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The use of the
companies
It is not possible to prepare a full list of
variants of how to use offshore companies, and also it is not possible to
finally conclude, whether the selected variant complies and satisfies your
concrete situation and your purposes, because there are features in the
internal national legislation of the country of business activity, features
of company incorporation and availability, or unavailability of double tax
treaties. Below you will find some typical schemes of the use of offshore
companies, which may give you an introduction about the necessity of such
use, however we urgently advise you to follow them after preliminary
consultations and studying by experts of each concrete case.
1. The company as an intermediary in
foreign trade.
If you are engaged in export or import of
goods, you can use the offshore company as the intermediary in foreign
trade activity.
An offshore company buys goods from a
provider for one price, say, for US$1, and sells it to your local resident
company for another price - US$2, further the local company sells goods to
real buyers for US$2,1 dollars. Thus, the basic profit collects in the
offshore company. As the company is registered in the offshore zone, the
income is not subject to the taxation. Depending on a business direction
(import or export), a kind of the tax, which is subject to minimization,
the costs of goods are increased, or reduced.
For realization of foreign trade operations
in the countries of the European
Union it is meaningful to use the companies incorporated in the Isle of
Man, or in Madeira, because VAT (Value Added Tax) is available for those
companies. In other cases: the classic offshore companies - British
Virgin Islands, Panama,
and in the case of " black lists
" - LLCs registered in USA, the intermediary trading companies of Iceland, the
British companies, acting as nominees.
2. The company as a contractor, or an
agent.
The use of this variant is based on a method
of increase of costs with participation of offshore companies. Your local
resident company always may order a service with an offshore company,
payment for which may be included in the cost price and written off on
charges. Thus, the amount of paid income tax is reduced for at the local
resident company, and the income received by the offshore company is not
subject to income tax in the country of registration.
For incorporation of an offshore company in
this case, it is important to take into account, first, the region and the
name of the company, which should correspond to a kind of planned costs.
For example, for realization of legal services it is preferable, that the
name of a company to contain a word "legal" for creation of a
reality of carried out costs and avoidance of steadfast attention of tax
bodies. Second, it is necessary to note the size and the order of payments
of taxes at a source during realization of debit payments in the country of
residence of the local company.
We recommend you to use the companies of British
Virgin Islands and Panama,
and in the case of " black lists
" - LLCs registered in USA, the
companies of Iceland,
Hungary
and the
British companies, acting as nominees.
3. The company as an investor.
Reinvestment of funds.
By the certain moment of time you will face a
situation when the basic part of money resources will belong to your
offshore company, and you will need new investment projects, for example,
establishment of branches, construction of new manufacture and so on.
In this case your offshore company can act as
the founder of the local resident entity, or issue a loan to your resident
company. For large investment projects we recommend to use banks for
fiduciary investments of money resources; that will provide additional
guarantees of confidentiality and safety of investment of funds. It is
important to take into account availability of contract about mutual
protection of investments between the countries where investments are
directed too by the country of incorporation of investor.
4. The company as a property owner.
If you, as a physical person, make
"expensive" purchases, for example, the real estate, automobiles,
than sooner or later you may meet a question of tax bodies about payment of
income tax by you, as the physical person, on all profits, which allowed
you to make these purchases. If you have carried out preliminary tax
planning actions and the tax declaration sent by you fully corresponds to
and includes all incomes received by you, so, probably, this section will
not represent any interest for you. If no, we recommend, that your offshore
company to act as a buyer of a real estate and other movable property by
registering or not registering representative office depending on
requirements of the local legislation.
In the case of an acquisition of a real
estate in the Great Britain by an offshore company, the beneficial owner of
which is a non-resident of the Great Britain, at the further alienation of
the real estate and origin of a difference between purchase and sale price,
the above difference is not a subject to a tax for a capital increase.
Please look into our information material
“Acquisition of a real estate in the Great Britain " for more
details.
5. The use of a company as a
holding company.
For creation of affiliated companies and
planning of an optimum amount of received dividends it is important to
consider taxes at a source in the country of incorporation of an affiliated
company. We shall look into situation, for example, when the company of
British Virgin Islands is the founder of the company in Russia. For
allocation of dividends we shall assume, that the total amount is equal
US$100, the Russian company is obliged to withhold a tax at a source – 15%
of the amount of dividends. Thus, the company of British Virgin Islands
will receive only 85 units of a conditional income. If we turn to tax
planning and a company incorporated in the country having double tax treaty
with Russia will act as a founder of Russian company instead of the company
from British Virgin Islands, so it is possible to decrease the amount of
tax at a source. For example, there is double tax treaty with Denmark (the
rate of tax cannot exceed 10% of a total amount of dividends), with the
Netherlands (5% or 15% depending on the share held in the authorized share
capital of Russian company) and other countries (lists of treaties for
Russia and Latvia).
Thus it is important to consider not only the
rate of tax at a source in the country of incorporation of affiliated
company, but also such important conditions, as taxation of income of
dividends in the country of registration of a holding company and the rate
of tax at a source during allocation by the holding company to its
shareholders.
A choice of a country for registration of a
holding company influenced by the above-mentioned factors. The most
favorable countries are Austria, Belgium, Gibraltar, Germany,
Denmark, Spain, Malaysia, Portugal, Singapore, France, Switzerland, the Netherlands, the Great
Britain, first of all, because of a plenty of double tax treaties entered
into and taxation of income from received dividends by holding companies
registered in the above countries. Please look also into “ common
comparative characteristics of holding companies”.
6. The company as the owner of
intellectual property.
With the purpose of safety and prevention of
influence of various political processes on operations of local resident
company, an offshore company can act as the owner of the intellectual
property: a trademark, patents, licenses, industrial samples. Further the
offshore company will grant the rights of use of the above intellectual
property to the local resident company on the basis of license contracts,
that will allow the local company to increase charges, and thus, to cut
income tax in the country of incorporation. It is important to note, that,
as a rule, there is a tax at a source on payments for the right of use of
intellectual property, therefore it is necessary to choose a country of
registration of the company- owner of intellectual property, which entered
in double tax treaty with the country where the company making royalty
payments is registered. We recommend the following countries: Cyprus,
Luxembourg,
the Great Britain, and the
Netherlands.
7. The use of the company as a holder of a
bank account.
In the countries with the rigid currency control
there is an interdiction to open accounts in foreign banks without of the
currency sanction of the state institutions. The solution of a problem can
be the incorporation of an offshore company and opening of a current
account in the name of that company. You manage the company and its current
account with the bank, you have an opportunity to receive a corporate
debit/credit card and with its help to make purchases worldwide. We offer
the wide list of banks where we can
open corporate current accounts.
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