As has been suggested in another article on this site how to keep ownership of an Offshore company private it’s a good idea to add layers to your International corporate structure if you can.
Here’s one suggested structure that will not only make it near impossible for would be vultures to crack the privacy veil but which should also allow you to do tax effective business in most countries of the world:
- Frontman: A Hong Kong company.
The Hong Kong company is a terrific structure in that it’s a tax haven company that isn’t widely perceived to be a tax haven company. It pays no tax in Hong Kong on its worldwide/non-Hong Kong sourced earnings but yet it doesn’t carry with it the suspicious “odour” of the classic tax haven IBC. This makes it an ideal vehicle for doing business in developed financial centres (and especially in China).
Hong Kong is one of the busiest and wealthiest financial centres in the world. It has sound political stability and incredible infrastructure in terms of banking, financial, IT and professional services.
What’s even more attractive about having a Hong Kong company as your corporate frontman is that there is so much money flowing out of Hong Kong and into the big western countries that the chances of wage like payments to you (eg for Consulting fees) ever being noticed or questioned by onshore authorities are very slim.
AND as an added bonus Hong Kong has signed the fewest Tax Information Exchange Agreements (“TIEAs”) of any tax haven making it a very private incorporation centre indeed.
- Middle tier: A Belize Discretionary Trust.
The Trust would hold the shares of your Hong Kong Company. Yes you could simply set up a nominee shareholder to hold the shares of your Hong Kong Company but the problem with that scenario is that you remain the underlying “beneficial” owner of the company and any assets it owns (and thus may have an obligation to declare and pay tax onshore on the Offshore company’s worldwide earnings).
In the case of a Trust however any property held by the Trustee (ie the shares in the HK Corp) is at law the property of the Trustee (to hold for the benefit of the Trust’s beneficiary/ies). In this instance the Belize Trust is set up to own the shares of your Hong Kong Company. This then creates a shift in the underlying legal and beneficial ownership of the company from you to a third party (a resident of a nil tax jurisdiction) ie The Trustee. This should enable you to avoid having to declare and pay taxes onshore in respect of the Hong Kong Company’s earnings.
PLUS BY establishing the Trust as a discretionary Trust you add a further privacy/tax planning safeguard in that the ultimate beneficiary of the Trust (ie the Foundation, see below) might never be declared or made a presently entitled beneficiary of the Trust until such time as you are ready to draw down on the capital of the structure.
- The Ultimate Holding entity: a Seychelles Private Interest Foundation.
This would be the primary intended beneficiary of the Belize Trust and is the solid rock upon which the rest of the house is built.
Presumably you/your family would be the ultimate beneficiaries of the Foundation. The great thing about having a Seychelles Private Interest Foundation at the bottom of the family tree is, unless or until such time as you decide you need to start drawing a significant income out of the structure, the money can move around and be reinvested within the structure potentially without you having to declare (and pay taxes onshore on) the profits of the structure. This should enable your investment pool to grow rapidly thanks to the power of compounding).
How can this all be so?
Because arguably the Seychelles Private Interest Foundation is not caught by the standard onshore Controlled Foreign Company (“CFC”) laws in that (a) it’s not a company and (b)the Seychelles law deems the Foundation itself – a separate legal entity – to be the owner at law of all assets (including income streams) held by the Foundation.
You could even add more layers to the structure (eg later) if you want. For example you could incorporate a Dominican or other tax haven IBC to act as Settlor of the Trust (or as the Founder of the Foundation).
And if you wanted to a create a seriously sexy structure you could even set up a Purpose Trust to form a Private Trust company to act as the beneficiary of the Foundation in order to make the structure as tax sound and as bullet proof as humanly possible (the possibilities are endless ).
But that’s a discussion for another day…
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This is a generic example of how an offshore corporate entity can or might be used. Local laws may impact on your situation. Hence we would recommend that you seek local legal and/or tax advice before establishing such an entity