A tax haven is neither a legal nor a scientific technical term. Countries that offer significant tax advantages are usually referred as a tax haven. In this respect, the meaning of tax haven is naturally regarded as relative. Compared to a country with 35% income tax a neighbouring state with 12% tax burden is considered a tax haven. Even though compared with a country that has no taxation of income it is not considered as a tax haven.
In the traditional sense a tax haven is a country where you can register your company which remains tax-free in this country (with the exception of some state taxes) as long as it does not act in this country. Some constitutional states have gone even further, by having both trade as well as income tax abolished in the country itself and also offshore.
A true tax haven jurisdiction normally has a complete network of rules, laws and precedents which are only designed to attract international companies into the country. These benefits include not only a taxation of 0.00% on the trade but also laws that allow fast and efficient company establishments, include minimum mandatory messages, have strict security measures in the area of finance and business and a well developed financial system as well as arrangements with other governments to maintain confidentiality of information.
St. Vincent represents a peculiarity in the international offshore. Here it is up to the company whether they want to pay taxes or not. This might sound strange to you but it has a deeper meaning. For a tax payment equal to 1% St. Vincent provides an internationally recognized tax certificate which shows and certifies towards third states that St. Vincent is not a zero-tax-haven.
Most tax havens have available a small territorial area and low population. The direct taxes paid during the registration of an IBC and the annual fees are only the tip of the iceberg in terms of the overall impact of a successful offshore business start-up-industry in a particular country.
A tax amounting to 200$ multiplied by tens of thousands of offshore companies brings a million-dollar budget, without even affecting the infrastructure of the country. The non-government income is even higher. This generates itself through business fees paid by all the offshore companies to the registered agents, managers and administrators which are paid on the spots.
The cash deposits and transfers of offshore banks, insurance companies and investment funds come along with this. All in all, a successful offshore financial sector creates jobs, career opportunities and income for many people.
The offshore services sector creates demand for high quality telecommunications equipment, office space, computer equipment and software, office furniture and office accessories. The result is the significant increase in prosperity and social stability of the country. This in turn strengthens the independence of the country – in particular its ability to withstand pressure from other governments and organizations.
Tax havens and offshore companies have been around for several decades.
Tens of thousands of new offshore companies are established worldwide each year. Millions of offshore IBCs operate around the globe. Almost all of the major Fortune 500 supranational companies own and operate offshore IBCs.
In our time it is almost a must: offshore transactions reduce the total costs and thus remain competitive. This applies to both the big companies and new companies. Thus, the offshore area is not at the edge of the business society but rather in the middle.
Some estimates go as far to say that half of all the money in the world (imagine the sum we are talking about!) is in the offshore society no matter what point in time. The total international trade, goods, commodities and services, goes through low or zero tax companies. Investment funds are regularly registered in tax havens, so they are not adversely affected by excessive taxes; therefore their investors are able to offer highly competitive returns. Many offshore holding companies support companies when investing abroad with minimal loss of withholding taxes.
The lion’s share of the global e-commerce is in the offshore area. This list could go on forever. To understand this trend you can compare money with water. It will always flow from higher areas (tax burden) to lower areas and both areas get along with this.
No, the ownership of shares of an offshore company, whether directly or indirectly, is basically the same as owning a company in your own country.
Of course, you should seek advice before establishing an offshore company. Many of the countries with high tax burdens have enacted laws to work against known offshore financial centres. In particular, some of the high tax jurisdictions have imposed a discriminatory withholding tax on the disbursement of funds from domestic companies to companies that are located in certain offshore jurisdictions.
Therefore, it is advisable to verify whether the own country has such a black list or similar discriminatory provisions relating to transactions with offshore companies. A competent accountant or bookkeeper in your own country should be able to answer this question. All in all the offshore company does not differentiate with the company in your own country apart from the fact that the taxes are not as high and that the offshore company can be established faster and is easier to manage.
There are two main reasons for this. The first one is all about the tax reduction. The second is about the protection of property and discretion. These two reasons have to be considered independently. Some offshore companies do not intend to lower their taxes, but merely to serve as a protective sheath for a portion of the assets of the company owners. In most cases however, these two motives overlap and complement each other.
The main advantages of the offshore IBC are:
If your government would not require accounting or record-keeping from you, would you continue to do it anyway? The difference would be quite striking. Many of the offshore jurisdictions do not require official accounting records. Basically, offshore companies can freely configurate their books. However, some offshore financial centres have recently realised that some accounting obligation for the offshore companies lies within the shareholders own interest because a certain order in the books brings inner peace. This in particular is the case if the offshore company has more than one owner and is therefore in need of a slightly more pronounced management and control.
Conclusion: Basically, it is left to the company owners or corporate organs whether commercial accounts are kept or not. In the case of St. Vincent, you should create commercial accounts if you are thinking of using the tax certificate (1% tax scheme).
In terms of internal structure there is hardly a difference! An offshore company is also regarded as a legal entity (a company), of whom is registered only outside of the country in which the owner has registered his place of residence. Historically, the term “offshore” is closely associated with a company that was not only established outside the home country, but it has also a number of advantages which are not always available in their own country.
An onshore company pays taxes (in some cases a very high one), an offshore company is exempt. An offshore company is also free from the normal financial reporting and accounting requirements.
To establish an offshore company, the owners do not need to show a large paid-up capital. The offshore company is easily and quickly registered as well as easily controlled. Apart from these “advantages”, the internal structures and management of an offshore company are mostly on the same line as a “normal” business corporation.
No, usually there is no provision for a minimum capital. The owners of the IBC can freely decide over the height of the authorised capital which is to be specified in the establishment documents. Often, the law does not even prescribe the time limits by which the authorised capital must be paid out, this is decided by the shareholders. As in many other offshore financial centres, for example on the Seychelles, the private company can run its business with a capital of any chosen amount, or even without any capital.
Usually the shares can be issued in any chosen currency. Since the government license fees of international Business Authorities are often calculated in dollars, the most popular currency is the US-Dollar.
No. The only legal provision in this regard is to have a “minimal presence on the ground” in the country. This means that you have to be able to show a “Registered Office” and a “Registered Agent”.
Usually this service is provided by us, by a licensed registered agent, which is in charge of all the international business companies that we register and manage for our customers.
We can also offer you several optional services for your offshore company, such as mail and fax forwarding, email forwarding and answering calls. These services give your company a bit more of a solid image. However, an IBC per definition is not active on site, with the exception of transactions with other IBCs.
A nominee shareholder is an independent person who is officially registered as a shareholder in an IBC. The purpose of the nominee shareholder is to protect the anonymity of the actual owner of the offshore company.
If a nominee is appointed a confidential legally compliant document is issued from the nominee to the beneficial owner. It is a declaration of trust, a nominee service agreement or similar document. This document is proof of the actual situation – namely, that the shares of the nominee are only held in the name of the beneficial owner and that only the beneficial owner may dispose of such share and is entitled to any gain on those shares.
Both options are about equal in terms of confidentiality. However, the long term use of nominee shareholders is preferred because the general tendency in the offshore financial services industry is to limit the use of bearer shares or to ban it altogether (exception: St. Vincent).
A nominee director, also known by the politically correct term of “Third-Party Director”, is an independent person (corporate or individual) that is officially registered as a director of an IBC and acts as such.
The main reason to use a nominee director is, to have no direct connection between the owner and his offshore company visible to the outside. The use of a nominee director or nominee manager for an offshore company shall prevent the assumption that the beneficial owner of the offshore company controls and manages it (the “management and control system” concept). In the essence, the main purpose of a nominee director is to protect the customer in terms of confidentiality.
The nominee director may perform various management functions that would otherwise be performed by someone who is in direct relation to the company. The actual participation of the nominee directors on the everyday concerns of the offshore company varies depending on the needs and circumstances of the customer.
In general, the longer the nominee director is participating actively in the management, the more expensive is the service for the offshore company. Very often (but not always), the involvement of the directors, as the name suggests, is nominal. In this case, all the practical features of the ordinary administration of the company are carried out by the owner of the company himself, who acts through a power of attorney as “representative” of the IBC. For more information on this subject see the section Business Management.
A Certificate of Good Standing (CGS) is an official document issued by the company register, the Register of Companies. A CGS confirms that a particular company is legally valid, all the administrative requirements are met in relation to their further registration and has paid all state taxes and therefore on the date issued is “in good standing”, that it is in good shape vis-à-vis the trade register. The Certificate of Good Standing is similar in form and content to the first Certificate of Incorporation of the IBC.
The Certificate of Good Standing is used to confirm formally the continued legal existence of an offshore company after a certain time has elapsed since it has been established. The CGS confirms that the status of an independent legal person (legal entity) for the corresponding offshore company has not been revoked or become invalid, that the company has not merged with another one, has not filed to the resolution and not removed from the register.
Most banks tend to keep asking their customers regularly for a new Certificate of Good Standing (for the offshore company). Such a demand is normal when the IBC is older than one year. Any other party, such as a potential partner, can request a CGS to ensure that your company exists legally. The Certificate of Good Standing can be obtained at the Register of Companies at any time. This is a standard service which is provided by the registered agent. Since the Certificate of Good Standing essentially is a “snapshot” of the legal health of the company at a particular time, it makes no sense to order a CGS in advance.
If, over time, the offshore company has not been managed properly or has not paid its annual fees, it will lose its good status and finally be deleted from the Register of Companies. For these companies, of course, no Certificate of Good Standing can be applied for until all fees are paid for its status to be restored. The restoration of a “bad” company is possible, but it is a costly and time consuming process.
Some beneficial owners of offshore companies routinely ask for a Certificate of Good Standing for their own companies to check whether their registered agent is pursuing his task to maintain the IBC in good condition.
No. All procedures in preparing the way and the creation itself can be performed without the presence of the customer. All of the founding documents will be signed by the registered agent or its official representative (also referred to as subscriber). The documents after the establishment are also prepared by the registered agent. This leads to a complete chain of legal documents, with which the customer can acquire the control of the new IBC.
No. Before the registered agent starts with the foundation of a new company, the customer has to agree to the applicable terms and conditions. The actual foundation documents (Memorandum, Articles of Association, founding protocol and establishment declaration) are all signed by the initial subscriber, in this case the registered agent. This is standard procedure prescribed by the international Business Companies Act.
There is a standard set of documents. This is required by all registered agents, in accordance with the requirements of the affected offshore country. For example on the Seychelles it is the International Business Authority. Under these conditions, a clearly legible copy of the ID card or Passport is required, a certificate of residence of persons that occupy an important position such as the director, subscriber or shareholder is also required.
Yes, but not in detail. In general we need to know what intended type of business your new IBC shall be. Indication of your intended business purpose will be of your benefit, because we can then sometimes avoid potential problems if it turns out that you need a specific license for your business purpose. Sometimes, we can recommend some minor changes in your business structure of your IBC, this can only be done if we know exactly what you intend to do. However, to register an offshore company you do not need to provide any commercially sensitive information, names of potential customers, or such like. We also need to know about the expected geographical area of operation of your new IBC. Here again we can make, in many cases, suggestions to structure or suggest ways to optimize the use of the offshore company.
Because we are committed to it by the laws of anti-money laundering. In terms of due diligence requirements, we are like a bank. By this license we are bound, by strict rules, to know and identify our customers. Therefore, we are now obliged by law to clearly determine the identity and whereabouts of all our customers. As mentioned above, this information remains strictly confidential and only internally in our files. We can be prosecuted if we make these data public.
Yes. The change of the agent is a pretty common procedure for IBCs. The change can be made by request to the current registered agent to resign and to hand over the management of your offshore business to another licensed registered agent. Such a request must be submitted in writing. All reputable agents will respect such a request.
Although the change of a registered agent is legally fairly simple, people with bad intentions (for example, the attempt to avoid payment of current or past due renewal fees) face considerable problems. They will not find a registered agent easily that would be willing to take over the management of your business.
Yes. The formal procedure for dismissal of the directors of the IBC and the new appointment will depend on the structure of the particular offshore business - the number of directors, shareholders, what are the minimum requirements for the company resolutions, etc.
For companies where most of the management was taken over by the registered agent, the change of the director or any other change in the internal structure of the IBC will be effective if explicitly requested by the beneficial owner of the IBC. Apart from this request, the owner is not required any more as all transactions will be handled by the agent.
If the registered agent is not the nominal director and shareholder, that means that all positions were filled by the beneficial owner – the registered agent can only act as an advisor concerning the necessary formalities. In this case, the execution of the relevant resolutions must be organized by the owner of the IBC.
A shareholder is a person (an individual or legal person), which is the formal holder of shares of an offshore company. Basically he does what the name implies – he holds the shares.
Relating to offshore companies, a distinction between holding the shares and the actual owning of shares must be made. Often, the shareholder holds shares to manage them in the name of another person. Such shareholders are called “nominee shareholder”. In such a case the other person – who is accordingly the real owner of the shares – is called “beneficial owner”. Effectively the nominal shareholder then acts as a “shield” for the beneficial owner, he prevents the public from seeing who the real owner of the IBC is.
In the constellation nominee shareholder/beneficial owner, the beneficial owner is the person who is the real de facto owner of the shares and therefore entitled to claim profits, dividends and payout. The beneficial owner is the one who decides on the eventual sale of shares. Well, not all beneficial owners are shareholders and not all shareholders are the beneficial owners – it is possible that both positions are filled by the same person.
Obviously the director of the offshore company can sign. The authority of the director is based on the executive powers that are granted to him in the founding documents and in the Articles of Incorporation. If the beneficial owner himself is the director then he has no other conditions for his signature. If the director is provided through a third party (nominee director) then he is only allowed to sign on the basis of explicit instructions and authorisation from the beneficial owner. Under no circumstances is the nominee director entitled to sign without instructions as this is contrary to its mandate and the terms and conditions of the business with the customer. The only exception in which the nominee director is empowered to act in its sole discretion, is in those cases where a claim or complaint by another party is brought against the company or if circumstances arise in which it is necessary from the perspective of the nominee to take immediate urgent action to act in the best interest of the beneficial owner or the company, provided that the beneficial owner is not clear with giving adequate and lawful instructions. Only in this case, to protect the company, the nominal director is empowered to act independently.
A person holding a valid power of attorney is also authorised to sign on behalf of the company under the authority contained in the scope. It is common practice for the beneficial owners or their agents to obtain subscription rights for an offshore company through a power of attorney.
The owners are always in control of the IBC! Whether they are direct signatories depends on the internal structure of the company. The owners of the company are direct signatories in the following cases: (a) if they are appointed as directors or appointee (this can happen in cases where there are no concerns about confidentiality), (b) if a power of attorney or special resolution to grant these rights will be issued by the offshore company. In case (b) the beneficial owner can demand these rights at will.
This depends on the current structure of the IBC. If you are a direct shareholder of the company (without demanding an appointed nominal shareholder) share certificates and an entry in the register of shareholders is a clear proof of ownership.
If a nominee shareholder is involved, proof of ownership of the beneficial ownership will be confirmed by another official document.
A declaration of trust, a deed, a nominee service agreement or a declaration of the beneficial owner may serve as evidence. Such a document confirms with absolute certainty the actual owner of the offshore company independently of the name that the nominees sign in.
As part of an offshore company, a declaration of trust is a written confirmation from the nominee shareholder to the beneficial owner, stating that the shareholder holds shares of the IBC, in fact, for and on behalf of the beneficial owner. This document states clearly that the beneficial owner is the sole owner of the shares and it also confirms that the nominee transfers the shares (sell or trade them) only in the context of the explicitly given and written instructions from the beneficial owner. It also states that all rights, profits, dividends and other benefits which may arise from such shares belong to the beneficial owner and not to the nominee directors.
The name, date of registration, the registration number, registered office address and the name of the registered agent.
There is an option available for almost any business company – on request – the company register of directors and/or shareholders can be registered in a public register file. If this is done, then the information on directors and/or shareholders is also open to the public. This registration is optional and usually only carried out only after explicit instructions from the beneficial owner of the company.
The annual fees are the annual recurrent costs of government taxes and fees that you (or rather, your offshore company) have to pay to continue to maintain it in good condition under the laws of the state. These costs can be compared to taxes and the administrative burdens of normal “domestic companies”. Of course, the total maintenance costs for an offshore company are usually much lower than for a company in a country with high taxes.
The annual fees are composed of two main factors: (1) mandatory fees for the absolute minimum necessary to keep a corporation in good condition, and (2) optional fees for services that will strengthen and improve your offshore company, these are not compulsory. In general, the level of fees is optional for the exact structure of the business, their services and the workload of the registered agent.
The mandatory fees always include (a) the governmental fees (fixed rate) and (b) the registered office and registered agent fee.
The governmental fee is essentially a fixed sum in the amount of the state fee that is paid by all offshore companies in leu of income tax. Whatever the name, the fees of the government are fixed taxes being founded by the government for the privilege of flying the flag of the particular tax haven.
The fee for the registered office and registered agent is an honorarium. It is paid to the registered agent for being the official intermediary between the owner of the company and the government. This fee also covers the use of the registered agents office address as the official address of the offshore company. It also covers the minimum necessary administrative services in order to meet the requirements of the International Business Companies Act. The law requires that in view of the clearance certificate, all offshore companies must have a registered office and registered agent, so the fee is necessary.
The optional fees for services in the offshore corporate management will occur in cases such as (a) the appointing of a third party as director (nominal), (b) the appointing of nominal shareholders, (c) third parties (nominal) appointment to be allowed to sign off accounts, (d) virtual office services such as email and fax forwarding, document processing and answering, (e) various secretarial, legal and management services, either by fixed fees or on hourly basis.
For simplicity reasons, the annual fees are generally invoiced annually once, just before the approval anniversary of the offshore company. The sum of the annual fees payable for the coming year is payable in advance. In more complicated offshore company executive agreements some fees are billed after the work is done. These will be billed monthly or quarterly.
Although it is not always clear and visible, you use these provided services. Specifically, your offshore company. Apart from the address of the registered office, which is provided to you, the registered agent is legally responsible for the safe keeping and updating of certain company documents – the Memorandum and Articles of Association of the IBC, the list of members or a copy of it, the register of the directors or a copy thereof, copies of all resolutions, notices and documents that the company produces.
In addition, unless the directors of the company have a different solution for this agreement, the registered agent is also the custodian bank for all protocols from meetings and resolutions of the shareholders as well as the resolutions of the board. It is the duty of the registered agent to keep these documents up to date and to keep them available for inspection by the directors, shareholders and owners of the IBC.
Finally, the registered agent acts as an official intermediary between the offshore companies and the Government of the Seychelles, in particular as regarding to the timely payment of government taxes. All in all, the registered agent takes over several important functions without which the IBC cannot exist legally.
By not paying the annual fees the offshore company will lose its status of good standing. This will then result in heavy fines and legal consequences for the IBC.
Late payment of the governmental taxes, for example, a late payment of up to 90 days will be fined with a 10% charge. If the payment is later than the mentioned 90 day period then there will be a fine of 50%. After this time, the registrar will remove the company from the Register of Companies because of non-payment of fees (amount may vary from state to state).
An IBC which was deleted from the register remains obliged to pay accruing and unpaid fees. Such companies continue to remain liable for all debts and liabilities. Any creditor can legally collect a dept from a company that has been excluded from the register using the means of court orders.
A deleted company may legally not trade or take on new business and its directors, shareholders, managers and owners cannot use the company’s assets to do so either. If they do, they can be held personally liable for any claims or legal consequences of these transactions.
If deleted companies are run by an appointed manager who acts on behalf of the beneficial owner and under his direction, the personal liability extends to the beneficial owner. In essence, the deleting of an International Business Company means that all funds and assets are legally frozen until the company is again legally clear or all claims were settled.
It is possible to restore a company after it was deleted, however, considerable state charges for the restoration will be due. These recovery fees are in addition to all outstanding and new fees as well as penalties. In addition, a high fee will be due for the registered agent when a deleted IBC is to be restored.
The correct procedure for the termination of an International Business Company is a voluntary liquidation. It is a fairly simple process to prepare and submit a statement containing the solvency, making a statement of assets and liabilities, the appointment of an administrator, publishing reports to the local media, the preparation and submission of several resolutions and documents to the register.
Most of these procedures can be performed by the registered agent, but a certain excess of the founder is also required. After a voluntary dissolution is completed properly, there is no possibility of recourse for creditors against the IBC and no deferred or potential liabilities for directors, shareholders and owners of the IBC.