Category Archives: Company- Management

Russia recently passed a Controlled Foreign Corporation Law.

A Controlled Foreign Corporation (or CFC) Law is an onshore law which purports to tax income or capital gains made by Companies incorporated Offshore but which are controlled from onshore.

Essentially how a CFC law works is if management and control of a tax free Offshore Company is seen to lie in your hands, or if you have the capacity to own the overriding majority of shares in the tax haven Offshore Company, then you are required to declare in your local tax return profits made by the nil tax Offshore Company.

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

TWO IMPORTANT TAX PLANNING ISSUES TO CONSIDER:

1. 1.      Management and Control

The first thing to note is you will need to refrain from nominating yourself as Director and Shareholder of your tax free International Business Company (“IBC”) because this places management and control of the Company in your hands.

Generally speaking, and particularly where CFC laws are in place, an Offshore Company which is seen to be managed and controlled from Onshore can be taxed onshore.

Hence when setting up a tax free Offshore Company, if you want to minimise the chances of the Company being taxed “onshore”, Management and Control of the Company will need to be, and be seen to be, taking place from Offshore. How that can be achieved is by deploying a Nominee Shareholder and or Nominee Director as part of the Corporate structure.

There are a number of features that can be built into the Corporate/Legal structure of your IBC to ensure that your ownership rights are protected (and which will prevent the Nominees from running away with your property or money). For more information on that and how a Nominee Service can work for you please click on these links:

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

https://offshoreincorporate.com/faq/how-can-i-protect-my-underlying-ownership-of-my-offshore-company-where-a-nominee-is-engaged-to-act-as-director-or-shareholder/

1. 2.      The Impact of Russia’s CFC Law on the Shareholding Structure

The bottom line is with Russia having recently passed a Controlled Foreign Corporation a nil tax Offshore Company or IBC by itself won’t be of much use to you. Why? Because Russia’s new CFC law requires you to declare and pay tax at home on the income of any Offshore Corporation that you control or have the capacity to control (And if you fail to report the IBC’s income to the Russian authorities you will be committing an act of tax evasion. Tax evasion is a crime punishable by imprisonment).

There is a potential solution however. The solution is to set up a Foundation as well as an IBC.

Why set up a Foundation?

As discussed if an IBC alone is used you will still be liable to declare and pay tax at home on your IBC’s earnings

It would be wise then to set up a Private Interest Foundation to own the shares of your tax free Offshore Company.

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

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

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

Prices start from as little as $1,600. For more information Foundations please visit this page from our website:

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

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

Local conditions can have an impact. Hence it would be wise to seek local legal/tax/financial advice before committing to set up an IBC or Foundation.

The UK Agency Company is commonly used as a below-the-radar way to (tax effectively) do business from Offshore with EU clients.

UK companies can be used to act on behalf of offshore companies in a variety of transactions. Typically in such arrangements the UK Company operates as a “nominee” or “agent” or “bare trustee” for the offshore company. Whatever legal term is used to describe this sort of arrangement, the outcome will be that:

a)     the offshore company’s existence is not normally disclosed to the third parties who deal with or contract with the UK nominee company.

b)      it is the UK company that raises invoices, and enters into contracts, and receives trading income on behalf of the undisclosed offshore company.

c)       the UK company receives a commission from the offshore company for its nominee services. The amount of the commission will be quite small – typically 1% or 2% – bearing in mind that the business activities are managed and controlled by the undisclosed offshore company which carries on the trade or business in the name of the UK Company. Because all the UK company is doing is granting the offshore company the right to use its name, and because the UK company takes no other part in the business activities and receives a full indemnity from the offshore company, it cannot justify receiving more than 1% or 2% of gross fees or gross profits on arm’s length or commercial principles. Obviously each case needs to be considered on an individual basis.

d)      the UK nominee company only declares for UK tax purposes and statutory accounting purposes its commission. This is the correct approach assuming an appropriately drafted nominee agreement is in place between the UK Company and its offshore principal. It is also assumed that the offshore principal’s trading activities do not take place in the UK; that the offshore company’s management and control is located outside the UK; and that the beneficial ownership of the offshore company is non-UK resident.

e)      the UK company can register for VAT in the UK. In this regard it is normally essential that trading activities take place in at least two non-UK but EU countries, or that the UK nominee company is involved in “triangular” trading.

• If the UK Company is involved in a triangular trade it is entitled to apply for a UK VAT number which eliminates VAT for all parties in this transaction.

• The UK Company receives a commission of say 2% on the gross margin.

• The UK Company would receive 100% of the sales revenue into its bank account.  On instructions from the offshore principal the revenue is then paid from the UK Company’s bank account to the offshore company’s bank account less the 2% commission.

One question I’m commonly asked is Can a UK Agency Company Do Business in the UK?

Technically yes a UK Agency Company can do business in the UK.

However, ideally, the UK agency company should not trade with other UK companies as this would be regarded as generating UK sourced income, which would be subject to UK assessment in full.

If activities are anticipated with UK companies, these should/could be concluded directly with the offshore principal company rather than via the UK agency company; this would not create any concerns or issues from a UK perspective as this would not trigger undue inspections or unallowable deductions like in many other countries.

The other option if you are looking to business in the EU Common Market via Offshore – and a significant proportion of your clientele is from the UK – is to set up an Irish Agency Company (which is a little more complicated than, but can be used in the same way as, a UK Agency Company)

When reviewing a new client’s individual needs/aspirations and in coming up with a bespoke Offshore Corporate Structuring Plan I often recommend that the client set up a tax free Offshore Private Foundation.

Often (a little too often for my liking, truth be told) I’m asked Do I really need a Foundation?

Typically a Foundation is set up to hold the shares of a tax free Offshore Trading Company  (or low tax Offshore Trading Company). Consider:

1. The Foundation is set up purely so that you should not have to declare and pay tax where you live on your Tax Free Offshore Company (IBC)’s profits
2. The Foundation doesn’t do anything. It just holds the shares of the IBC
3. The money revolves in and through the IBC
4. The Foundation doesn’t receive any money unless or until:

(a) You decide to sell the business (ie the IBC); or

(b) You’ve moved your place of tax residence to somewhere which will not tax you:

(i) on dividends paid to the Foundation; or

(ii) on distributions paid to you by the Foundation.

If you DO NOT Have a Foundation in place to hold the shares of your IBC and you live in a country which has CFC laws you will be required to declare and pay tax at home on all the IBC’s profits. Failure to so declare would be an act of tax evasion the penalty for which is imprisonment.

The IBC should not have to declare income in or pay tax where it’s incorporated. Why not? Because IBC jurisdictions do not tax their Companies on what they earn outside of the country of Incorporation.

What is a Controlled Foreign Corporation Law?

A Controlled Foreign Corporation (or CFC) Law is one which purports to tax onshore income or capital gains made by Companies incorporated Offshore but which are controlled from onshore.

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

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

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

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

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

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

I’m often asked can I transfer ownership of my home or investment property/s to my tax free Offshore Company (“IBC”)?

It can be done legally but you need to assume the worst case scenario (ie that that the local tax authorities or a litigation lawyer will investigate and possibly try and overturn the sale or transfer) and plan accordingly.

The key is commercial reality. The sale or transfer must be, and appear to be, “above board”.

Tips:

1. The inquisitor might ask Where did the buyer come from? How did you meet the buyer? So the smart thing to do would be to (ie assuming you wish to sell the property to your Offshore Company or Foundation – see below) is list the property for sale with an agent that has international reach (ie one which regularly attracts non local real estate investors) and have the Tax Haven Company (or Private Foundation – see below) make a bid for it after a few others have made an offer.

2. The sale will need to be seen to be at fair market value – you can’t just sell a house to a nil tax IBC for one Dollar (unless it is gifted – see below). Similarly 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.

3. Depending on where you live you may be able to “gift” the property to a tax free Offshore Company (or tax free Offshore Private Foundation). It might be difficult to explain why you’re gifting a piece of property to a zero tax IBC hence the smarter thing to do might be to set up (and transfer ownership of the property to) a tax free PIF ie Private Interest Foundation (eg one characterized as 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.

4. You will not want to be seen to be doing or managing anything for the IBC/PIF. Hence the communications will need to be seen to be coming from the IBC Director (or Private Foundation Councillor as applicable)

5. Check local tax laws first. Often when a piece of real estate is sold the seller has to pay capital gains tax. Likewise if/when property is gifted a gift tax may apply.

6. Check local investment laws next. There may be prohibitions or restrictions on the ability of non-local persons or companies to buy and/or hold real estate in the country where the property is located.

7. If you intend to keep living in the property – and you want to fly under the radar – it might not be wise to pay rent to the Offshore IBC (or Offshore Foundation as the case may be) directly; It would probably be more prudent to have a property manager appointed by the Offshore Company (or Foundation) to collect the rent and manage the residential tenancy.

Local conditions can have an impact. Hence before committing to transfer property to an Offshore entity you should seek local legal/tax/financial advice.

The Cook Islands an English speaking sovereign state in the south pacific comprising some 15 islands and is a world leader in the field of Asset Protection Trusts. A self-governing state with a British based legal system in the mid1980′s the Cook Islands became the first ”Offshore”  jurisdiction to create comprehensive asset protection trust legislation. Its asset protection trust law has now been implemented in one form or another in thirteen countries and eight U.S. states (and is famous for having resisted attempts by US Authorities/Courts to tap into assets held by a US resident settled Cook Islands Trust see FTC  vs. Affordable Media, LLC, 179 F. 3rd 1228, U.S. Ct. of Appeals, 9th Cir. 1999).

Features & Benefits of the Cook Islands Trust

Registration of a Cook Islands International Trust affords a number of benefits including that a trust will not have any taxation liability in the Cook Islands.   It is a relatively simple procedure for a trust to be registered in the Cook Islands eg it is not necessary for a copy of the trust deed to be filed with the Registrar of International Trusts.

The Register of Trusts which is administered by the Financial Supervisory Commission is not open to public inspection, where any such inspection or release of information can only be achieved with a court order and subject to the International Trusts Act 1984.

The Cook Islands is still considered the leading Asset Protection jurisdiction in the world, and can boast a long line of judicial precedent which upholds the integrity of the International Trusts Act 1984 (“ITA”).   The Cook Islands can distinguish itself as one of the few jurisdictions where US Government Authorities have failed in their attempts to upset a Cook Islands International Trust.

Exemption from Taxation

An international trust has no taxation liability in theCook Islandsand no requirement to file any returns, reports, or records.

Modification of Common Law Rules

The ITA alters the common law rules relating to:

• the rule against accumulations

• the rule against perpetuities, removing the perpetuity period.

• the rule against double possibilities

• the rules restricting the extent of charitable purposes

• the rules against purpose trusts

Revocation

The trust can provide for an express power of revocation otherwise it will be deemed to be irrevocable.

Retention of Control and Benefits by Settlor

An international trust shall not be declared invalid or a disposition declared void or affected in any way if the Settlor retains or acquires:

• a power of revocation of the Trust;

• a power of disposition over Trust property;

• a power to amend the Trust Deed;

• any interest in the Trust property.

Heirship Rights

A disinherited heir cannot challenge an international trust on the basis that it interferes with his or her right to succeed to assets or property.

Spendthrift Beneficiary

An international trust can provide that an interest in property given to a beneficiary for life or a lesser period shall not be alienated or pass from the trust by bankruptcy or be taken in execution by process of law.

Bankruptcy

An international trust is not void or voidable in the event of the Settlor’s bankruptcy, notwithstanding any law of the Settlor’s domicile or place of residence and notwithstanding that the Trust is voluntary, without valuable consideration and made for the benefit of the Settlor, the Settlor’s spouse or children.

Fraud

Comprehensive rules provide when an international trust may be challenged on the grounds of fraud.

• Where a creditor proves that an international trust was settled:

-                      with the principal intent of defrauding a creditor, and

-                      the settlement rendered the Settlor insolvent or without property by which the creditor’s claim could have been satisfied;

the settlement is not void or voidable but the trust is liable to satisfy the claim of the creditor out of property, which, but for the settlement, would have been available to the creditor.

• An international trust and a disposition to a trust is not deemed to be fraudulent against a creditor of a Settlor:

-                      if the settlement or disposition takes place after the expiry of 2 years from the time the creditor’s cause of action arose;  or

-                      the creditor fails to bring his action before the expiry of 1 year from the date of such settlement or disposition;  or

-                      the settlement or disposition takes place before the creditor’s cause of action arose.

Governing Law

A term of an international trust expressly selecting the laws of theCook Islandsto govern the trust is valid, effective and conclusive regardless of any other circumstances.

Foreign Judgments

Foreign judgments are not enforceable against an international trust.  Any claimant must commence new proceedings in theCook Islands, subject toCook Islandslaw.

Exclusion of Foreign Law

An international trust governed by the laws of theCook Islandsor disposition of property held by the trust will not be void, voidable, liable to be set aside or defective by reason that the laws of any foreign jurisdiction prohibit or do not recognise the concept of a trust, or that the laws of theCook Islandsare inconsistent with any foreign law.

Commencement of Proceedings

Any proceedings to be commenced in the High Court of theCook Islandsto set aside the settlement of any international trust or disposition to such trust must be brought within 2 years of the settlement of disposition.

Statutory Rights of Delegation

A trustee has a statutory right to delegate its powers and functions, such as management of trust property, including investment management, and to employ professionals to act in relation to the affairs of the trust.

Custodian and Advisory Trustees

A Custodian trustee may be appointed to hold trust property and an Advisory trustee to advise the trustee in relation to the trust property.

Guarantee against Expropriation

TheCook Islandsgovernment guarantees that there will be no compulsory acquisition or expropriation of trust property except in accordance with due process of law.

For more information on Cook Islands Trusts please contact me:

Recently I was approached by a prospective client looking to reduce additional (prohibitive) expenses over and above wages that usually apply “onshore” when one hires workers.

Via strategic deployment of an Offshore Corporate Structure there is the potential to save money here and in two ways.

What you could do here if you are/were in such a position is:

1. Incorporate a tax free Offshore Company (“IBC “ie International Business Company)
2. You/your firm would secretly be the owners of the IBC
3. You/we would set up a bank account and an email address for the IBC Offshore
4. You would have the user name/passwords for the IBC’s bank account and email account (and would have 100% control of both)
5. Your workers/contractors would invoice and or get paid by the IBC
6. The IBC would invoice your local/onshore business each pay period for the cost of providing/managing your labour force.

You would probably want to characterize the IBC as a Labour Hire Company. For more information on what a Labour Hire Company is and how it can save you money check here: https://en.wikipedia.org/wiki/Labour_hire

If you set this up (a) you should be able to avoid having to pay high taxes, worker’s compensation insurance, superannuation, and social security contributions etc above payroll for your workers and (b) you should be able to avoid having to pay an independent firm a commission for invoicing.

Local laws can have an impact. Hence it would be wise to seek local legal, tax and financial advice before committing to create such a vehicle.

Irish Companies investing in research and development will be able to avail of a new 6.25 per cent corporation tax rate under a new “knowledge development box” (KDB) announced in the Irish budget on October 12. 

Such an announcement could herald a boon for persons looking for low tax Offshore IP Company options – Ireland’s Minister for Finance Michael Noonan is boasting that said the KDB will be the first such measure in the world that is compliant with the new recommendations of the OECD (Organisation for Economic Co-operation and Development). 

“This puts Ireland in a unique position to offer long-term certainty to innovative industries planning their research and development investments,” he said. 

Mr Noonan said fostering innovation would be critical to Ireland’s new economic model and the KDB was designed to incentivise this. 

Income that qualifies for the KDB will be subject to a reduced rate of corporation tax of 6.25 per cent. Ireland’s corporation tax rate is 12.5 per cent. 

The KDB adds a further dimension to our ‘best in class’ competitive corporation tax offering, which includes the 12.5 per cent headline rate; the R&D tax credit; and the intangible asset regime, Mr Noonan said. 

Joe Bollard, a tax partner with global “Big 4” Accounting Firm Ernst & Young, said the report on redrafting the global tax regime, released recently by the OECD as part of its Base Erosion and Profit-Shifting (BEPS) programme, had changed what Ireland had been intending to do with its knowledge box. 

New recommendations as part of BEPS are behind a move from the ownership of an IP asset, to the expenditure of money on research. Activity in relation to scientific and technical work, as against brand development, is also being targeted under the new regimes. 

The new Irish knowledge box, he said, is not likely in itself to “turn the dial” in relation to attracting new talent to Ireland so that companies can avail of the lower tax rate. He said Ireland’s relatively high income tax rate was an issue in this regard. 

What remains to be seen however is what income will attract the 6.5% tax regime. Early indications are that to qualify for the 6.5% rate the innovation/IP in question will need to have been developed in Ireland. If not (and or if the IP/Technology is on paper seen to have been incubated in Ireland) then an Irish Company could be formed to hold any form of IP (regardless of where it was developed) in which case nett income received by way of royalties/license fees would be taxed at just 6.25%.

For clients looking for a transparent controversial low tax “Offshore” IP Company solution such an offering could prove extremely popular.

Watch this space for developments!

A Purpose Trust is a particular type of trust which, unlike a conventional trust, can be formed to hold assets for a purpose without conferring a benefit on any specific person. An example of such a purpose is to hold shares in a company.

Purpose Trusts are currently used, among other things, in conjunction with asset financing transactions and securitisations.

They are also used to hold the shares in a Private Trust company (PTC) structure, where confidentiality and control issues are important. The advantage of using a Purpose Trust in such a scenario is that there are no registration or disclosure requirements of such trusts at law generally speaking. Therefore the ownership of the PTC will be confidential, and the shares in the PTC will be immune from an attack on the Settlor (ie the person who sets up the Trust).

A PTC is a privately owned company that acts as trustee, usually exclusively for a wealthy family trust or group of trusts. The board of the PTC can be populated with a mixture of professional advisers and a client’s family members. Often PTCs are at the heart of The Family Office. They have a number of popular advantages including:

• They provide a means by which a Settlor, or his family, can retain a greater degree of control over their trust affairs without compromising the validity of the trust(s).
• The Board of the PTC will have a heightened knowledge of the family’s business and financial affairs and be sensitive to the range of those interests, whilst also being empathetic to the needs of the beneficiaries, and having an intimate knowledge of the Settlor’s wishes. All of this should allow them to deal with sensitive family issues more freely and often with greater speed and flexibility;
• Having a PTC as trustee of family trusts will also avoid the need for future changes in the trusteeship;
• Professional trustees are often reluctant to take ownership of assets or participate in ventures where substantial risks may be present, and a PTC (due to the composition of the Board) can enable riskier investments to be included in the trust fund, (although the PTC will still have the usual trustee obligations).

Not all Trust jurisdictions enable the registration of Purpose Trusts. We can assist to register a Purpose Trust in Seychelles, Belize and the Cook Islands.

Though not as widely known a Purpose Foundation could also be used in lieu of a Purpose Trust. But more on that another time.

For more information on PTCs check my Blog Article of 25 October (scroll down to below my last published article)

Eccentric entrepreneur and privacy advocate Kim Dotcom is building his own private internet, allegedly safe from the prying eyes of surveillance authorities.

Via video link at Sydney (Australia)’s SydStart conference this week, the web mogul explained that “MegaNet” will work on a non-IP-based internet “that uses the beauty of blockchain [Bitcoin's public ledger] and new protocols to communicate and exchange data”, while still using the internet’s existing physical infrastructure.

“If you don’t have IP addresses you can’t hack the server, you can’t execute denial of service attacks on gaming services or websites,” Dotcom said from New Zealand, where he is currently awaiting the result of an extradition trial.

“Most importantly it will make it difficult for governments to invade our privacy. This entire network I’m working on is fully encrypted. It literally works from the people for the people.”

How will it work?

MegaNet will rely on people’s unused processing power on their phones and laptops, and allow them to donate bandwidth to the service.

“The more people that install the MegaNet app on their devices, the more powerful it will become,” Dotcom said.

If 100 million smartphones joined up, the network would have more online storage capacity, bandwidth and calculating power than the top 10 largest websites in the world combined, he said.

It will rely on existing physical internet infrastructure people use today – so-called “dumb pipes” – but will add a new layer of encryption running through all communications.

Dotcom claimed the encryption technology he’ll use is so powerful no super computer will be able to crack it.

In order to function, MegaNet is literally going to be using up your device’s battery power, storage capacity and web bandwidth to power its so-called private network.

If you consent, it will draw from your smartphone’s processing power and bandwidth while it’s idle – for instance, when you’re asleep – if it’s plugged in and connected to Wi-Fi.

However, Dotcom told media that default settings would use only processing power, and users would opt in to donate bandwidth.

“In the beginning you set your restrictions,” he said.

“The default is no use of bandwidth, and only storage on your phone. But if you want to, it enables us to utilise some of your bandwidth. Users are fully in control. It’s not costing them anything.”

As for the blockchain, MegaNet will borrow from Bitcoin’s lauded method of recording transactions (even the Australian Securities Exchange is considering it), but instead of users storing transaction records, they will store some of the files that make up this new “alternative private internet”. Presumably these will be encrypted too, otherwise everyone who connects to MegaNet will have some record of who is using the system and for what purpose, and that would contradict Dotcom’s pitch.

When can we get it?

The millionaire admitted that phone technology, including battery life, will need to improve before MegaNet can really take off.

“We’re looking at a 10-year plan,” he said.

“Over the next decade, current smartphones are going to be replaced by phones 10 times stronger and faster, with massively more computing power, that are as powerful as desktop computers are today.

“Battery tech in the making is going to give you 24 to 48 hours battery time with full usage. There are lots of advancements currently taking place. Today’s bottlenecks might be a challenge, but over the years, with new devices and new capacity with mobile bandwidth, there will be no limitations.”

The mogul is confident that a technology solution will keep people secure and that privacy doesn’t require new infrastructure.

“Right now they’re just my words, but I’ll prove it to you with proof when the service goes live. You watch. The security community will appraise it and validate this service.”

Dotcom expects 100 million users to sign up within the first year of launch (expected sometime in 2016).

A Private Trust Company (PTC) is a Company which is established with the sole purpose of acting as a corporate trustee to a trust or a number of connected/related trusts (eg Trusts with common Settlors or Beneficiaries).

PTCs are commonly used by High Net Worth (HNW) families as a key plank of their wealth management (and succession planning) strategy, for a number of reasons:

1. They deliver confidentiality
2. They provide a comprehensive framework under which family members can be involved in decision making (by being on the board of the PTC)
3. They can avoid the complications of succession law ie when used in conjunction with a tailored Offshore Trust or Offshore Private Foundation
4. They reduce management costs (ie there’s no need to engage or pay a Private/Outside Trustee)
5. They provide protection from fiduciary risk (ie a PTC eliminates the chance of an external Trustee turning rogue and stealing or wasting assets).

As long as certain criteria are fulfilled the PTC will not have to obtain a licence to carry out trust company business. The speed at which a PTC can be established, and the relatively low cost of operation have made PTCs extremely attractive to HNW families and their advisors.

A PTC’s sole purpose is usually to act as trustee of a trust (or group of trusts) belonging to a family or commercial group; these trusts may be family succession-oriented, commercial or philanthropic in their aims.

A PTC can be particularly useful for wealthy families who either do not wish to relinquish control to professional trustees or where the trust fund is to be invested in assets, which a professional trustee may be reluctant to deal with, such as works of art or family businesses.

For maximum confidentiality it would be preferable to register your Private Trust Company as an IBC in a privacy haven (ie somewhere which does NOT have a publicly accessible Register of Directors or Shareholders or Beneficial Owners – contact me for details of which jurisdictions meet that criteria).

A Private Trust Company is commonly deployed to act as Trustee of a Purpose Trust or as Councillor of a Purpose Foundation (ie a Trust/Foundation which is established purely for the purpose of holding a particular asset).

Given their nature and structure Purpose Trusts and Purpose Foundations (as they do not have to name specific beneficiaries) can deliver cutting edge asset protection and tax minimisation possibilities (more on that next week).

Local laws can have an impact. Hence it would be wise to seek local tax/legal/financial advice before committing to set up a PTC.