide income in and pay tax in America regardless of (a) whether you spend less than half the year there and (b) whether you have any substantial connection with the USA. (For Americans the only way to be classified as “non tax-resident” of the US is to hand in your passport and denounce your citizenship then do all the above things and leave the country indefinitely).

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