| By the end of the Industrial Revolution the numbers of middle class and super
rich had grown exponentially. This was the catalyst for the emergence of offshore
tax havens and the spawning of a whole offshore tax planning industry. New found
wealth in the developed industrialized economies in the West produced financial
service centers in small developing states seeking to bolster their economies.
The developed world has, of course, since “got in on the act” including
the world’s economic powerhouse the United States, and other strong economies
such as the United Kingdom, China, United Arab Emirates and Portugal to name
a few. The US offers tax free anonymous offshore companies in a number of States
including the popular Delaware, Nevada
and Florida jurisdictions. The UK controls Isle of Man, Jersey and Gibraltar,
China offers offshore
companies in the semi autonomous jurisdiction of Hong Kong. The UAE provides
offshore financial services in the Emirate of Dubai and Portugal from the constitutionally
autonomous island of Madeira.
The Cayman Islands, Cyprus, Dubai, Bahamas, Belize, British Virgin Islands
(BVI), Delaware, Dubai, Gibraltar, Hong
Kong company formation, Isle Of Man, Jersey, Liechtenstein, Madeira and
Panama all actively market their offshore company formation and asset protection
services.
Tax Mitigation – Tax Advantage
The main attraction of an offshore company in a tax haven is the prospect of
zero tax and increased privacy with respect to ones holdings. Compliance requirements
are less rigorous with many offshore tax havens not requiring company accounts
to be filed enables efficient tax
mitigation.
Asset Protection
An offshore company is separate legal entity from its shareholders and directors.
Losses incurred by the company are restricted to the share capital of the company,
not the personal assets of the owners. Incorporate offshore and the shares of an offshore company may be held by a Foundation or
Trust securing the beneficiary’s assets from law suits and thus creating
bullet proof asset protection whilst complying with OECD guidelines.
Corporate and Personal Privacy
All the major offshore jurisdictions allow the true identity of directors
and shareholders to be concealed from the public gaze. Nominee Directors,
Shareholders, Trusts and Foundations are used to keep the organization and
individuals behind a corporate structure hidden. Reliable company credit
reports are not available in tax havens because there are no legal requirements to file records. As the 2006 case between Barclays Bank International
and HM Revenue and Customs demonstrates,
it is not a good idea to use the offshore wing of a bank based in the individual’s
home country. HM Revenue and Customs is set to collect £1.5bn in taxes
following a commissioner’s ruling requiring Barclays Bank to provide account
details of its UK customers’ offshore
bank accounts.
Seven Golden Rules of Offshore Corporation Structuring
1: Do not put all of your eggs in one basket. It is recommended
that wealth and assets are deposited in several different financial institutions.
Diversify exposure by using multiple accounts.
2: Don't deposit funds in Trust Companies offshore.
Nowadays trust companies provide many services which are similar to banks. Some
provide debit cards, internet trading. However, such companies are not banks
and are therefore not regulated by a particular banking authority or government
watchdog.
3: Don't deposit funds in jurisdictions which do not
enforce banking law. When choosing an offshore bank, it is vital that
the bank is situated in a well regulated jurisdiction.
4: Don't deposit funds in small private banks. In a number
of offshore Jurisdictions it is possible obtain a banking license for as little
as GBP £50,000 including capitalization. There are numerous small start-up
offshore banks offering their services on online – do not use them!
5: Don't allow lawyers, or nominees to sign on your accounts.
When establishing offshore accounts, it is imperative to have exclusive signatory
Control. . If extra privacy is required you and it becomes necessary to use
nominee to sign on your account, ensure there is a signed engagement agreement
detailing the responsibilities of both parties.
6: Always ask for references. Before ordering an offshore company
online ensure you can find a physical address and a landline telephone number
on the site. Call the number during working hours and see if it is answered
by a real person. Verify references as company
director search is not available in these jurisdictions.
7: Be cautious when using offshore accounts. Use common sense
and do not have offshore bank account statements delivered to your country of
residence.
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