Reasons for taking your business offshore

• Flexibility;
• Privacy Reasons
• Protection against litigation;
• Confidentiality of profit and loss accounts;
• All round privacy and confidentiality - examined in depth below;
• Freedom from administrative duties, e.g. book-keeping and the filing of returns: Has your country become a Bureaucratic Nightmare?
• To enable clients to create the impression of running a much larger and more internationally orientated company than they actually do.
• To open a second front for an existing domestic business. This single step increases flexibility, at the same time it opens up numerous opportunities to maximise profits through the creation of a company with a totally different and separate personality
• Tax savings: Do you ever wonder how the rich often avoid or delay paying taxes in their home country? Even more important, have you ever wondered how the rich seem to avoid inheritance taxes?
• Lack of hassle and interference: Are you tired of your government constantly dictating what, where and how you can run your business by constantly introducing new rules and regulations?
  
  
  

Protecting privacy and confidentiality with a secure offshore structure

There are many sound commercial and security reasons for taking advantage of the confidentiality that an offshore structure provides. Although the actual way your offshore company might be utilised varies greatly from one case to another there are a number of considerations that tend to apply in most cases. In this section we will cover the most popular applications; you will probably find that one or more will tie in with your own plans but if you need further advice, please give us a call.

When it comes to offshore facilities it is obvious that confidentiality has always been, and remains, a cornerstone of the functioning of all successful offshore centres. Without the various confidentiality laws and codes of practice there would be no benefit in using them, and their economies would suffer. Proof of this has become apparent in the Bahamas and Channel Islands, who to varying degrees have caved in to external political pressure to relax confidentiality; in both cases they have seen the money progressively drain away over recent years as clients turn to offshore centres with stronger safeguards against disclosure.

back to top

Offshore Banks, Trust Companies and Service Providers

Generally banks, fiduciaries, trust companies and corporate service such as ORCA all endeavour to adhere to the strictest standards, whether these are enforced by law or not.
Subject to the requirements of the various money laundering and financial regulation laws, only a properly authorised criminal investigation will a reputable company or bank to divulge the ownership of an offshore structure or bank account. In our experience, after 26 years in this business, we have found that in reality, determined investigations rarely arise. On rare occasions when they have, it has normally been due to the most serious types of criminal activity having taken place. When it comes to routine tax and civil issues so many uncertainties, barriers and obstructions can so easily be put in place that the effort and cost becomes such that very few government departments or civil lawyers can justify the expense. Of course the amount involved is a deciding factor but nobody is going to spend €50,000 to recover €100,000 or €150,000 when there is no guarantee of success. Of course if we are talking €2,000,000 with recovery costs of say €100,000 they might make more effort but it is very unusual in the absence of fraud, money laundering or some clear indication of serious criminal acts having been committed. Keep in mind that when the amount of money passing through a legitimate structure is very large the whole thing is in any case is likely to be far more substantial than normal with various built in safeguards, and different components. When ORCA assembles a structure of this type the end result is that even though somebody might try to secure a judgement even if they are successful the funds will not be where they though they were rendering the judgement useless because it can’t be enforced!

Many clients ask, what are the drawbacks of an offshore company? The truth is that even after many years of setting up secure offshore structures we can’t find any, even if you need to operate in an onshore location which obliges foreign companies to establish a branch office, solutions are still available. If we take the UK as an example, you simply register a UK company with either the same or a similar name to your offshore company, the UK company then becomes a wholly owned subsidiary of your offshore company, this UK company provides several advantages, it can operate freely in the UK, it can register for VAT giving access to the entire EU market, it can also hold credit licences and various other permits you may require. The other major benefit of this arrangement is that the offshore company name appears as the director on official records, this avoids your own name appearing at the UK Registry of Companies. An ideal situation that provides the benefits of anonymity combined with full control.

One further advantage is that should you be unfortunate enough to get into an awkward spot of litigation you can always close the UK Company, this leaves the offshore parent company intact and untainted by the events in the UK, meaning it can continue to operate without interruption and form a new UK company to act as its agent.

Divided into a weekly figure this works out at £13 ⁄ $26 ⁄ €18 per week. It goes without saying that if you can’t save at least 10 to 20 times that sum each week through tax reduction and increased profits, you probably don’t need an offshore company!

Unfortunately, many so called experts who set up offshore companies will sell you numerous facilities you do not really need, others will send you a list of what’s available and let you choose for yourself, without bothering to help you determine if you are making the right choices. Of course, only you can make the final decision as to how you structure your offshore entity although actual needs can generally be determined based on a combination of commonsense, your personal requirements and a basic business plan setting out your objectives. The key is  at all times beware of hidden charges and unpleasant surprises. Our intention is always  to ensure that you know exactly what you are getting for your money and to clearly explain the various alternatives which are available.

Returning briefly to hidden charges and underhanded tactics, a typical example which we came across involved an existing client who contacted us and asked us to take over the management of an offshore company originally brought from another firm, the only problem was that the firm were demanding £800 ⁄ $1600 ⁄ €1145 in order to resign as agents and release the company to ourselves. No valid grounds can possibly exist to levy such a charge; it just represents extra money in their pockets, and is not ethical or justifiable in anyway. We don’t charge anything to release a company, (unless a fee is required from a registrar or a third party which is beyond our control) after all if we are doing our job right why would a client want to go elsewhere?

Finally, when forming an offshore company structure always stand back and consider how the basic set up looks to your clients. The primary consideration is that certain jurisdictions appear to suggest specific things. If you mention the Channel Islands in the UK, people think of tax avoidance, which is not always the case. If you mention a Colombian company people might think of Cocaine, if you say you are incorporated in Liechtenstein, it suggests substantial assets. Whilst the first two are more often than not wrong, the third is usually a correct assumption, this is because a Liechtenstein company or foundation is very costly to operate both in regard to the initial formation and the ongoing annual costs.

Holding companies

Holding companies can handle dividend receipts from a spread of subsidiaries. This allows a group to centralise its resources and maximise the tax benefits. Careful use of tax treaties is needed to obtain the best results

Various locations, both on and offshore, can be used; the holding company can also fund subsidiaries in a tax efficient manner.

Property owning companies

Owning overseas property through an offshore company provides a number of advantages.
It is possible to avoid inheritance tax, capital gains tax, and death duties;

The process of sale is simplified. In some countries the establishment of title is time consuming and costly. Once title has been established for a company owned property it never needs to be established again. Sale can be made by transfer of the shares in the company, the title to the property then remains vested in the company.

Sales by share transfer also saves legal fees as well as the transfer and value added taxes that are levied in some countries. Government stamp duties and capital gains taxes can also be avoided. Perhaps more important when the purchase needs to be competed quickly is that exchange control delays can also be prevented.

An example of how an offshore company can be employed in the UK is apparent in the case of a UK non resident owner who can use an offshore company to gain relief from income tax, capital gains tax and inheritance tax on ownership of a UK property, the same benefits are generally achievable by most nationals.

Corporate ownership has the additional added benefit of shielding the identity of the ultimate beneficial owner of the property.

Probate

The ownership of a portfolio of investments, properties or other assets through a single offshore holding company can simplify probate procedures upon the owner’s death. Probate can be applied for in the offshore jurisdiction rather than in several different countries where the assets are located.

Consultancy and services

Consultants, financial advisers, real estate agents and those providing services, such as, musicians, security consultants, bodyguards and entertainers often receive much of their income from overseas.
This income can be remitted to an offshore company, which in turn employs the individual and pays over a modest amount for expenses, retaining the bulk of the funds offshore.

Employment overseas can be facilitated by the use of an offshore employment company. This can either employ an individual or a group of individuals working overseas. The employee keeps the bulk of his income outside the country of employment. This type of structure can also reduce currency exchange problems and circumvent a number of employment and residency obstacles.

Ship and yacht ownership

It is often advantageous to own title to a vessel in an offshore location; this can have significant tax benefits. It can also provide an easy registration procedure for yachts, which in certain countries can only register on the major national register with onerous compliance requirements.

A separate offshore company may be formed to operate or charter the vessel thus separating ownership and income which offers further potential tax benefits.

Intellectual property

Patents, copyrights, trademarks, franchises and other rights such as those in music, computer software, and technical knowhow can all be transferred into the ownership of a licensing company, which can either be offshore or onshore. The licensing company enters into licence or franchise agreements and the original company then receives royalty payments and licence fees.

Inheritance tax protection

Ownership of assets through an offshore company can often eliminate liability in the owner’s own country to inheritance tax and death duties.

Internet Trading

One of the fastest growing areas of international trade is the Internet. The international nature of the trade and the potential tax complications of dealing internationally can be solved by the creation of a specialist internet trading company offshore.

To obtain favourable tax treatment, it is best to locate the server physically offshore (somewhere other than where you are based) and to have an appropriate domain name, for example if your current domain name is www.smithandjones.co.uk or www.smithandjones.nl you could opt for a tax free British Virgin Islands domain such as http://www.anycompany.vg or simply a .net or .com

Though the opinion is often expressed that such operations are all in cyberspace and therefore location is not important, in reality regulation is increasing and planning should anticipate possible future developments. As things currently stand (2008), the Americans seem determined to keep
the internet tax free, but no one really knows how it will turn out long term, certain legislation concerning the sale of downloadable products and services relating to the payment of EU VAT are making things somewhat more complicated. An example of this is eBay, if you live in the EU you have to pay VAT on your invoices but if your billing address is outside the EU you don’t. This was the result of EU legislation which came into force in July 2003.

Coming back to the US - which to a great degree seems to dictate the direction in which the internet develops we need to look at the 1998 Internet Tax Freedom Act which was authored by Representative Chris Cox, R-CA and Senator Ron Wyden, D-OR and signed into law on October 21, 1998 by President Bill Clinton in an effort to promote and preserve the commercial potential of the Internet. This law bars federal, state, and local governments from taxing Internet access and from imposing discriminatory Internet-only taxes such as bit taxes, bandwidth taxes, and e-mail taxes. The law also bars multiple taxes on electronic commerce. The bill has been extended three times by the United States Congress since its original enactment and was last renewed on October 30, 2007 for 7 years so this seems a pretty positive sign for the future.