With Dominica vastly becoming one of the best Tax Haven jurisdiction in the Caribbean, the business of Offshore Companies registration in Dominica is rising at a nominal rate. With that in mind, I’ve put together some information on the different ways an Off-shore company can be used. This information is intended as no more than a general guide – it’s more less as info for beginner’s to the world of off-shore companies and their advantages. Please don’t feel intimidated by most of the technical terms (or jargon), it is meant to give you an idea of how versatile offshore companies can be.
International Trading
Import and Export transactions can be made extensively more tax-efficient if they’re carried out through offshore companies. Using an off-shore company as a mediator between a seller and a buyer of products or services in different countries allows profits to be accumulated offshore. (This is usually called Transfer-Pricing.) Such offshore-companies are generally known as marketing or export consultancies, and, with nominees handling phone calls, emails or faxes, which greatly enhanced the appearance of the company.
Although invoicing is always carried out via the offshore company, the goods can, nevertheless, normally be delivered direct from seller to buyer. Such devices can be particularly beneficial for transactions between European Union countries, with VAT accounting problems solved by registration in a suitable location, such as the UK or Southern Ireland, the onshore company then working in conjunction with another corporate vehicle, for example a Dominica company.
The Consideration of using an offshore company can also offers possibilities to move money from a high-tax to a low-tax area.
Manufacturing
A number of countries have a preferential tax-rate for manufacturers, and this can be exploited by establishing a manufacturing company in the appropriate jurisdiction and separating the manufacturing parts of the company’s operations from its other functions by basing it in such a free-trade zone. If structured correctly, huge savings can be made.
Investment Companies
An Investment offshore company is often used to make investments and accumulate wealth. Just as an onshore company can invest in stocks, shares, property or commodities, so can an off-shore company. The only difference is that the offshore company doesn’t have to pay tax on its profits, nor accumulated taxes when it is passed on to beneficiary.
In many jurisdictions, Withholding Tax is levied on income remitted out of the jurisdiction, but the careful use of double-tax treaties can reduce or even eliminate tax on the investment income. This may enable the investor to make investments in high-tax countries from an offshore base with minimal tax liability.
In some countries, interest is paid gross on tax-free bonds or bank deposits and this can be integrated into the client’s tax planning. In certain instances, interest may be rolled up without income being remitted, and, in some jurisdictions, death duties and capital gains taxes are not levied.
Most importantly, the use of an offshore company also protects the identity of the ultimate beneficial owner. Anonymity comes automatically with off shore companies, and is respected by the law in the offshore world.
Holding Companies
Offshore holding companies can handle dividend receipts from a spread of subsidiaries. This allows a group to centralize its resources and maximize tax benefits. Careful use of tax treaties is necessary to obtain the best results.Various locations, both on and offshore, can be used, with the holding company funding subsidiaries in a tax-efficient manner.
Property-owning Companies
Placing property into the ownership of an offshore company yields many immediate advantages, including the avoidance of Inheritance Tax and Capital Gains Tax. This is because the anonymously-owned offshore company changes hands in the event of death or re-sale, not the property.
Additionally, any subsequent sale is greatly simplified. In some countries the establishment of title is time-consuming and costly; but once title has been established for a company-owned property it never needs to be dealt with again. This is because the sale can be made by transferring the shares of the company, with title to the property remaining vested in the company. In other words, the company can be sold instead of the property.
Sales by share-transfer almost always save on legal fees, together with any transfer or value-added taxes that are levied in some countries. Government stamp-duties and capital gains taxes can also be avoided.
Probate
The ownership of a portfolio of investments through a single offshore holding company greatly simplifies probate procedures upon the owner’s death. Probate can be applied for in one offshore jurisdiction rather than in several different countries where the assets are located.
Legal fees are often significantly reduced and publicity can be avoided for high-profile individuals and families.
Consultancy and Services
Consultants, financial advisor’s, real estate agents, musicians, security consultants, bodyguards and entertainers often receive much of their income from overseas. This income can be remitted to an offshore company, which is the individual’s employer, and, after paying only a modest amount for expenses, thus retains the bulk of the funds offshore.
Employment overseas is often facilitated by the use of an offshore employment company. This can either employ an individual or a group of individuals working overseas. The employee keeps the bulk of his income outside the country of employment. This type of structure can also reduce currency exchange problems and circumvent a number of employment and residency obstacles.
Ship and Yacht Ownership
It’s often advantageous to pass ownership of a vessel to an offshore company. As well as securing significant tax benefits, it can also provide an easy registration procedure for yachts, which in certain countries can only be registered on the major national register with onerous compliance requirements.
A separate offshore company may be formed to operate or charter the vessel, thus separating ownership and income for additional tax benefits.
Intellectual Property
Patents, copyrights, trade marks, franchises and other rights such as those in music, computer software and technical know-how can all be transferred to the ownership of a licensing company, either offshore or onshore. The licensing company enters into licence or franchise agreements with the original company owner and then receives royalty payments and licence fees.
Insurance companies
Most offshore centers will only accept registration of insurance companies which are subsidiaries of existing insurance groups, or which are very heavily capitalized. Nevertheless, in several first-class jurisdictions it is still surprisingly easy to register an insurance company that would not meet the capitalization requirements.
Internet Trading
One of the fastest growing areas of international trade is the Internet. The international nature of the trade and the potential tax complication of dealing across borders can be solved by the creation of a specialist internet trading company offshore.
To obtain favorable tax treatment, it is best to locate the server physically offshore and to have an appropriate domain name. For example if your current domain name is www.jtc-advisory-service.com or www.jtc-advisory-service.info you could opt for a tax free British Virgin Islands domain such as www.jtc-advisory-service.vg.
Though the opinion is often expressed that such operations are ‘all in cyberspace’ and therefore location is not important, it remains a fact that regulation is increasing and planning should anticipate possible future developments. Although the Americans seem determined to keep the internet tax free, no one really knows how it will turn out long term. True to form, EU legislation concerning the sale of downloadable products and services relating to the payment of VAT is making things more complicated. An example of this is eBay: if you live in England you have to pay VAT on your invoices, but if your billing address is outside the EU you don’t. This is the result of EU legislation which was past in July 2003.
Asset Protection
Transferring title to assets to an offshore trust means that the settlor (the person who gives up ownership in favor of the trust) no longer visibly controls these assets. This means that they cannot be seized in cases of insolvency, marital proceedings, professional negligence, or by the taxman.
However, if the trust was set up intentionally to avoid a known current or future liability it may be set aside by the courts. Particular care is needed in the US and, since the 2004 budget; the UK is also looking closely at trusts.
Regardless of problems in some countries, trusts, when correctly structured, are excellent asset protection vehicles, and are extremely flexible in times of political and economic instability.
A further advantage of trust formation is that 100% anonymity is still possible and a trust can perform all the functions of a company without some of the restrictions that apply to companies.
Family Wealth Protection
Trusts are often used to safeguard family wealth by imposing conditions on the use and distribution of money and assets by present and future generations. Such arrangements may also replace a will in certain circumstances. Trusts can be used legitimately to avoid ‘forced heirship’ provisions affecting inheritance. Inheritance, capital gains and income taxes can all be minimized in this way.
For more information about Off-shore Companies and Offshore Services, please visit:offshore-companies-in-dominica.com.
