FAQ


What are the meanings of offshore company term?

An offshore company may be a company which is incorporated outside the jurisdiction of its primary operations regardless of whether that is an offshore financial center or a non-resident company.

It is also any company, resident or non-resident, incorporated in an offshore financial center. For any of these companies, Offshore Company Law may apply. That it may include: must be incorporated under Offshore Company Laws and regulations of an offshore jurisdictions; must be incorporated by non-residents of the offshore jurisdictions; it cannot trade within the jurisdiction in question; must pay nominal tax expenses levied by the offshore jurisdictions.

Most offshore companies are incorporated to take advantage of: tax planning purpose, confidentiality, fees, operation cost, legal protection, etc. Most of legitimate uses are: international trading, asset protection, captive insurance, yacht registration, and legal tax avoidance, protection of intellectual property, succession planning or confidentiality (non-criminal).


What is a tax haven?

In a common language, tax havens are those areas that offer a wide range of tax advantages for offshore companies registered in that territory compared to other nations and jurisdictions. Usually is a state, a country or a territory with low rate for taxes or not at all. Tax havens also provide little or no financial information to foreign tax authorities.

A company can operate under favorable tax conditions, only if it is registered in tax havens and sometimes operate outside the territory of registration.
Individuals and/or corporate entities that do not reside a tax haven, can find it more attractive for themselves in areas with reduced or nil taxation levels. Different jurisdictions tend to be havens for different types of taxes, for different categories of people or companies and situations.

The traditional tax havens, corporate function is supported by a legislative mechanism very well organized.
It should be noted that, by not paying tax, company law does not violate the contrary, the law is exempt, partially or totally tax.

Characteristics of a tax haven:
- secrecy regarding banking information, tax data, financial information or ownership and management information
- access to low taxes
- ease of initial regulatory compliance
- limited or no regulatory filing required
- rapid relocation of activities is allowed
- greater degree of protection from monetary predators
- anonymity in some locations.

Many individuals move a large portion of their existing assets to a tax haven jurisdiction. It should go without saying that in setting up offshore it is essential to do things correctly. There are qualified offshore advisers which can provide legally correct financial structures for those thinking of moving offshore.


What is an IBC (International Business Company or International Business Corporation)?

An IBC is a legal entity incorporated in a tax haven which is free from all local taxes and cannot conduct any business activity in the country of formation. Offshore, in its broadest sense of the term, means simply a jurisdiction other than your own. Offshore companies are most commonly used for offshore banking to conduct international trade, investment activities or for assets protection.

Offshore companies are also used for the ownership of land and real property, for ownership of intellectual property, licensing and franchising, personal services by individuals working overseas and offshore e-business. Those kinds of companies can be involved in buying and selling goods and services, hold bank accounts and operate businesses.


Characteristics of an IBC vary by jurisdiction and usually will include: rapid formation, low costs, minimal filing and reporting requirements, exemption from local corporate taxation and stamp duty, preservation of confidentiality of the beneficial owner of the company, wide corporate powers to engage in different businesses and activities, abrogation or restriction of the requirement to demonstrate corporate benefit, the ability to issue shares in either registered or bearer form, an abrogation of any requirements to appoint local directors or officers and provision for a local registered agent. Usually, the minimal requirement for a IBC formation are:minimum one shareholder and one director, The shareholder and the director can be the same person and there are no restrictions on their nationality. IBC's may issue different types of shares including the unnamed bearer shares, beeing another way of protecting shareholders identity.

With nowadays technology and internet facility, a business location is really not nearly as significant as it has been traditionally. You may now operate and accessed digital data from an Internet server located anywhere in the world and operate a business or hold existing funds securely and privately. Therefore an offshore company allows you to hold assets out of your name in a safe and secure financial center and the same time allows you to retain 100% control of your IBC'S assets. There are countries with IBC laws that take privacy very seriously. Many of these countries have become financially strong by offering a safe-haven in which to store one's money.


Which are the main documents for setting up an offshore company?

The main documents required for offshore companies registration in most commonly used jurisdictions are:


- Certificate of Incorporation - this document is issued by the office of registration and certify that the company was introduced, the name given by the registration office to register companies on time. A so-called Apostille is usually attached to the certificate of registration (usually called certificate of registration) which is a certificate issued by the central authority (usually the registrar) while the registration certificate was indeed issued by the office of registration. This is a legally recognized and accepted internationally by Hague Convention of October 1961.
- Memorandum of Association (ideally registry-certified) - this document includes basic regulations regarding the operating company. Generally is a standard document, usually composed based on that country law text and of course all statutes, and here, the statutes should be amended freely by owners and company executives. This is a statutory document which effectively governs the offshore company's relations with the outside world. It is the act of filling Memorandum of Association with the Registrar of Companies that brings a company to life.
The Memorandum typically indicates, among others: name of the company, registered office and agent, nature of business and powers of the company and share capital the company is authorized to issue.
- Appointment of First Directors - immediately after incorporation, the first director or directors are usually appointed by an incorporator's resolution and they will be delegate their rights related to the company. Unless your incorporation agent has provided a nominee director, your company paperwork is likely to include an Appointment of First Directors. This usually takes the form of a simple document giving the name of the first director(s) appointed, signed by the offshore company incorporator. Ideally this document should be apostilled to ensure the validity of the document outside of the jurisdiction.
- Minutes of First Meeting - provide a written record of the very first meeting of your offshore company's board of directors, the first steps to be taken, founding act, approval and embossed seal of the company.
- Register of Shareholders - typically takes the form of a record book that lists the owners of shares of stock issued by the offshore company. The company's share register record the following information: names and addresses of all shareholders, with numbers of shares held by each. Also there are note regarding dates and parties involved in relation to: issues of shares to shareholders, transfer of shares by or to shareholders or repurchase or redemption of shares from shareholders.
If there are bearer shares, the appropriate entry in the Register should note the details of the bearer's agent or attorney to whom the company can address any notice normally sent to shareholders. If there is not a nominated administrator to assume responsibility for keeping the company's statutory records, there is necessary to have maintained the company's Register of Shareholders. The Register must almost always be kept at the company's registered office in the jurisdiction of incorporation.
- Company seal - Is generally required that an offshore company should have a company seal. This is utilized for documents authentication. The seal must first be approved at the first meeting of directors and is utilized for sealing share certificates, minutes of the company or other important documents. This seal is not used for stamping invoices or agreements - you can simply use a signature for this scope.
According to the jurisdiction of incorporation we may have additional the following documents: Register of Directors, Share certificates, Certificate of Good Standing, Apostille and Management Agreement.


What is a LLC (Limited Liability Company)?

The LLC is a flexible legal entity incorporated in a tax haven which is free from all local taxes and which provides limited liability to the members. The LLC is a type of unincorporated association and is not a corporation. LLCs are popular because the similarities with corporations - owners have limited personal liability for debts and actions of the LLC. In others sense LLCs are more like a partnership, providing management flexibility and benefit of pass-through taxation.
Owners of an LLC are named members, which may include individuals, corporations, other LLCs and foreign entities, since most states do not restrict ownership. There may be also just one member in some countries. A few types of businesses cannot be LLCs - banks and insurance companies.
It is usually used to protect assets against lawsuits.
According with the chosen jurisdiction this kind of structures presents many advantages and they differ from limited liability companies in other countries. Some of the main characteristics are: limited liability, the availability of pass-through income taxation, flexibility for the members in deciding different internal regulations.

A member of a LLC is responsible for the debt only to the length of the capital invested in the company. LLC owners report business profits or losses on their personal income tax returns - the LLC itself is not a separate taxable entity. Also all LLC owners are protected from personal liability for business debts and claims - creditors usually cannot reach the personal assets of the LLC owners.
Generally this type of structure is recommended if you are concerned about personal exposure to lawsuits or debts arising from your business. An LLC gives your personal protection against potential claims against your business.
To form an LLC each state has slight variations, but general principles are:
- Choose a business name ( there are three rules to follow: it must be different from an existing LLC in the chosen country, it must indicate that it's an LLC and it must not include words restricted by the chosen jurisdiction.
- File the Articles of Organization - the document that legitimize the LLC and includes details about the business( name, address, members etc)
- Create an Operating Agreement - is not required by most locations even if is highly recommended for multimember LLCs for smooth operation.
- Obtain Licenses and Permits - regulation may vary by industry or location.
- Hiring employees
- Announce your business

 


What is a Trust?

For a better understanding of the concept of Trust we choose to propose two official definition of the term.
Trust definition from Underhill&Hayton, Law of Trust and Trustees is: ""A Trust is an equitable obligation, binding a person (called a Trustee) to deal with property owned by him (called Trust property, being distinguished from his Private property) for the benefit of persons (called Beneficiaries or, in old cases, cestuis que Trust), of whom he may himself be one, and any one of whom may enforce the obligation."
Also the Hague Convention of the Law Applicable to Trusts and on their Recognition has a definition of the Trust: "For the purposes of this Convention, the term "Trust" refers to the legal relationships created 'inter vivos' or on death by a person, the Settlor, when assets have been placed under the control of a Trustee for the benefit of a Beneficiary or for a specified purpose."
In simpler words - a person, named Settlor places assets in a legal custody of another, named Trustee, held for the benefit of some third party, the Beneficiary. Therefore the Trust is not a separate legal entity, but more of a legal obligation agreed between two parties: the Settlor and the Trustee. The trustee becomes the legal owner and is responsible for managing the assets and distributing them to the beneficiaries of the offshore trust in accordance with the term of the trust deed. The trust is unlike a corporation of foundation. The settlor must select the type of trust he wishes to form, make important decisions on defining details regarding whether the trust is revocable or not, whether the trust will be discretionary or not, and to specify the rights, duties, obligations and expectations of the trustee. The legal title passes to the trustee, which must fulfill obligations set out in the trust. The beneficiaries hold very strong rights with respect to the interests in the trust. In most jurisdictions it is recognized that the intent is to provide the defined benefits for these beneficiaries and for the trustee carry out his duties in the best interest of the beneficiaries.
The terms on which the trustees administer the trust assets are detailed in a trust deed and trust legislation to govern trusts has been enacted in many common law jurisdictions.
There are three minimum certs for a Trust to be valid: intention (the Settlor must have clearly intended to settle the Trust and confer legal control of assets), assets (the Trust is not operative until assets have been transferred) and objects (it must be clear for whom the Trust was created and subsequent assets transferred to the Trust are being held).
An offshore trust can held the following assets: shares and stocks in both quoted and unquoted companies, investment portfolios, real and intellectual property, bank deposits, and life assurance policies issues on the life of the Settlor and most other types of assets.
You may choose the trust structure in one of the following situations: if you want to preserve your wealth against uncertainty, political, economic or family; if you want to transfer wealth to your heirs in a tax efficient manner; if you want to plan your estate to maximize the benefits of your wealth for family members and others; if you want to transfer wealth to your heirs in accordance with their wishes and not in a accordance with laws of the country where they live; if you want to consolidate the ownership of assets owned throughout the world in one location; if you want to centralize reporting or if you want to minimize or eliminate estate taxes arising on the death of the settlor.


What is a Vintage company?

Vintage companies are companies limited by shares that have been incorporated years in advance (between 2-4 years or more) but have not conducted any business activities since the time of registration. These kinds of companies are held to get to a certain maturity before being functional.
Usually these companies are used by customer for prestige reasons - they do not want to start a business on a brand new company. Sometime may be an administrative reason the motivation to use it. Some offers and requests are open only to companies of a certain age. The original registration date makes a vintage company appear older and more reputable than a brand new business.
In addition to these reasons, vintage companies have an undisputed advantage over the brand new companies' formation in that they could work, sign contracts, acquire rights and assume the responsibilities of the date of registration. Also the name security may be a reason - previously registered company name is unlikely to be subject to rejection or objection.
The purchase price of a vintage company is higher than of a brand new company because it consists of several components. First is the initial company incorporation fee, in addition, annual maintenance fees paid for each year of existence (office and registered agent, annual fee) - the person or entity that originally registered the company already had to pay these fees each year, and obviously need to recover expenses before selling the company.


Offshore Financial Centers vs. Tax Havens?

These two very used terms, although they may seem like the same thing, they are really not.
The Tax Haven is merely a territory in which the taxes are very low or no tax at all.
An Offshore Financial Center is a jurisdiction that provides facilities other than low tax, for an offshore company to be incorporated, which market it highly competitive, compared to other territories. Also in a Financial Center we have banking secrecy and anonymity, which is very appealing.
There can't be affirmed which is the best offshore jurisdiction. The best location depends upon the intended use of the offshore company, upon the personal and business circumstances of its owners and upon the various tax regulations in force in the countries where the offshore company will engage in business.


What is the difference between a registered shareholder and a nominee shareholder?

A registered shareholder is when the beneficial owner records his name on the share certificate and in the Register of Shares as the owner of the assigned shares under a custodial agreement.
A nominee shareholder is when the beneficial owner refers to a company member holding the shares on behalf of the actual owner or beneficial owner. The nominee appears on the certificate and the register, in return the nominee signs a Declaration of Trust to the beneficial owner giving up any right to exercise any powers over the shares - including voting rights or the right to sell or transfer these shares. The identity of the person with the true interest is subject to disclosure and investigation under the Companies Act. A Declaration of Trust from nominee shareholder to the beneficial owner is to ensure that nominee cannot use the shares in anyway without the express authority of the beneficial owner.
The nominee shareholder is used where the Companies Registry may be open to public examination or if the owner requires a deeper sense of privacy.


Why is important to choose a legitimate jurisdiction?

By different classifications there are between 40 and 80 countries in the world offering tax benefits to offshore business. Is well known that many offshore jurisdictions are regarded by banks, the OECD ( Organization for Economic Co-operation and Development) and other bodies in the finance industry as being regulated either as effectively as or better than their onshore counterparts whilst other known to be areas of dubious legitimacy. In present things had changed, and the distinction between offshore and offshore equated to legitimate or illegitimate. The current is that there is no correction between legitimacy of jurisdiction and tax status.
Some locations are still seen as being somewhat in between offshore jurisdiction and financial centers.
Usually jurisdiction is choosing because of the low tax fees and flexible regulations, specialized in offering commercial and corporate infrastructures.
For example in Cyprus , although still maintaining low corporate tax and other benefits has successfully reformed all its financial sector legislation in line with international best practice, fully compliant with EU directives , the OECD , FATF and Financial Stability Forum, since EU accession.


What about an offshore bank account?

Most financial transactions are made through offshore company bank accounts. Each offshore bank and foreign jurisdiction has its own requirements. We will provide you all necessary documents to open account - we will send the bank forms with your package of company documents. After the bank forms are filled, a photocopy of the ID (passport or drive license) and verification of residential address (utility bill, credit card statement) will be sent to the bank. Some banks require further documents such as bank reference and proof of residence.
The minimum initial deposit required differs from bank to bank. Also each bank has its own internal policies in relation to the customer. Most of the banks provide multi-currency accounts, distance banking via internet, phone or fax.
After the bank account had been opened and fully activated the opening balance has to be paid directly to your bank account. You have to transfer an amount equal to the minimum required balance or any amount in excess of this required minimum balance.


Is it legal to own an offshore company?

There is no illegality to own an offshore company. If you have good advisors you will benefit of all the benefits it's suppose to. Many high-tax countries have introduced some countermeasures in their tax regulations against known offshore finance centers. Therefore is indicated before proceeding with incorporation of an offshore company to check if in your country exists a blacklist or any discriminating regulations targeting transactions with offshore corporation.
The legal structure and operation of an offshore company mirrors that of any common law-based limited company. Just like any other company is managed by a board of directors for the benefit of its shareholders, which have the power to elect the company's directors.
In conclusion an offshore company is the same as a regular company in your country only is not burdened by excessive tax, is faster to incorporate and easier to manage. In itself, it's completely legal to have and use.


What about offshore foundations?

Offshore foundations are also known under the term of Private Foundations or Private Interest Foundation. They have characteristics of both a company and a trust. A foundation is a separate legal entity without any members or shareholders and is generally established to reflect the wishes of the founder, who may be an individual or a corporate entity. Foundations can be used for charitable purposes or for private purposes (succession and estate planning) and be established for a fixed or indefinite period of time. Foundations are more popular in civil law jurisdictions where the concept of Anglo Saxon Trust is less well known.
The wishes of the founder are contained within the Foundation's Charter and Regulations.
Regarding the foundation uses there are no restrictions on the legal activities of a company wholly or partially owned by the Foundation. Legally a foundation cannot engage in business activities, like marketing and selling a product. Usually many individuals choose to incorporate an offshore company (IBC) which is wholly owned by a private foundation in order to carry out any offshore investment, trading or commercial activities; or the foundation may be the ultimate holding entity for a number of different offshore companies established for various purposes. This is the most common and safe asset protection techniques used in offshore banking and asset protection today.
Activities of the Foundation may include any of the following: wealth protection inheritance/succession planning, avoidance of forced headship rules, protection and management of assets, charitable purposes, holding art collections, pension funds, minimizing international income, capital gains and estate taxes or receive and manage capital and titles.
Foundations are generally restricted from holding interests in property in the location of domicile of the foundation, but may otherwise hold a variety of assets including: stocks, bonds, other securities in public or private companies, intellectual property, real estate/immovable property, bank assets, investment portfolios, art, jewelry and other.
An offshore foundation may be a solution in the following situations: if you want to preserve the wealth against uncertainty (political, economic or family related), if you want to transfer wealth to your heirs in a tax-efficient manner, if you want to transfer wealth to your heirs in accordance with their wishes and not in accordance with the laws of the country where they live, if you want to consolidate the ownership of assets owned throughout the world in one location, if you want to centralize reporting or if you want to minimize or eliminate estate taxes arising on the death of the founder.
In the process of incorporating a foundation there are three basic components to take into consideration: the Founder (the person who gifts assets to the Foundation), the Foundation Council (the officers who manage the Foundation, sometimes called Protector) and the Beneficiaries (the individuals or institutions who benefit from the Foundation assets).
The Founder established the Foundation for a specific purpose, which are contained within the Foundation Charter and articles which are not a public document. Next the Founder appoints a Foundation Council to oversee and manage the Foundations assets in accordance with his wishes. Periodically the Foundation Council as directed would distribute the assets, or a proportion thereof to the beneficiaries.
The founder may be a person or a corporation who submits the Foundation Charter to the authorities and brings the Foundation into existence. The Foundation Council is in charge of carrying out the purposes and objectives of the Foundation. Also the Council can be either a person or a Corporation.
A foundation is an iron clad way to secure your assets because no court or judge can ever order you to provide funds that a foundation owns. That would be an illegal order and courts cannot issue illegal orders.


What is a Certificate of fiscal residence?

As the name suggests, a fiscal residence certificate or a tax residence certificate is a document that certifies a company's tax residence. Although the name and content of the document may vary from a country to another, the essence is always the same: tax authorities, or similar body of a country certificates that a particular company or branch registered in that country appears in the tax authorities register, has a tax number and, where necessary, pay the tax. The Certificate of Fiscal Residence is valid for one year from the date of issue and is valid for one company and for income of the same nature. If you hold several companies a Certificate of Fiscal Residence must be obtained for each one, and the same should be applied for income of different nature.

You need such document for:
• Parent-Subsidiary Directive
• Interest-Royalty Directive
• Savings Directive
• Double Taxation Treaties

Private individuals, private individuals with a tax number, business associations and other organizations may request a tax residence certificate on the basis of treaties on the exclusion of double taxation. Fiscal residence certificates are used abroad and therefore is important to pay attention to accurately providing the name of the foreign organization or authority that will use the certificate.
For example most European countries, like United Kingdom and Portugal, request a Certificate of Fiscal Residence to benefit companies from the Double Taxation Treaties and the application of several European Directives. The Certificates of Fiscal residence are a proof of fiscal residence of the company when are signed and stamped by the Tax Authorities, which helps the company in issues like tax exemptions and withholding tax, according to each country.