When setting up an Offshore Company if privacy is a priority for you (and/or if you want to minimise the chances of having to endure a tax audit) then the ideal is to incorporate your tax free Offshore Company in a country which does not have a TIEA (ie Tax Information Exchange Agreement) with your country of tax residence. (See below which explains what a TIEA is).
But what do you do if, after offshore incorporation, your home country signs a TIEA with the country where your nil tax Offshore Company is incorporated???
For the discerning Offshore Company Owner a key question to ask (as part of the process of choosing an Offshore Company Jurisdiction) is “does this jurisdiction allow its companies to migrate/redomicile???”
The good news is many if not most tax havens allow you to redomicile an IBC to or away from the jurisdiction.
The migration/redomiciliation process is fairly straight forward:
First up the IBC/Offshore Company’s board of directors passes a resolution authorising the change of domicile from country A to country B.
Once that’s done a number of corporate/legal documents need to get drawn up including a board resolution and Articles of Continuation (ie a one page document signed by the Board formally authorising a change of home jurisdiction).
Certain documents then must be delivered to the Company’s new Offshore Manager/Registered Agent to formalize the process of redomiciling the company from one jurisdiction to another include the following:
- Signed board resolution authorizing the change of domicile
- Articles of Continuation
3. Original notarized set of documents from previous jurisdiction, containing:
a) Copy of the Certificate of Incorporation
b) Copy of the Memorandum & Articles of Association
c) Copy or original certificate of good standing
Depending on how cooperative the Company’s Registered Agent (Offshore Manager) is the process can take anywhere from a week to 3 weeks. Cost can be anywhere from $500 to $1,500 depending on how old the Company is, what the jurisdiction is and the outgoing Registered Agent’s requirements.
What is a Tax Information Exchange Agreement?
A Tax Information Exchange Agreement (TIEA) provides for the exchange of information on request relating to a specific criminal or civil tax investigation.
Let’s assume that you set up a Tax Free Offshore Company in a country which has a TIEA with your home/taxing country.
How it works in practice is, if your home state becomes suspicious of your connection to or involvement with an Offshore Company (ie if they think an Offshore Company is being used by you to avoid domestic tax obligations), the Tax Authorities of your home country can request of the Tax Haven country Government, as of right, (ie if there is a TIEA entered into between the 2 countries) that they give up the name and address of the “underlying beneficial owner” of the company in question.
Although the information isn’t publicly filed this information must/will be kept by the Tax Free Offshore Company’s local Registered Agent who is obliged by law (as a condition of its International Corporate Service Provider’s License) to hand over this information upon request by/to the local Financial Services Authority (who then pass ownership details to the Tax Haven’s Attorney General’s Office who then pass it down the line to the requesting country).