Category Archives: Company- Management

Recently I was contacted by a prospective new client who was looking to form a Seychelles IBC. In this particular instance the client was wanting to form a Company with custodial law similar to the United States Uniform Transfers to Minors Act (which allows a minor to be a shareholder of a company and the adult, the custodian/controller).

The querist herein was looking for a system which would give ownership to a 6 year old minor daughter (‘the Minor”) but maximum control and power to the adult custodian/trustee. Specifically the prospect was asking whether Seychelles law would consider either parent as automatic custodian.

So what is the legal position in Seychelles? Can a Minor own the shares of a Seychelles IBC?

In short, in the case of a Seychelles IBC (International Business Company), a parent can be the trustee. Under the Civil Code the father has the administration of the Minor’s property so there is no problem with the father being the trustee. If the parties divorce the parent who has custody becomes the guardian and administrator of the Minor’s property.

The parents could be the directors and the Minor could be the shareholder of an IBC. This might meet the requirements of such an enquirer because, since a Minor can be the shareholder of a Seychelles IBC, I cannot see why he/she cannot be the sole shareholder. A Minor can own property, so he/she should be able to be a/the sole shareholder in a company.

Obviously, the minor cannot act while a Minor except through a guardian, but that does not prevent one from being a Seychelles IBC’s sole shareholder. That said it should be noted that it is difficult to administer the property of a Minor, as loans and mortgages can only be obtained after obtaining the court’s prior consent. Likewise, the sale of the company or shares in it would require court approval. All of that restricts the use to which the IBC can be put. But, if the IBC is to be used for the purchase of a house, say, for the Minor, than there should be no problem.

Also it should be noted Minors cannot make decisions and hence a Minor cannot be appointed to a post which requires decisions to be made.

I’m often asked by people who own (or who are setting up) a Seychelles International Business Company (“IBC”) What records do I have to keep for my IBC?

The record keeping requirements of the Seychelles IBC are as spelt out in the Seychelles International Business Companies Act 1994 as amended. A consolidated copy of the Act (Incorporating all amendments) can be viewed here:  http://greybook.seylii.org/se/CAP100A#!fragment/zoupio-_Toc410944342/KGhhc2g6KGNodW5rxIVhbsSHb3JUZXh0OnpvdXBpby1fVG9jNDEwOTQ0MzQyKSxsZWZ0UMSNZU5vdGVJZDonJyxuxLVlc1F1ZXJ5xLrEvHNjcm9sbEPEiMSKOiFuLHNlYXLEh8WCxYTFhsS7xZXFl8WZaFPEkHRCxYZSRUxFVkFOQ0UsdGFiOnTEoCkp

Kindly note:

(a) A Seychelles IBC is required to keep a share register at the Company’s registered office – see section 28.3

(b) A Seychelles IBC is obliged to keep accounting records and to advise of the address where those records are kept – see section 65.1

(c) A Seychelles IBC is obliged to take minutes of company meetings and to keep copies of same + board resolutions – see section 65.2

(d) The Register of Directors and copies of minutes/resolutions for/re a Seychelles IBC can be kept anywhere but the company must advise the address where they are kept (See section 65.2

A Seychelles IBC must also compile and file in its Registered Office a basic annual return. Here is an example of what a typical annual return looks like (the names/addresses/details etc are all fictitious):

“XYZ Holdings Group Limited (“the Company”)

Number : 999999

ANNUAL RETURN DECLARATION

Section 119 of the International Business Companies Act, 1994 (as amended)

For the period ending 31/12/2015

I hereby declare that:

a)     Accounting records (“records”) are being kept by the Company in accordance with the International

Business Companies Act, 1994 (as amended) at

1 Smith Street, Smithtown, Smith State, Utopia

and that such records shall be made available through the Company’s Registered Agent on request

without delay and;

b)  The Share Register of the Company located at its Registered Office is updated and complete and a true

extract of Registers of the current shareholders, directors and other officers is produced here:

Director: Bla Bla Bla Management Ltd.

Registered Shareholder: Yeh Yeh Yeh Holdings Ltd.

I also hereby declare that:

1)  I understand that should the Company violate the provisions of Section 119 of the International Business

Companies Act, 1994 (as amended), the Company and each director will each be liable to a penalty of $100

and to an additional penalty of $25 each day or part thereof during which the contravention continues.

2)  All records and information will be retained for at least 7 years and shall be made available through the

Registered Agent on request and without delay, even in the event that the Company is struck off.

3)  The activity summary of this entity is sale of commodities, bonds and financial instruments. In relation to

the details about the sale of commodities, please be aware that the company will be engaged in trading and

selling of gold, gold certificates, silver, silver certificates, financial bonds, petroleoum products and

minerals. This trading will be done using brokers already established in those industries and based in

various countries around the globe. In relation of the countries, here is the list. USA, Canada, Mexico, Brazil,

Europe (European Union), Russia, Switzerland, Isle of Man, UAE, Saudi Arabia, China, Hong Kong, Singapore,

Philippines, Japan, Australia, New Zealand

4) All assets of the Company have been lawfully introduced and are not derived from or otherwise connected

with any illegal activity.

5) The Company is not engaged or involved directly or indirectly with any unlawful activity or used for any

unlawful purposes.

6) The Company is not and will not be engaged in any activity which requires a licence, consent or approval

in any jurisdiction without first obtaining such licence, consent or approval or which will breach any

conditions contained in any such licence, consent or approval;

I understand that this Compliance Annual Return Declaration will not be filed publicly and that it will be retained

privately by the Registered Agent. I hereby declare that the above is true and accurate and that I am not providing

false, misleading or inaccurate information.

Dated 04/03/2016

Signed For And On Behalf Of The Company : ________________________________

Name of Director Or Authorized Signatory*: Bla Bla BLa Management Ltd

*Authorization must be in writing and be provided to the Registered Agent. Authorization can be given by way of a

resolution of the directors or a power of attorney. ”

If an asset is owned by an “Offshore” Company (and especially if that Company is registered in a privacy haven) it can be very hard to seize the asset or the Company (ie if a judgment is entered against you and you are the underlying beneficial owner of the Offshore that has received the asset). This is so on 2 counts:

(a)   Foreign judgments are rarely recognized by “Offshore” Courts; &

(b)   Generally the judgment creditor would need to be able to prove that you are the underlying beneficial owner of the Offshore Company (which would be all but impossible to do if the Company is registered in a privacy haven ie somewhere which has no public register of directors or shareholders or beneficial owners).

What you would need to be wary of however is the possible impact of onshore Insolvency Laws. For example in most developed countries:

(a)   any transfer of assets within 6 months of you going bankrupt can be overturned and the asset clawed back by the Bankruptcy Trustee

(b)   a transfer of an asset where the primary purpose of the transfer was to defeat a creditor can be overturned and the asset clawed back by the Bankruptcy Trustee at anytime (ie regardless of when the asset was transferred).

That said the claw back power only pertains to the initial transfer of the asset (eg from you to the Offshore Entity). So what you would want to do is ensure that the asset is transferred through 2 sets of hands ie from you to Offshore Entity One and From Offshore Entity One to Offshore Entity Two.

Why so?

Because the Bankruptcy Trustee should have no power to overturn the 2^nd transfer of the asset.

So if you live in a country which has this model of Insolvency Law you will want to set up 2 Offshore Entities and transfer your at risk assets from you to Offshore Entity 1 and then from Offshore Entity 1 to Offshore Entity 2.

(and for maximum security the smart thing to do would be to set up the 2 Offshore Entities in different countries).

As always local laws can have an impact, so be sure to seek local legal/tax/financial advice before committing to set up an Offshore Company for such purposes.

Commodity Brokering is an activity which lends itself well to Offshore Corporate Structuring.

A Commodity broker is a person or firm who endeavours to connect commodity suppliers or manufacturers with would be purchasers (and/or vice versa).

When such a transaction is successfully completed (ie when the purchaser receives delivery of the commodity) the Broker (ie the middle man) charges a fee which is usually a percentage of the contract price.

If you are a Commodity Broker looking to move Offshore here’s how it would work for you: 

• You set up a zero tax International Business Company (“IBC”)
• The IBC enters into a procurement contract with the supplier (or purchaser as the case may be)
• You are appointed as the IBC’s authorised representative (ie you are authorised on behalf of the IBC to source suppliers and or purchasers and negotiate commission rates etc. )
• The source of the IBC’s income is/would be the procurement contract which would be signed Offshore + the situs of the Contract would be expressed in the agreement as being “Offshore” (ie the nil, tax jurisdiction where your IBC is incorporated).
• Thus from an International Taxation Perspective the IBCs trading profits are generated in a nil tax environment tax free/offshore (ie provided the IBC is structured properly)
• When you need some living/spending money the IBC pays you a wage, or consulting fees or a commission (eg a percentage of profits generated)
• That living/spending money can be paid to your local bank account (which means it would be assessable income wherever you are ordinarily resident for tax purposes 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 authorities to know how much money you are earning by way of wages you could use an anonymous ATM or Debit/VISA card to withdraw your wages from an Auto Tele Machine
• The majority of trading profits could be reinvested Offshore potentially tax free.

As always local laws can have an impact, so be sure to seek local legal/tax/financial advice before committing to set up an Offshore Company for such purposes.

This week’s article discusses the features and benefits of the Mauritius nil tax International Business Company (known in Mauritius as a GBC2).

Mauritius is a group of lush tropical islands in the south western Indian Ocean and is located northeast of Madagascar and some 1,000 miles southwest of Seychelles. A former French and British colony, Mauritius offers:

• A British system of law and parliament
• Political/economic stability
• A well-developed Financial Services Sector; and
• A well-educated productive bi-lingual French/English speaking workforce.

Since gaining independence from Britain in 1968 the Mauritian economy has grown steadily from one based in agriculture to a more diversified economy with Tourism, Financial Services and Agriculture (primarily sugar cane) as its 3 economic pillars. This has seen a resulting rise in standard of living from low to middle income delivering levels of economic and political stability which are the envy of the region.

Whilst better known as a Banking Centre (Mauritius boasts at least 3 world standard “Offshore” Banks) Mauritius offers two forms of nil tax Offshore Company ie the GBC1 ( a domestic designed to do business or hold shares in companies based in DTA Treaty partner countries) and the GBC2.

The GBC2 is Mauritius’s equivalent of an IBC – a GBC2 pays no tax in Mauritius on what it earns internationally, and can only be used to do business outside of Mauritius.

Feature and Benefits of Mauritius GBC 2 Companies Include:

Legal Framework

The Mauritius GBC2 is set up under the Companies Act 2001 and licensed under the Financial Services Act 2007.

Special Characteristics

A Mauritius GBC2 is prohibited from having transactions with Mauritian residents or in Mauritian currency; and

A Mauritius GBC2 is not considered as a Mauritius tax resident company (and therefore does not have access to the double tax treaties of Mauritius).

Liability of Shareholders

The liability of the shareholders of a Mauritius GBC2 is limited up to the unpaid amount of the shares they hold.

Shareholders

The minimum number of shareholders of a Mauritius GBC2 is 1 and the maximum is 25.

The shareholders do not have to be residents of Mauritius.

The shareholders of a Mauritius GBC2 can be individuals and/or legal persons.

There is no public register of shareholders in Mauritius for GBC2’s.

Shareholder’s meetings can be held anywhere.

Directors & Secretaries

The minimum number of directors of a Mauritius GBC2 is 1.

There is no restriction on the nationality or residency of the directors.

Corporate directors are allowed.

Director’s meetings can be held anywhere.

There is no requirement for the directors to be shareholders.

The names of Directors do not appear on any public record.

There is no requirement to appoint a Company Secretary.

If a Company Secretary is appointed the Secretary does not have to be a Mauritius resident

Shareholders Meetings

Every company in Mauritius should hold an annual meeting of its shareholders.

The first annual shareholder meeting should be held not later than 18 months from incorporation.

Annual shareholder meetings should be held not later than 6 months after the balance sheet date of the company and not later than 15 months after the previous annual meeting.

Annual meetings can be held anywhere in the world.

Capital

The minimum capital requirement for a Mauritius GBC2 is US$1.

The share capital can be denominated in any currency, except MURs.

Non-par value shares are allowed.

Bearer shares are not allowed.

There is no capital duty on the issuance of shares of a Mauritius GBC2.

Authorised share capital can be any amount (commonly $US100,000)

Registered Agent/Office

A Mauritius GBC2 must have a registered office in Mauritius.

Every Mauritius GBC2 must have a Resident Agent in Mauritius.

Restrictions applicable to Foreign Investors

There are no restrictions on foreign investors investing in a Mauritius GBC2.

Formation Procedure

The following procedure needs to be followed in order to incorporate a GBC2 company in Mauritius:

1. Reserve the name of the company with the Registrar of Companies.
2. Apply for a Category 1 Global license through a licensed offshore management company.

It usually takes between 3 and 5 working days to register a Mauritius GBC2.

Registration Fees

The registration fee payable to the Financial Services Commission upon incorporation is US$65.

Government Fees

The annual return filing fee is US$65.

The minimum annual tax/license fee is $US235

Confidentiality

The details of the beneficial owner are disclosed to the service provider and to the Authorities but are not available on public record.

The details of shareholders are not available on public record.

The details of directors are not available on public record.

The accounts are not publicly accessible.

The use of nominee shareholders is permitted.

Filing Requirements

Registrar of Companies: A Mauritius GBC2 is required to file an annual return with a summary of its financial position within 6 months from the year end.

Tax Authorities: There is no requirement for a Mauritius GBC2 to file a tax return.

Accounting Records

A Mauritius GBC2 is required to maintain accounting records.

Accounts must be filed (though these are not publicly accessible)

Accounting records can be kept outside Mauritius

The Accounts can be in any currency.

Financial Statements

A Mauritius GBC2 should prepare annual financial statements under IFRS.

In accordance with IFRS, holding companies are required to prepare consolidated audited financial statements on an annual basis. However, consolidation is not required if the company is an intermediary holding company and a holding company further up the structure prepares consolidated financial statements under approved accounting standards.

Audit

A Mauritius GBC2 is not subject to audit requirements.

OCI MAURITIUS GBC2 COMPANY PACKAGES

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 Mauritius GBC2 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 1,700

With tax effective offshore company management (ie including Professional Corporate “Nominee” Director, Shareholder & Company Secretary): $ 2,100

Every effort has been made to ensure that the details contained herein are correct and up-to-date, but this does not constitute legal or other professional advice. We do not accept any responsibility, legal or otherwise, for any error or omission.

This week’s article introduces the Belize Private Foundation.

The INTERNATIONAL FOUNDATIONS ACT of 2010, introduced Belize as a leading player in the world of Private Interest Foundations.

Designed primarily for asset protection purposes the Belize foundation is a civil law alternative to the common law trust which is becoming increasingly popular among international investors. The essential difference between a trust and a foundation is that a trust is a relationship (not a legal entity) between the trustees and the bene­ficiaries created by an act whereby the settlor transferred property to the trustees for the bene­fit of the benefi­ciaries; whereas a foundation is a legal entity in its own right and, unlike trustees (who are answerable to benefi­ciaries), foundation council members are answerable to the foundation.

Of late, a number of offshore ­financial centers in common law jurisdictions have enacted legislation to provide for the establishment of foundations to remain on the cutting edge of this highly competitive industry. The Act is largely based on similar legislation in Antigua, the Bahamas and Anguilla, although consideration has also been given to corresponding legislation in Panama and Isle of Man.

The Act applies only to non-residents of Belize. It is con­ned to ‘international foundations’ and does not deal with domestic foundations.

Key Features of the Belize Private Interest Foundation:

• The Act seeks to make the foundation more user friendly, in effect, a hybrid between an IBC and a trust. Provisions are inserted to facilitate and enhance efficient but discrete registration, renewal, striking off, restoration, dissolution, continuance and discontinuance of foundations, as is currently the case with the IBC’s and the IBC Registry
• Like an international trust, registration is mandatory for international foundations, with the international foundation being invalid and unenforceable if not registered.
• Registration does not require the foundation charter to be registered, only the particulars thereof, need to be furnished.
• While the Act does grant full exchange control and tax exemptions to international foundations, the Act makes it expressly clear that such exemptions only apply to international foundations duly registered.
• Specifi­c provisions are inserted for purposes of civil asset protection. Such provisions provide for non-recognition of foreign judgments and anti-alienation of the foundation endowment as well as the reduction of the limitation period within which to bring actions in relation to a foundation. There are similarities in these provisions and our trust legislation as well as trust legislation from other jurisdictions, although the asset protection features of the Belize international foundations are stronger.
• Provision is also made for substantial security for costs in respect of claims brought against international foundations. This is an attractive feature of the Belize foundations as it seeks to discourage frivolous litigation being instituted in Belize.
• Detailed provisions, clarifi­cations and limitations are also introduced in respect of the founder, the foundation endowment, the charitable foundation as well as other bodies and relevant matters involving the foundation. Such extensive codi­fication substantially eliminates legal guesswork in the interpretation of certain powers, rights and obligations.
• Specifi­c provision is made for permissible disclosure of confi­dential information in pursuance of treaties having the force of law in Belize for mutual legal assistance in criminal matters, tax information exchange, money laundering and terrorism prevention, among other circumstances.
• The fees as specifi­ed in the International Foundations Regulations are highly competitive as compared with other jurisdictions. The registration fee and the annual renewal fee is only US$200.00.
• On the whole, the Act combines the best of both worlds. It replicates in a common law jurisdiction like Belize, the essential characteristics of a civil law foundation while avoiding unnecessary complications. It is hoped that a foundation established under Belize law will prove to be an ideal vehicle for asset protection purposes and will ­find favour with investors from both the common law and civil law countries.

Prices:

For a Belize Foundation, inc 1 year’s basic admin $,1600 ( + $400 if a Nominee Founder & $300 if a Nominee Councillor is required ( both of which would be advisable for tax purposes):

2^nd and subsequent years $715 (or $1,015 if nominees are required)

For more information on Belize Private Interest Foundations please Contact me or click on any of these links:

What is a Foundation:https://offshoreincorporate.com/private-interest-foundations/

What is a Protector: https://offshoreincorporate.com/faq/what-is-a-protector/

What is a Council: https://offshoreincorporate.com/faq/what-is-a-council/

What is a Founder: https://offshoreincorporate.com/faq/what-is-a-founder/

What is a Charter: https://offshoreincorporate.com/faq/what-is-a-charter/

What are Foundation Regulations: https://offshoreincorporate.com/faq/what-are-foundation-regulations/

As ever local laws can have an impact. So be sure to seek local legal/tax/financial advice before committing to register a Belize Foundation

Currency speculation (ie buying up large quantities of a particular currency in the expectation/hope of it being revalued in the near future) is an activity which lends itself well to “Offshore” Corporate Structuring. 

To summarize how it works is:

• You set up a zero tax Offshore Company eg an International Business Company (“IBC”). The Company would be owned by a Private Foundation (ie to get around CFC laws and bank account reporting)
• The IBC enters into a contract with you to buy the Currency (eg Dinars/Dong or etc) at their present value
• The sale will need to be seen to be at fair market value (you can’t just sell the Dinars/Dong or etc to the IBC for one Dollar/Euro!). And the contract of sale will need to be seen to be on normal or reasonable commercial terms. That said the sale contract could be an instalment or vendor finance contract ie where a deposit is paid and ownership is transferred but the seller retains a mortgage until such time as all the instalments have been paid
• Depending on where you live you may be able to “gift” the money to an Offshore entity. It might be difficult to explain why you’re gifting a sum of money to an IBC hence the smarter thing to do might be to set up (and transfer ownership of the property to) a PIF ie Private Interest Foundation (eg a Charitable Purpose Foundation). This one might survive the “sniff test”. Why? Because all day every day well intentioned wealthy persons gift money or assets to Charitable causes
• Once the currency is revalued your IBC exchanges the speculative currency (eg Dinars/Dong etc) for hard currency (eg USD) and banks the profit free of tax
• For all intents and purposes the IBCs trading profits are generated in a nil tax environment tax free/offshore (ie provided the IBC Is structured properly)
• 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 authorities to know how much money you are earning by way of wages you could use an anonymous ATM or Debit/VISA card to withdraw your wages from an Automatic Teller Machine
• The majority of trading profits could be reinvested Offshore potentially tax free.

As always local laws can have an impact. So be sure to seek local legal/tax/financial advice before committing to set up such a structure/business.

For clients looking to (a) avoid Controlled Foreign Corporation Laws and (b) get around the reach of AEOI (Automatic Exchange of Information) protocols the Seychelles Foundation has become a must have as an ingredient of any successful International Corporate structuring plan.

In such a situation a Seychelles Private Foundation is set up to hold the shares of a tax free Offshore Company: The Company does the trading, ie it buys and sells, employs staff etc; The Foundation is completely passive ie it just holds the shares of the Company.

Clients looking to set up such a structure invariably ask me “So how does the money flow?”

Generally speaking the monies usually flow in through the company and no dividend is paid by the Company to the Foundation unless:

(a) You’re in a risky business and want to get money out of the company and into somewhere where it is safe from law suits etc; or

(b) You’re ready to retire, you move to (and become a tax resident of) a tax haven at which time the Company pays  a dividend to the Foundation and the Foundation pays distributions to you which you receive free of tax; or

(c) The Company has made a stack of $ and you want to go and buy an investment or do some (eg forex) trading (in which case the really clever thing to do would be to pay dividends to the Foundation and have the Foundation incorporate a 2^nd company to go buy the investment or do the trading, but more on that another time…).

Bear in mind domestic laws can have an impact. Hence it would be wise to seek local legal/tax/financial advice before committing to create such a structure.

Annual Tax on Enveloped Dwellings (and related taxes) and Non Resident Capital Gains Tax

As many readers will already know, offshore companies owning UK residential property now have potential UK tax exposure that in practice requires the appointment of a tax agent to deal with these new tax liabilities (and their reliefs), created by ATED 1, ATED-related CGT and ATED-related SDLT. Even if for any reason an offshore company can claim relief from the ATED regime, there is now (since 6 April 2015) a new capital gains tax regime for non-UK residents (NRCGT) to consider.

In this article, we provide an introduction to the new taxation regimes applicable to offshore companies owning UK residential property.

UK taxation of ‘Enveloped’ UK residential property: an update:

The UK government have referred to the use of offshore companies to own UK residential property as “enveloping” and have devised a tax regime to discourage such enveloping. This regime may loosely be described as the “ATED” regime, which consists of 3 penal taxes:

(a) An enhanced SDLT charge of 15% when a company acquires residential property for consideration exceeding £500,000.

(b) An annual tax, or “ATED“. The amounts of ATED are set out below: 

These ATED charges will be increased each year by at least the annual rate of inflation of the Consumer Prices Index (CPI). However, the taxable value bands will not be indexed or inflated, which underlines the penal intentions of this regime.

If enveloped residential property had a market value exceeding £2,000,000, on 1st April 2012 then ATED will have been payable for the ATED financial years 2013/14, 2014/15 and 2015/16, at the ATED rate applicable to the 2012 market value of the property.

The taxable value of residential property owned by a company is not determined for ATED purposes each year. The central valuation system is a 5 yearly regime based on a statutory valuation date arising every 5 years. The first statutory valuation date was 1 April 2012, so the next statutory valuation date will be 1 April 2017.

With retrospective effect from 1 April 2012, the property threshold value of the ATED charge was reduced to £1,000,000 for the ATED year beginning 1 April 2015 (so that ATED of £7,000 would have been payable by envelopes for the 2015/16 year).

From 1 April 2016 the market value threshold will be reduced yet further to bring companies owning UK residential property worth more than £500,000 but no more than £1,000,000 on 1 April 2012 within the ATED regime.

Therefore, it is important to assess the market value of enveloped residential properties on 1 April 2012 in all cases where property was enveloped by a company on the first statutory valuation date. The 2012 valuation will constitute the taxable value of the property for ATED purposes until either the next statutory revaluation period occurs, or the market value of the property on the date of its acquisition if the property is acquired by a company within a 5 year statutory period.

(c) ATED-related CGT is the third aspect of the penal regime directed against offshore corporate ownership of UK residential property.

If a company is within the ATED regime described in (b) above, it will generally have to pay ATED-related CGT on any proceeds of sale realising capital gains. The rate of ATED-related CGT is 28% and there is no annual indexation relief. However, re-basing provisions mitigate the impact of this recently introduced tax.

Long-standing envelopes can rely on the rule that companies within the ATED – related CGT regime at its inception are deemed to have acquired the residential property on 5 April 2013 at market value. If a company first came within the ATED regime on 1 April 2015 (as a result of the retrospective reduction in the ATED threshold to £1,000,000) then the company is deemed to have acquired the property for ATED-related CGT purposes on 5 April 2015, at current market value. If residential property owned by a company only comes within the ATED regime on 1 April 2016 (as a result of the retrospective reduction in the ATED threshold to £500,000) then for ATED-related CGT purposes the company will be deemed to have acquired the property on 5 April 2016 at current market value.

There are potential reliefs from these three ATED-related taxes which companies can utilise. The most commonly used relief applies where the company rents residential property or properties on commercial terms with a view to profit. This relief will not be in point if the beneficial owner of the envelope or persons related to him reside in the property. Such occupation by a person connected with the beneficial owner disapplies the relief for the relevant dwelling. But otherwise, conducting a genuine property rental business (or a property development business) is a legitimate way for an offshore company to avoid all ATED related taxes.

What other UK taxes may be payable even if my offshore company is able to claim relief from ATED?

Even if the ATED regime is not applicable to an offshore company owning UK residential property (because of statutory reliefs or because the company is a nominee or trustee) nevertheless other UK tax regimes may be applicable. Rental income arising from residential property to an ATED-relieved offshore company will be subject to basic rate income tax, and whilst it used to be a general rule that non-UK resident companies were not subject to UK CGT, capital gains tax will now be applicable to ATED – relieved offshore companies, because of a recently introduced CGT regime for non-residents (NRCGT) which will apply if an offshore company outside the scope of ATED sells or otherwise disposes of UK residential property realising gains. The new NRCGT was introduced with effect from 6 April 2015.

Non Resident Capital Gains Tax (NRCGT)

NRCGT is not a tax on all forms of UK property: it is limited to disposals of UK residential property, not within ATED. The NRCGT is applicable to non-UK resident individuals, companies and trusts.

In the case of companies, there is an exemption for diversely held companies, and widely-marketed unit trusts, but these exemptions will not generally apply to property rental offshore companies.

The rate of NRCGT is 20%

Given that NRCGT was only introduced on 6 April 2015, existing residential property in the scope of the tax can be re-based to market value on 5 April 2015 for NRCGT purposes. Indexation also applies to NRCGT going forward, so it is not a penal tax in the way that the ATED taxes have been designed to be. But NRCGT, although a more benign tax regime than ATED-related CGT, only applies if ATED-related CGT is not applicable.

De-enveloping

Many clients are now seeking to de-envelope their residential property to avoid ATED taxes. Transfers of residential property from offshore companies to their beneficial owners will be a disposal for CGT purposes. This disposal will probably result in a capital gain for the company (unrealised) which may then be subject to CGT. De-enveloping UK residential property assets will result in loss of UK IHT sheltering for non-UK domiciled beneficial owners, but offshore companies will be likely to become transparent for UK IHT purposes from April 2017 anyway where they envelope UK residential property.

De-enveloping strategies are probably best undertaken sooner rather than later to benefit from the recent CGT re-basing of property values in 2013 (ATED related CGT) and 2015 (NRCGT).

Stamp Duty Land Tax (SDLT)

Another tax that falls to be considered is SDLT particularly in the context of de-enveloping strategies. An assignment of UK property where the transferee does not assume any obligation in connection with the transfer is free of SDLT. As long as the beneficial owner of an offshore company that is “de-enveloping” does not give payment or consideration for the property assets, the main rule is that there is no SDLT charge. However, an exception to this rule applies if the transaction involves either the release of a debt due to the transferor, or due from the transferor. In either case, the chargeable consideration for SDLT purposes is the amount of the debt.

HMRC appear to accept that if the debt is a shareholder loan then on liquidation of the company the loan also dissolves and is not chargeable consideration. Alternatively, the shareholder’s loan can be capitalised before distribution of the property.

A liquidation of a UK property owning company can therefore be considered to transfer UK property to beneficial owners as part of a de-enveloping strategy. Although liquidation will not now avoid CGT charges against the de-enveloping offshore company if there has been capital appreciation of enveloped property, such liquidation can in appropriate circumstances avoid SDLT and the statutory rebasing provisions will provide a significant measure of tax relief for the offshore company from CGT.

If you do own UK property in the name of a UK Company we would strongly suggest you seek legal advice from your UK lawyer and Tax/Financial Advice from your UK Tax Adviser/Accountant asap.

I’m often approached by clients looking to set up a Fund Management or Investment Services Company Offshore.

For the purposes of this week’s article I’m going to focus on the options for incorporating such a business in Seychelles.

You may be surprised to know there are several ways to set up a Funds Management Type Company in Seychelles (including several options that should not require any form of special license).

Here are the options:

(a)    If your main aim is to obtain a license offshore to trade others funds then a Seychelles Securities Dealer’s license might be the way forward (usually referred to in other Offshore Jurisdictions as a Broker’s License). See below for details; or

(b)   Alternatively you could set up a Private (non-licensed) Closed End Fund. See below for details; or

(c)    Another possibility is you could obtain a Mutual Fund license for the proposed business. Seychelles is arguably the quickest, easiest and cheapest place to do this. See below for details;

(d)   Another possibility is to utilise a Seychelles IBC which could be contracted to trade an investor’s money in the broker’s account under Power of Attorney. See below “How To Trade 3^rd Party Funds Using a POA” which explains how that can work; or

(e)   If you just want to assist others to invest or manage monies you could apply for a Financial Adviser’s License in Seychelles. See below for details.

Seychelles Securities Dealers Licenses

A Seychelles Securities Dealer’s License is a license which allows a Business (ie a Seychelles Company) to trade in securities, either as a principal (ie on its own account) or as an agent (on behalf of the Company’s clients). In comparable jurisdictions such a license is usually referred to as a Broker’s License. For more detailed information please contact me.

Private (Non-licensed) Closed End Fund

A closed end fund is in effect a private or collective investment company limited by shares wherein (a) generally the shareholders have the right to hire/fire the directors and (b) where the investment matures and is redeemable at the conclusion of a set period and (c) where the number of shareholders/investors is set (ie you can’t take on board new investors during the defined investment period). If structured and managed correctly such a Company should not have to apply for a Fund License. For more detailed information please contact me.

Seychelles Licensed Mutual Fund

There are three kinds of Licensed Fund that one can set up in Seychelles, a Public Fund, a Professional Fund and a Private Fund. The essential differences and distinctions are as follows: 

1. A Public Fund is one which is designed to be mass marketed. As it is aimed at the general public a very detailed Offering document must be given to and approved by the Authority before a license is granted. (The authority needs to be sure that all plans and risks of the fund are disclosed upfront to the investors).
2. A Professional Fund is one aimed at qualified/sophisticated Investors. Minimum investment is $100,000 and only qualified investors can invest (ie in the case of an individual, the investor must have a net worth of at least one million USD). Unlike a Public Fund one does not need to file a finely detailed Offering document prior to receiving License approval.
3. A Private Fund is one aimed at the Professional Adviser looking to gather together a consortium of investors from his/her client database. It is limited to 50 investors only. No minimum or maximum investment is required. Again, unlike a Public Fund one does not need to file a finely detailed Offering document prior to receiving License approval.

For detailed information as regards Seychelles Licensed Funds click on this link:

https://offshoreincorporate.com/faq/how-does-one-go-about-obtaining-a-fund-license-in-seychelles/

Trading Funds Under PoA

Powers of Attorney are commonly used by Traders (eg Forex Traders) to trade funds for a 3^rd party. How it works is:

(a)   In the case of forex etc trading an account is opened in the name of the 3^rd party investor (“the Account Owner”).

(b)   The Trader sets up a tax free Offshore Company (“IBC”)

(c)    The Account Owner (ie 3^rd party investor referred to in a PoA as “the Principal”) signs a Power of Attorney with the Trader’s IBC which appoints at law the Trader’s IBC as the Account Owner’s Authorized Trader and attorney-in-fact (the “Agent”).

(d) The Trader and the Investor enter into an agreement whereby the Trader is entitled to be paid a percentage of profits generated.

Seychelles Investment Adviser Licenses

Such a license enables you to act Internationally as an investment advisor for Funds, Family Businesses, and High Net Worth Individuals (“HNWIs”).

It is highly useful for Investment Groups who manage and provide advice to investment funds and HNWIs as regards wealth management, asset preservation and structuring advice. The Seychelles Investment Advisor License would be tremendously helpful especially if the client has given you a Power Of Attorney to manage and organize his/her portfolio. Such a license can enable you to act either via agreement or under Power of Attorney.

With this license, you can:

          Advise other persons concerning investment in securities

          Issue, analyze or prepare reports concerning specific portfolios

          Manage a portfolio of securities for another person

As the saying goes there’s more than one way to skin a cat. But the devil is in the detail! Do make sure then that you seek legal/financial/tax advice before committing to incorporate such a business as described above Offshore.