|
By making use of an offshore
company, it may be possible to secure a
number of advantages. Far from being exhaustive,
the following list outlines some of the
structures which are available, and give
examples of some of the uses which may be
made of an offshore company.
Offshore Company
formations
Probate and Privacy
A high net worth
individual with properties or other assets
in a number of countries, who is not UK
resident, may wish to hold these through
the medium of a personal holding company
so that upon his demise probate would be
applied for in the country in which his
company was incorporated rather than in
each of the countries in which he might
hold assets. This saves legal fees and avoids
publicity. Again, not everybody wishes to
advertise wealth and an individual may wish
to hold property through an offshore entity
simply because of the privacy which the
offshore arrangement gives.
Property Companies
There are often great
advantages in using an offshore property
holding company for the purpose of holding
a UK or an overseas property. Advantages
of offshore property ownership include avoidance
of inheritance tax, avoidance of capital
gains tax, ease of sale which is achieved
by transferring the shares in the company
rather than transferring the property owned
by the company and reduction of property
purchase costs to the onward purchasers.
Taking the United Kingdom as an example,
use of an appropriate offshore vehicle can
offer relief from capital gains tax and
inheritance tax. It should be remembered,
in particular, that when a non-resident
company disposes of a property investment,
no capital gains tax is charged and holding
through an offshore company removes the
application of inheritance tax which would
apply if a non-domiciled investor held a
UK property in his personal name.
Patent and Copywrite Companies
An offshore company can purchase or be assigned
the right to use a copyright, patent, trademark
or know-how by its original holders with
a power to sub-licence. Upon acquisition
of the intellectual property right the offshore
company can then enter into agreement with
licensees around the world who would be
able to exploit the intellectual property
right in various countries. It is thought
preferable to acquire, for example, a patent
at the patent pending stage before it becomes
very valuable so that the capital payment
for the acquisition of the patent can be
set at a lower amount. Often royalties paid
out of a high tax area attract withholding
taxes at source. In many cases an interposing
holding company may allow a reduction in
the rate of tax withheld at source.
Shipping Companies
The use of offshore
shipping companies can eliminate direct
or indirect taxation on shipping. Shipping
companies may own or charter ships, the
profits from which activities can be accumulated
tax free. Tax and legal requirements do
not generally dictate that the offshore
company owning a shipping vessel must be
incorporated in the jurisdiction whose flag
the ship flies. The historic havens for
these purposes have been Panama and Liberia.
Lately, the registries of other nations
have expanded and consideration might be
given to registrations at British Ports
of Registry such as those in the Isle of
Man and Gibraltar. A certain prestige attaches
to the registration of a ship or indeed
a yacht at a British port of registry and
the vessel can be surveyed at most ports
throughout the world by a surveyor recognised
by the UK Department of Trade and Industry.
The British flag has always been regarded
as one of the world's most dependable.
Trading Companies
An importing or exporting
company might establish itself in an offshore
area. The offshore company would take orders
directly from the customer, but have the
goods delivered directly to that customer
from the manufacturer or place of purchase.
The profits arising out of the difference
between purchase price and sales price would
then be accumulated in either a tax free
or low tax area. With such trading companies,
it is important to choose an offshore area
which has good communications as shipping
and other documentation may be critical
to the scheme.
Investment Companies
Funds accumulated
through investment companies set up in offshore
areas can be invested or deposited throughout
the world and whilst generally returns or
interest payable in respect of these funds
will be subject to local taxation, there
are a number of offshore areas in which
funds may be placed either in tax free bonds
or as bank deposits where interest is paid
gross. Similarly, in many offshore areas
no capital gains taxes are applicable. Use
of an offshore company incorporated in a
suitable country allows the possibility
of investing tax efficiently in a high tax
country.
Banks
Many offshore banking
institutions have been established in tax
havens in recent years. Many of these institutions
are subsidiaries of major international
banks. Such institutions pay interest free
of withholding tax and engage in international
financing from offshore bases which are
free from exchange controls. Such banking
institutions and their associated trust
companies are able to provide a wide range
of financial services to their international
clientele. Offshore banking institutions
are also used by the smaller business organisation
and indeed in some cases by individual owners
to act as offshore cash management centres.
In the past, particular offshore jurisdictions
have lacked the supervision which should
accompany the setting up of smaller banking
institutions. Indeed the British Government
introduced a moratorium on the setting up
of banking institutions in its Caribbean
dependencies until such time as adequate
legislation had been brought in and bank
supervisors appointed. Of these jurisdictions,
one of the first to meet British Government
requirements was the Turks and Caicos Islands.
Under its banking regime two types of licence
are available, namely, a national and an
overseas, the latter only permitting banking
activities outside the Islands. In either
case a bank would have to maintain a physical
or representative presence in the Islands.
A combined licence can be granted. The management
of the proposed bank would be required to
display a sound knowledge of banking with
evidence of ability and experience and no
less than two directors must be appointed.
In respect of those banks wishing to deal
with the general public without restriction,
substantial capital resources would have
to be demonstrated.
Professional Services
Those who receive
substantial fees in respect of their professional
services in capacities such as performers,
consultants or authors, may assign or contract
with an offshore company the right to receive
those fees. The offshore employment company
may not have to pay tax on its profits which
can be reinvested in a tax free climate
to generate further income from the offshore
company. Payments to the individuals concerned
can be structured in such a way as to minimise
their tax liabilities. One example in this
regard in respect of an overseas employment
is to increase subsistence expenses as against
fees paid to the individual.
Holding Companies
Use may be made of
an offshore holding company which would
fund the operation of subsidiaries in various
countries so that the subsidiaries obtain
the benefit of tax deductions on interest
paid. If the holding company is situated
in an offshore area where there are no income
or corporation taxes and no requirement
that dividends must be paid, then the profits
which are accumulated in the tax free climate
can be used to fund the requirement of subsidiaries
or reinvested as business convenience suggests.
Insurance Companies
There are a number
of offshore havens which are keen to encourage
the establishment of insurance companies
which, like banking companies, bring employment
and investment to the country of incorporation
and generally enhance its reputation and
its range of financial services. In a number
of offshore havens it is possible to incorporate
insurance companies which pay no tax in
respect of their premium or investment income.
|
