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

DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

How To 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

Could Abu Dhabi be the new BVI?

For decades, many of the world’s richest people chose to safeguard their assets in overseas locales ranging from the Cayman Islands to Switzerland and the British Virgin Islands. But a new wealth hub is becoming wildly popular with billionaires — the skyscraper-studded emirate of Abu Dhabi.

Purportedly one of the richest men in Crypto ie Changpeng “CZ” Zhao, India’s Adani family, hedge fund billionaire Ray Dalio and Russian steel magnate Vladimir Lisin are among the dozens of high net worth individuals who’ve set up Special Purpose Vehicles in Abu Dhabi’s international financial centre this year, according to a review of hundreds of corporate filings in the United Arab Emirates by Bloomberg News.

More than 5000 SPVs now exist in Abu Dhabi Global Market compared with just 46 in 2016, according to data compiled by M/HQ, a wealth advisory firm that’s among the leaders in setting them up. It isn’t publicly known where individual billionaires moved their assets from, why they did so or what each one contains. Yet the wealth influx reflects broad global shifts in how the world’s rich are protecting their money.

Popularised by alleged junk-bond king Michael Milken in the late 1980s, SPVs are separate legal entities that have become go-to structures for high net worth individuals seeking to isolate their financial risk. Essentially holding companies that manage wealth, Abu Dhabi says its SPVs can contain assets such as property and equity.

The financial flows to the UAE mark a new role for its $US509 billion ($760 billion) economy as the ruling Al Nahyan family attempts to diversify away from oil. Abu Dhabi’s gains also come at a time when some nil/low-tax jurisdictions such as the British Virgin Islands and Cayman Islands have faced greater scrutiny from officials elsewhere in the world and seen a slide in new corporate registrations.

“ADGM is a great place to set up SPVs and it’s increasing sharply,” said Bhaskar Dasgupta, a corporate adviser who previously worked for the Abu Dhabi free zone. “We’re seeing more high net worth individuals moving from the BVI, Caymans, Mauritius and Singapore to here.”

Billionaire arrivals

The Middle Eastern business hub is attractive because of its safeguards to ring-fence assets from foreign jurisdictions and the ability to benefit from the UAE’s double tax treaty network.

The UAE’s double tax treaty can help wealthy individuals minimise their tax bill for companies tucked inside the SPV, dependent on whether the additional countries in which they do business have a Double Taxation Avoidance Agreement (“DTAT”) with the Gulf state.

Abu Dhabi is slowly becoming the new financial haven of choice.

Abu Dhabi and nearby Dubai have become thriving global cities. Those making large investments here are eligible for long-term residency and even in some cases UAE passports. Then there are Abu Dhabi’s sovereign wealth funds, which control more than $US1 trillion in assets, and influential private investment firms. (It has also been reported that, for some investors, SPVs offer the potential to bolster high-level relationships with the deep-pocketed Abu Dhabi royals).

Dalio made a splash earlier this year when he set up his within ADGM, coinciding with plans to open a branch of his family office in the emirate, Bloomberg reported in April.

Egyptian billionaire Nassef Sawiris told Bloomberg News that he’s moving his family office to ADGM as well. It has been reported that it will also be registered as an SPV with some staff shifting over from London and Luxembourg.

At the same time, the UAE has in recent years sometimes been a haven for those navigating regulatory challenges overseas.

Zhao, the former CEO of digital-asset exchange Binance, bought his first home in Dubai in 2021, citing its pro-crypto policies. ADGM records show the billionaire set up multiple SPVs in Abu Dhabi this year, including Binary Finance Group Holdings, Alphanest Holdings and CZ Labs Holdings. He has UAE and Canadian citizenship, according to US court records.

“We obviously think ADGM is a great place to domicile companies,” a representative for Zhao said before the US judgement. “Also note, we have companies in other great jurisdictions, too.”

Abu Dhabi’s stamp of approval is also valuable to dealmakers looking to court investment abroad as well as from the emirate’s wealth funds.

The international financial free zone, which was inaugurated in 2015, has also become attractive in recent years because the UAE held off on sanctioning countries like Russia while the US, UK and EU ratcheted up their own restrictions. Meantime, Switzerland, the United Kingdom and some Caribbean nations have cracked down on people with ties to countries navigating sanctions.

In fact, Abu Dhabi’s structures are increasingly winning the support of the royals themselves. Subsidiaries of Royal Group, which is controlled by National Security Adviser Sheikh Tahnoon bin Zayed Al Nahyan, the UAE president’s brother and one of the world’s most influential dealmakers, have set up a number of ADGM SPVs in the second half of this year, according to filings and people familiar with the matter.

One noteworthy new arrival to ADGM is Lisin.

The fourth-wealthiest Russian on the Bloomberg Billionaires Index set up the SPVs Serenity II Holdings and Nebula II Holdings in May 2023, Bloomberg reported. Lisin was drawn by Abu Dhabi’s stock exchange, its links to global investors like Dalio, and economic and legal stability, people familiar with the matter said. A spokesperson for the billionaire, who’s not sanctioned by the US, UK or EU, declined to comment.

Yann Mrazek, M/HQ’s Dubai-based managing partner, said the war in Israel and Gaza could prompt even greater demand for ADGM SPVs. The Swiss-trained lawyer said he recently got a request from a Palestinian entrepreneur looking to use the structure for asset protection.

Caribbean crackdown

Money outflows from havens like the BVI began around 2017, when Hurricane Irma ripped through the island. This prompted some key functions for the lucrative corporate-registry business to shift to the head offices of fiduciary firms in Europe and Asia, according to Jocelyn Viernes, the Dubai-based head of administration at Sovereign Corporate Services, another firm involved in ADGM SPV creation.

More recently in February, EU finance ministers blacklisted the BVI as a tax haven, hitting the island with administrative penalties and restricting the territory from some European funding. (That move was subsequently reversed in October after legal changes implemented by the local government.)

A separate push by the Cayman Islands to get off the Paris-based Financial Action Task Force’s gray list, which was successful this October, prompted the territory to increase its reporting requirements for new corporations.

The BVI is currently on pace for its worst year for registrations in at least a decade, according to the BVI Financial Service Commission. Meanwhile, the Cayman Islands are on track to register just over 10,000 companies in 2023, which would mark the fewest incorporations since 2013, according to the Cayman Islands General Registry.

The UAE has faced its own scrutiny from the FATF, particularly since its inclusion on the gray list in March 2022, but the issue of SPVs hasn’t been central to conversations on getting off the list, people familiar with the matter said.

“ADGM’s strategic location, policy stability and proximity to capital are key attractions for high net worth individuals, offering a secure alternative to the traditional but currently less predictable BVI and Caymans,” said Sam Blatteis, CEO of The MENA Catalysts, which provides government relations advice to firms in the Persian Gulf.

Attractive jurisdiction

An ADGM spokesperson said the free zone is attractive for a number of reasons, including the use of English common law, robust investor protection and low taxation. Its SPVs have many benefits such as no minimum share capital requirement, no restrictions on the nationality of shareholders and the ease of share transfer, the representative said.

Service providers who help set up the SPVs said part of ADGM’s appeal is the confidentiality granted to wealthy individuals. While the corporate registry lists directors and shareholders, there’s less red tape around auditing and ultimate beneficial owner disclosures, they said.

Abu Dhabi’s stamp of approval is also valuable to dealmakers looking to court investment abroad as well as from the emirate’s wealth funds.

Indian billionaire Gautam Adani — whose stocks were hit by a short-seller attack this year but are now recovering — has drawn funds from Sheikh Tahnoon’s International Holding Co. in recent years.

The billionaire’s family has an SPV set up in ADGM called Ardour Investment Holding, according to people familiar with the matter as well as filings.

The free zone’s registry shows that Ardour was set up in August 2023. Its shareholder is RVG Exim DMCC — a firm that Dubai corporate records show was set up by the tycoon’s brother Vinod Adani and managed by Subir Mittra, the head of the Adani private family office.

Ardour recently boosted its stake in the billionaire’s Adani Power Ltd., according to company filings. Adani Group representatives didn’t respond to request for comment.

Another tycoon to recently set up in Abu Dhabi is Murtaza Lakhani, the Pakistani trading mogul whom Bloomberg reported is central to Russia’s global oil business. His lawyers have denied that their client has any current role in Russian oil.

In June, Lakhani registered an SPV called Kings Road Investments Holding Ltd, where he’s listed as the sole shareholder, ADGM records show. Lakhani didn’t respond to requests for comment.

Meanwhile, several executives tied to luxury Swiss watchmaker Audemars Piguet set up their own SPV as far back as December 2021, ADGM records show.

Part of Abu Dhabi’s success in wooing more SPVs stems from how the UAE has leveraged its golden visa and passport programs in the past couple years, according to Armand Arton, the founder of citizenship firm Arton Capital. These reforms have encouraged the wealthy to make the Gulf state a more permanent home.

“We see this trend of more billionaires moving to the country,” said Arton. “Once they feel welcome and safe, they then look to relocate their businesses and assets, with ADGM being one of the preferred places.”

Bloomberg

Where To Incorporate a Crypto Business Offshore

Are you looking to launch a Crypto or Blockchain focussed Enterprise?

If so, straight up, you’ll be pleased to know, that Offshore Companies are widely used in the Cryptosphere including for:

Bitcoin Mining
Trading Cryptocurrencies
Investing in Cryptocurrencies
ICO Launches
Cryptocurrency Exchanges
Trading/Manufacturing NFTs
Launching DAOs
Crypto Token generation/sale
And more

Crypto Business License Options

What kind of Crypto business do you intend to do?

Would your prospective/targetmarket dictate (eg in terms of market credibility) that you come to market as a Licensed Organisation?

(if so) firstly you will need to work out what kind of Crypto license you could or should apply for.

There are a number of Licenses you could potentially apply for “Offshore” for Crypto/Blockchain related Enterprises 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
A UAE Crypto business license

The cost to incorporate and apply for a License for businesses of the kind described above typically ranges from $US20,000 to circa $50,00 depending on which jurisdiction you choose.

Decentralized Autonomous Organizations (DAOs)

If you’d prefer to not have to go down the VASP Licensing road you might want to consider setting up as a DAO.

A DAO is a Blockchain structure (like a secure database), that any member can leverage to self-govern through participation; A DAO sets rules – baked into code – and permits voting through digital tokens (a form of cryptocurrency) — all while leveraging smart contracts. Only that DAO’s Token holders have the power to vote.

In essence, a DAO allows groups of participants to create organizational forms beyond the hierarchical, top-down corporate firm (which must be responsive to the needs of a board and shareholders). DAOs essentially eliminate or minimize the roles of executives and managers in the organization, relying instead on transparent rules that apply to all members and participants.

The primary aim behind the creation of a DAO is to create a virtual entity to replace the central management of previous forms of organization. A decentralized autonomous organization (DAO), is an organization, particularized by rules encoded as a computer program, that is transparent, and controlled by the organization members. In terms of decision making a DAO is, in effect, unable to be influenced by any outside party including any central government.

DAOs are particularly prevalent in the Ethereum blockchain ecosystem, combining ideas about organizational forms, coordination, network effects, blockchain, and smart contract technology. A DAO allows a group to organize around a mission or goal and to coordinate the mission via smart contracts, enforced immutably and autonomously on the blockchain. DAOs represent an evolution in how people coordinate with one another, as the organization itself is autonomous from any third party intermediary’s influence and goals.

The main reason a DAO is formed is to decentralize and automate the governance of an organization. The rules by which a DAO operates are encoded as a computer program that is accessible via the blockchain, and controlled by all of the organizing members, rather than by a central governing board. Since the blockchain is essentially a public record, the DAO seeks to provide total transparency, requiring that all of its financial transaction records be recorded by a public facing blockchain. There is no top-down hierarchal structure to a DAO; A DAO depends almost entirely on the operation of autonomous smart contracts to enliven the rules and carry out the decisions made by/within the organization. In terms of where you might incorporate a DAO in a low or nil tax environment:

You could set up a Marshall Islands DAO LLC
You could set up a Wyoming DAO LLC
You could set up a Panama Foundation DAO

You could also potentially set up a Caymans Foundation Company to act as a DAO. However, you’d need to be able to satisfy the Compliance people in the Caymans that what you’re proposing is a not a licenseable under the Caymans VASP Legislation.

Non Licensed Options??

If you’re a typical start up you’ll probably find it hard to find the 20-50k needed to apply for a Crypto Business License.

If you’d prefer to go down the non-licensing road you could incorporate a Crypto Token Manufacturing/Marketing business as a Company in St Vincent (which has passed a VASP Bill but which has not come into existence) or (ideally) in Panama…. Panama tried to pass a VASP law but it was struck down as unconstitutional by the Supreme Court. Hence there is no 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.

Samoa also has not passed VASP Legislation (and has not publicly stated an intention to do so).

Samoa is attractive in that it has rather minimal annual compliance requirements (eg there is no requirement to prepare formal accounts or to file a return)

For details in regards to Samoa Company formations check this Link: https://offshoreincorporate.com/samoa-international-business-companies/

For details in regards to Panama Company formations 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

Where to set up an Unlicensed VASP Business Offshore

Are you looking to do a Crypto Token Launch?

Or to set up a Cryptocurrency Exchange?

Most Offshore jurisdictions have either passed (eg Caymans, BVI, Mauritius etc) or are in the process of passing VASP (ie Virtual Asset Service Provider) Legislation. The nett effect of VASP Laws is if you propose to do an ITO or IDO or to mint a new Crypto coin (or if you’re planning to set up a Cryptocurrency Exchange business), and if you want to incorporate in a country where such activity is now regulated you need to apply for a VASP License before you can incorporate.

Previously you could set up such a business in Belize or Seychelles or St Vincent without needing to apply for any form of Special License. Unfortunately. these jurisdictions have all announced that they intend to pass VASP legislation/regulations in the near future and until then, as a matter of policy, they won’t be allowing any business that looks or smells like a Virtual Asset Service Provider enterprise to incorporate in the jurisdiction.

Unfortunately to get your hands on a VASP license is not easy. You’ll need to have deep pockets (eg $US50,000+) to cover legal fees/set up costs and you’ll need to be patient as such a license can take 3 months+ to be approved.

But there is still a viable “Offshore” Incorporation option that does not require one to go down the VASP licensing road, ie the world’s second most popular “Offshore” Jurisdiction, the mighty Panama.

How Panama came into play as a VASP Enterprise locale is an interesting story.

The Panama Legislature in October 2022 passed a Bill that would have established a VASP regime in Panama for the following activities:

Exchange between virtual assets and fiat currencies.
Exchange between one or more forms of virtual assets.
Transfer of virtual assets.
Custody virtual assets or instruments that allow virtual asset control
Participation and provision of financial services related to the offer or sale of a virtual asset by an issuer, including, but not limited to security token offerings (STOs).
Financing through virtual assets
Authorized virtual asset Liquidity Provider
Digital Wallet service provider

The bill proposed that the Superintendency of Banks would be the regulator for VASP (virtual asset service providers), payment systems, and electronic money issuers.

The possibility of payments in crypto assets to the State was also to have been regulated by the bill.

BUT under the Panama model of republic such a law can be challenged by the President of Panama.

Which is exactly what happened…

And the Panama Supreme Court found for the President declaring the law Unconstitutional.

Which means that you can incorporate a VASP business in Panama without needing to apply for any form of Special License (ie providing you’re not planning to create/offer a “Security”)

Panama (which does not tax income earned outside of Panama) offers 2 low cost/low admin entities that could potentially be deployed to own and operate a VASP business ie:

A nil tax SA Company: https://offshoreincorporate.com/panama-offshore-companies/ ; AND

A nil tax Private Foundation: https://offshoreincorporate.com/panama-tax-free-foundations/

OCI specializes in assisting Blockchain startups and can assist you to incorporate in Panama should you wish to head down that road.

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

BVI PRIVATE TRUST COMPANIES (PTCs) REVIEWED

This Guide focuses on the legislative enactments concerning the establishment of private trust companies in the British Virgin Islands (BVI) and illustrates the clarity of the new regulations following the wholesale repeal of the Banks and Trust Companies (Application Procedures) Directions 1991.

INTRODUCTION

New rules relating to private trust companies (PTCs) known as the Financial Services (Exemptions) Regulations, 2007 (Regulations) came into force in the BVI on 1 August 2007 following amendments made on 15 January 2007 to the BVI’s Financial Services Commission Act, 2001 (FSC Act), the latter paving the way for the introduction of the Regulations. Further amendments to the trust legislation were introduced in 2013, enhancing the PTC regime.

In this Guide, we discuss the Regulations and outline the conditions which must be satisfied to enable a company to benefit from the exemption from the trust licensing regime in the BVI as well as, in particular, highlighting the new responsibilities imposed by the new rules upon the registered agent acting for a PTC.

Under the current regulatory framework, certain types of company are able to seek an exemption from the usual requirement to obtain a trust licence under the BVI’s Banks and Trust Companies Act 1990 (Act). It was the general intention of the BVI Government to create a system whereby specific classes of trust company are granted an exempt status.

Most unremunerated PTCs which do not offer trustee services to the general public (i.e. do not carry on the business of a trustee) are now able to benefit from the new exemption regime. Also, unremunerated BVI-incorporated companies which merely hold assets as nominees (or bare trustees) are automatically entitled to benefit from the exemption, provided that they do not carry on the business of a trustee.

WHAT IS A PRIVATE TRUST COMPANY?

A PTC is, essentially, a company which possesses trustee powers and which does not conduct trust business with the general public, its sole purpose being to act as a trustee of a family trust or a group of related trusts.

The Regulations define the term “private trust company” to mean a company:

That is a qualifying BVI company;
That is a limited company within the meaning of the BVI Business Companies Act, 2004 (BVIBC Act); and
The memorandum of which states that it is a private trust company

A “qualifying BVI company” in turn is defined to mean a company that:

has first incorporated under the BVIBC Act;
has been re-registered under Part II of Schedule 2 of the BVIBC Act;
has been re-registered under paragraph 6(1)(a) of Part III of Schedule 2 of the BVIBC Act and in respect of which an election to disapply Part IV of Schedule 2 has been registered; or
has been re-registered under paragraph 6(1)(b) of Part III of Schedule 2 of the BVIBC Act and in respect of which an election to disapply Part VI of Schedule 2 has been registered.

TRUST LICENSE EXEMPTION

A PTC will not be required to obtain a trust licence under the Act where its trust business consists solely of either:

Unremunerated trust business; or
Related trust business.

For the avoidance of doubt, the business of a PTC shall be deemed to consist solely of unremunerated trust business, notwithstanding that part or all of such unremunerated trust business also qualifies as related trust business. The same rule applies in respect of related trust business.

What is Unremunerated Trust Business?

Unremunerated trust business is trust business which is carried on by a PTC where remuneration is not payable to, or received by, the PTC or indeed any person associated with the PTC, in consideration for, or in relation to, the services that constitute the trust business.

For the purposes of the rules “remuneration” includes money or any other form of property and it matters not whether such remuneration is payable, or is received, out of the assets of a “relevant trust” (defined by the Regulations to mean a trust with respect to which a PTC is providing services that constitute trust business), from the settlor or beneficiary of such a trust, or from any other person pursuant to an arrangement with the settlor or a beneficiary of a relevant trust.

Any remuneration paid to a director of the PTC or a person associated with the PTC is regarded as “remuneration” under the new rules unless it is paid or received by way of the director’s remuneration:

With respect to professional director services provided to the PTC; and
The director is not otherwise associated with the PTC, i.e. by virtue of having a direct or an indirect beneficial interest in it.

The Regulations make clear that payments which are made to a PTC to indemnify it for costs and expenses paid or incurred by the PTC (e.g. regulatory fees and registered agent fees) will not be regarded as “remuneration” within the meaning of the new rules.

What is Related Trust Business?

Related trust business is trust business provided in respect of a single trust or a group of related trusts where each beneficiary of a trust is either a “connected person” in relation to the settlor of that trust, or is a charity. The term “connected person” refers to any person whose relationship to another is established by affinity or consanguinity (which may also be established by adoption).

A trust is, in respect of another trust, a “related trust” where the settlor of the first trust is a connected person with respect to the settlor of the second trust. Thus, in a group of trusts, the trusts are “related trusts” if the settlor of each trust in the group is a connected person with respect to all of the settlors of the other trusts in that group.

A PTC will be treated as carrying on “related trust business” if it acts as trustee of:

(a) a single trust, all the beneficiaries of which are charities or have certain specified blood, marital or adopted relationships to the settlor or are the settlor; or

(b) more than one trust, each of the settlors of which have any of those relationships to each other and all the beneficiaries of which have any of those relationships to the settlors of the trusts, or are the settlors (or are charities).

WHEN IS THE EXEMPTION LOST?

A PTC will lose the benefit of the exemption under the Regulations where:

it fails to ensure that at all material times its registered agent holds a Class I trust licence issued under the Act (incidentally, where the registered agent ceases to hold such a licence, it has a period of four weeks’ grace from the date on which the licence ceased before the disqualification applies);
it carries on business that is not trust business;
it solicits trust business from members of the public; or
it carries on any trust business other than either unremunerated trust business or related trust business.

WHAT ARE THE CONSEQUENCES OF THE EXEMPTION BEING LOST?

Where the exemption is lost and a company no longer qualifies as a PTC, there will be an obligation on the PTC’s part to ensure that it forthwith removes any reference in its constitutional documents to it being a PTC. The company will be regarded as carrying on unauthorised financial services business if it either carries on any trust business without having the benefit of the exemption or, having the benefit of the exemption, it carries on trust business which is not unremunerated or related trust business.

The Regulations impose strict duties on a registered agent which acts for the PTC where the exemption is lost (see section 7 below).

SANCTIONS

Unremunerated trust business and related trust business are both deemed to represent “financial services business” under the FSC Act. This means that the BVI Financial Services Commission (FSC) has available to it certain sanctions specified under the Act which will apply in the event that there is any breach or contravention of, or non-compliance with, a requirement on the part of a PTC. The PTC is effectively treated as a licensee under the FSC Act.

For example, section 32 (power to request information and documents) and the enforcement provisions of sections 36 (appointment of examiners), 37 (enforcement action), 37A (public statements) and 40 (power to issue directives) of the FSC Act all apply to a PTC subject to necessary modifications, although these provisions in no way restrict the powers of the FSC to take appropriate action against a PTC which is acting in breach of the Regulations.

DUTIES OF THE REGISTERED AGENT OF A PTC

A registered agent intending to act as such in respect of a PTC is obliged:

to satisfy itself that the company complies with the requirements of the Regulations;
on a periodic basis, to take all reasonable steps to satisfy itself that the company continues to comply with the requirements of the Regulations;
to take all reasonable steps to ensure that up-to-date records of the following documents in respect of the company are kept at the registered agent’s office in the BVI:

(a) the trust deed or other document that creates or evidences a trust and any deed or document that varies the terms thereof, for each trust; and

(b) documentation and other information on which the registered agent has relied to satisfy itself that the company complies with the requirements of the Regulations; and

(c) to immediately notify the FSC in writing if at any time the registered agent forms the opinion that the company has failed to comply with the requirements of the Regulations.

As alluded to above, these duties call for continued vigilance on the part of the registered agent and the degree to which it adheres to these obligations will be an important measure as to its liability in the event that a PTC is found to be in breach of the Regulations.

FORMAL APPLICATION NOT NECESSARY

There is no formal process for application to the FSC seeking approval for the grant of exempt status. Exemption will be automatic if the PTC meets the criteria laid down in the Regulations. Apart from an annual return which will need to be filed by the PTC, the only other document required to be filed publicly are the PTC’s Memorandum and Articles of Association.

The Memorandum and Articles of Association do not need to include the names of the directors or shareholders of the PTC. Such information is retained separately by the registered agent of the PTC and so those details are not a matter of public record in the BVI. Furthermore, none of the substantive documents relating to the trust, copies of which must be held by the registered agent (as mentioned in section 7 above), need to be presented to the FSC. Some clients may find this a particularly attractive aspect the overall BVI regime.

BARE TRUSTEES AND NOMINEES

As mentioned previously, a company is not required to obtain a trust licence under the Act where it acts solely as a bare trustee or a nominee. The criteria for determining whether a trustee acts as a bare trustee for the purposes of the Regulations will be specified in the Regulatory Code (which is yet to be issued by the FSC).

ADVANTAGES OF ESTABLISHING A PTC

PTCs enable family-controlled structures to be created whereby family members and/or trusted family advisers, who together have a wealth of knowledge about the family’s affairs, can become involved in the decision-making processes by assuming the role of director or consultant to the PTC. As the assets of the PTC are controlled by a board of directors comprised of the settlor and his family and/or persons who are familiar to the settlor and his family, this enables them to exercise more control over the trustee’s actions. The structure provides considerable comfort to those who are ordinarily reluctant to relinquish control of assets to third party trustees over whom they are able to exercise little or no governance. This added element of control, also affords greater privacy and confidentiality for the settlor and his family over their assets and activities.

Institutional trustees may not be prepared to take on the role of trustee where the trust is comprised of high risk assets because they may consider the potential liability resulting from their fiduciary duties over such assets as being unduly onerous. Where the PTC provides the trusteeship, there is still a role for the institutional trustee as it may be convenient for the board of directors of the PTC to delegate the PTC’s administrative function to a professional trustee services provider. The provider will be more inclined to take on this purely administrative function as it will have only a contractual relationship with the PTC (rather than a fiduciary relationship) with the consequent mitigated risk and restricted liability over the trust assets. This, in turn, is likely to result in a cost-saving for the family as lower risk invariably translates into lower professional fees.

Lastly, as it is a company, a PTC also offers the benefits of limited liability status.

PTC CAN ACT AS TRUSTEE OF A VISTA TRUST

The BVI’s highly acclaimed VISTA trust legislation was amended in 2013 to allow for co-trusteeship of VISTA trusts. A PTC may now be the qualifying trustee of a VISTA trust as an alternative to a licensed BVI trustee. Thus clients have a number of options when selecting trustees of VISTA trusts: the sole trustee may either be a licensed BVI service provider or a PTC; alternatively, one or more foreign companies or individuals may act as co-trustee together with the licensed BVI trustee or a PTC.

CONCLUSION

In the short time since their introduction, the Regulations have made a positive impact in the BVI as the BVI is now able to offer a more efficient and more cost-effective application process to those seeking to incorporate a PTC than that previously available under the old regime. applebyglobal.com 5 BVI-incorporated PTCs offer significant opportunities for families in their generic wealth planning and protection strategies. Provided that careful consideration is given to the incorporation of the PTC and the transaction is properly structured, a PTC can be a very useful vehicle for those who have previously felt reluctant to adopt trust structures because of traditional concerns regarding trustee control, cost and confidentiality issues. Indeed, it is becoming common practice in the BVI for structures to be established using a BVI VISTA non-charitable purpose trust (which is administered by a locally licensed trust company pursuant to a services agreement) to hold the shares of a PTC, which in turn will hold and deal with the shares of the holding or operating companies in accordance with the terms of one or more family trusts which the PTC is able to administer. As well as benefiting from the advantages offered by the BVI’s VISTA regime thus disengaging the trustee from any responsibility over the management of the PTC and providing an effective succession mechanism in regard to the directors of the PTC through the “Office of Director rules”, the purpose trust is an ideal vehicle for ownership of the PTC where personal ownership can give rise to tax or other problems for individual shareholders.

PTCs have become increasingly popular in offshore financial centres in recent times and the new BVI legislative framework for PTCs is intended to be the latest in a series of financial services-related statutes which have been enacted by the BVI government over the last few years and have established the BVI as one of the leading trust jurisdictions.

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com