How To Stake Cryptocurrency Using a Tax Free Offshore Company

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

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

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

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

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

Crypto Staking Using an Offshore Company

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

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

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

Once that’s done the following steps would apply…

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

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

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

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

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

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Vanuatu Broker & Crypto Licenses

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

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

Vanuatu is an attractive option in that:

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

License Options

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

There are 4 Licenses you could apply for in Vanuatu:

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

Principal License Application Docs etc Required

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

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

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

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

4. A detailed business plan

5. Three year financial projections

6. A Prospectus

7. AML/CTF Procedure manual

8. Complaints procedure

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

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

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

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

13. Certified copies of evidence of source of funds

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

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

16. Risk management procedure

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

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

Representative License – Docs Etc required

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

2. Copy of CV

3. Certified copies of qualification

4. Certified copy of a passport

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

6. Certified copy of Police clearance certificate

7. Two independent references including contact details of referees

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

Additional information required from an applicant for a Class D license

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

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

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

a). At least one director;

b). A Manager;

c). A Chief Technology officer.

Miscellaneous Requirements

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

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

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

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

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

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

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

Vanuatu Financial Intelligence Unit (VFIU) Registration

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

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

VFIU Registration – Docs required:

1. FIU – Registration Form For Reporting Entity

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

3. VFIU – Key persons form

4. VFIU – Compliance Report form

5. Certified passport for Compliance Officer/Alternative Compliance Officer

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

7. CV for Compliance Officer/Alternative Compliance Officer

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

9. AML/CTF policy and procedure manual

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

Vanuatu Competent Authority (VCA) Registration

The Vanuatu Competent Authority oversees tax administration regulation in Vanuatu.

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

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

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

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

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

VCA registration requirements

1. MDES Registrations are due by 31 March each year

2. Tax identification form

3. Certified copy of company incorporation certificate

4. Registration of company via MDES portal online

SET UP COSTS

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

Vanuatu Company Incorporation

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

Financial Dealer License Application

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

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

VFIU Registration:

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

VCA registration:

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

Annual Renewal

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

Requirement/Docs required:

1. Annual renewal fees need to be paid per invoice

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

3. Audited financial statement for the company

4. Proof of current professional insurance indemnity cover

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

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

+ Disbursements:

VFSC corporate renewal fee: $300

FDL Class A- principal license: $1,000

FDL Class A- representative license: $1,000

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

How To Realise Cryptocurrency Gains Offshore (Almost) Tax Free

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

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

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

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

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

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

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

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

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Offshore Legal Structures for a DEX (Decentralized Cryptocurrency Exchange)

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

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

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

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

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

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

10.A UAE Crypto business license

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

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

DEX Legal Structures – Overview

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Seychelles Private Trust Companies

Introduction

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

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

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

What is a Private Trust Company?

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

Key Features of a Private Trust Company

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

Normal Trusts Established under the Seychelles Trusts Act 2021

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

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

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

Conclusion

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Where To Incorporate a Crypto Token Launch Business Offshore

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

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

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

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

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

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

Non Licensed Options

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

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

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

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

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

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

Samoa

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

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

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

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

Panama

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

Panama is an interesting case study …

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

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

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

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

DISCLAIMER: This information is current as at 14.7.24 and the accuracy thereof may have been altered by legislative changes subsequent to publishing. OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers, financial advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

Cayman Islands Crypto Funds

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

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

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

Benefits of using the Cayman Islands include:

1. Familiarity to Managers and Investors.

2. Robust and Flexible Legal Framework.

3. Stable Political Climate.

4. Availability of High Quality Service Providers.

5. Proven Record as a World Leading Financial Centre.

Questions to Consider when it comes to structure

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

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

11.Do you currently have a fund management company?

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

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

Legal Structures

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

Open-Ended Cayman Islands Exempted Company

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

Closed-Ended Cayman Islands Exempted Limited Partnership

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

Service Providers

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

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

Legal Counsel

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

A Registered Office provider in the Cayman Islands

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

Administrator

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

Custodian

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

Auditor

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

Independent Directors

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

FATCA and AML

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

Bank Account

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

OCI Crypto Fund Services

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

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

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

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

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

DISCLAIMER:

Information current at 4.7.24. OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

Panama Money Remittance Licenses (“MRO”)

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

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

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

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

The application must be accompanied by the following documents:

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

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

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

Compliance and AML

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

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

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

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

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

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

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

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

Taxation

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

Generally, the applicable taxes to this operation would be:

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

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

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

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

The applicable tax rates in this case would be:

Income Tax on net income

Up to US$11,000.00 0%

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

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

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

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

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

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

What OCI can do for you?

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

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

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

Financials

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

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

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

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

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

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

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

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

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