Private Client Requirements

Asset protection

Protection of assets of the company and founders is an important aspect which can play an important role during selection of a suitable location for formation of an offshore company. A majority of classical offshore locations have drawn up laws which place special emphasis on asset protection.

The applicable jurisdiction thus provides a high-quality of protection to the company, founder and shareholders with regard to possible judicial decisions of third countries, protection from property forfeiture, nationalisation, etc.

Confidentiality and anonymity

A majority of offshore jurisdictions adopted laws guaranteeing nondisclosure of confidential information, through which any disclosure of information about founders, shareholders or stakeholders of an offshore company to third persons, public or state institutions and governmental authorities is excluded. The disclosure of this information is punished by strict financial sanctions. The anonymity may be fostered by a number of legitimate steps, such as issuing bearer shares, appointment of nominee directors or by using other ways so that the real founders and users of an offshore company could carry on their business activities in full confidentiality and anonymity.

Holding companies

Offshore corporations often hold investments in subsidiaries and/or associated companies, publicly quoted and private companies, as well as joint venture projects. Capital gains arising from the disposal of particular investments can be made without taxation. In the case of dividend payments, reduced levels of tax on income can be achieved by utilising a company incorporated in a zero or low tax jurisdiction that has double tax agreements with the contracting state.

Patent, royalty and copyrights

Offshore companies are an ideal tool for administration and management of licenses. For example, a majority of software companies license their users through companies which are established in an offshore jurisdiction, or through a firm, which is not established in a classical offshore jurisdiction, but is controlled by such a firm.

International trade

International business activities are another one of the most often uses of an offshore company, which thus can use for:

- exports
- imports
- re-exports
- mediation of business and contracts

A business company basically acts in the role of business mediation company, in the most ideal case it is doing business by itself. By its being registered in a liberal tax jurisdiction, it taxes its profits at an acceptable tax rate or it does not tax them at all if it is subject to such a fiscal system which enables it to do so.

Finance

An offshore company is able to grant a loan to a related company located in a high tax area, with tax deduction for interest payments. In this way, both inward investments from a foreign entity is achieved, which may be advantageous due to foreign investor protection laws, as well as tax savings on the deducted interest. Interest payments are often subject to withholding taxes, therefore it is important to choose a jurisdiction that maintains suitable double tax treaties in relation to interest payments. Suitable jurisdictions include Cyprus, Malta, the UK, the Netherlands and Luxemburg.

Personal and corporate tax planning

For a high net worth individual with properties or other assets in a number of countries the possibility of utilising an offshore company or an offshore trust can offer significant advantages. By establishing a trust that has minimal or no taxation on assets, the investor is ensured that investment profits are retained, extending the same tax-efficiency to the investors’ named beneficiaries. This saves taxes, 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. An international trust in Cyprus in combination with an offshore company in for example the BVI or the Bahamas could be a suitable option.

Real estate

Owning real estate through an offshore company allows in some cases for the avoidance of inheritance taxes, capital gains tax in case of sale, as well as income taxes. Most countries make no distinction between legal and physical persons as owners of real estate, so such transactions are relatively easy to complete. If, for example, an offshore company, beneficially owned by a UK non-resident, purchased a property in the United Kingdom for investment purposes and the property was then later sold on to a third party the capital gain arising from the transaction would not be subject to UK capital gains taxation.

Employment companies

Many companies utilise offshore structures for the employment of staff working on overseas assignments. This helps to reduce the costs associated with payroll and travel expense, administration, and may provide a tax and social security saving benefits for the employees. Suitable jurisdictions can be Cyprus, Malta and the UK.